$200M of Plenty(ful) Capital – The Next Wave of Vertical Farming
The $200M raise by Plenty – a pre-revenue company who just one month prior, acquired somebody else’s technology (Bright Agrotech) – is not something you hear about every day. Jeff Bezos, Softbank and Alphabet may have deep pockets, but they are not philanthropic organizations. And for Bezos, this is a follow-on to a 2016 round for Plenty that provided $26M. So, the question is – what are the growth plans for this vertical farming business following the July 2017 investment?
Vertical farming is certainly an area with potential: resource efficient, near consumer demand, and better nutrition – all at competitive costs from current producers of high value leafy greens, herbs and other potential crops. Robotics, sensors, controlled environments, and lots of data combine to create a new level of food production that is a long way from farming. Venture capital has been active in the past several years supporting commercialization of early-stage companies. AeroFarms raised $34M in May 2017, $20M in Dec 2015, and $36M in Nov 2014 and is currently on its 10th (or more) iteration of production facilities. Innovation in controlled-environment farming business models is also sprouting. BrightFarms’ use of long term fixed price purchase agreements helped the company raise $30M in Sept 2016, even though their approach is slightly less controlled due to lighting coming primarily from the sun instead of LEDs. Freight Farms recently increased customer focus on college and commercial campuses as the target for their shipping container-sized farms, following a $7M raise in July 2017. These companies all have operating projects with customers.
Sounds easy, but others have not been doing as well. Past start-ups such as FarmedHere, PodPonics, Alterrus, and Local Gardens have gone bankrupt in attempting to address labor costs, lighting costs, rent, farm productivity, and revenue management. Adapting to the market, Freight Farms laid off some of their work force as part of the shift toward commercializing targeted customers and pulling back on R&D in new areas.
But back to Plenty. The plan, discussed in interviews with us, is all about scale with the underlying belief that customers are ready. No need for market validation – it’s all about infrastructure and scale. Plenty’s proprietary technology subdivides smaller growing environments for flexibility and rapid deployment. The goal is to provide a scalable solution that can be deployed anywhere in the world within a few weeks. The production facilities will be sited near cities with over 1 million people, and product mix will be tailored to the local market. Hence the need for access to substantial capital.
Plenty claims that an essential element of the company’s differentiation comes from its proprietary technology and process, which it acquired from Bright Agrotech. Bright Agrotech’s ZipGrow emerged from the University of Wyoming Entrepreneur Competition in 2011, moving to its own facility in 2015. The two companies have had a close relationship prior to the acquisition: Nate Storey, the founder of Bright Agrotech became Plenty’s full-time chief science officer earlier this year. Physically, one of the unique attributes of the technology are the 15-20-foot growing towers, an alternative approach to the trays often seen in other vertical growing approaches. Like most others in this space, the software, use of machine learning, lighting, nutrient balance, etc. are all proprietary. An area that is still being refined is sourcing of seeds: identifying those that are heirloom-based or clearly stand out in taste.
Monitoring of the continued growth of Plenty, as well as the overall market, should focus on deployment of production facilities –the speed and number of cities, ideally with purchase agreements for the produce. Market saturation of locally grown produce from controlled environments is not an immediate concern; however, first to market in cities might make local expansion easier and create barriers for new entrants. To that end, we might also expect more capital coming into other companies that have demonstrated operating facilities and the need to expand quickly. Probably not a land grab yet, but something to watch. Other areas to monitor should include direct-to-user targeted approaches like Freight Farms’ focus on campuses versus grocery-type markets. The bottom line is that there is ‘plenty’ of competition as the technology moves to commercial deployment, and successfully scaling is now the focus.