Almost a year ago today BrightFarms Series C stood as one of the most impressive to date in the industry. When they raised the money last year, it was $9 million more than all other startups had raised combined that year to date.
What was the secret behind being able to raise so much?
According to Neal Parikh, vice president of finance at BrightFarms, “Our business model remains pretty unique,” says Parikh. “We use long-term, fixed price purchase agreements. It allows us to give retailers a steady supply and pricing as well as year-round access to fresh produce.” As of 2015, BrightFarms reported holding over $100 million in contracted commitments from supermarket clients.
Another key to the BrightFarms model is that they rely on the sun, but still use greenhouses and supplemental lighting to keep a consistency in
production volume all year round. Using the sun as much as possible allows them to cut on electric costs compared to those growing in warehouses. Putting their greenhouses in urban environments still, keeps transportation costs to a minimum and allows a fresher product to arrive on shelves than its competitors that take days or weeks to get a product onto shelves.
Reducing operational costs and landing contract commitments have led BrightFarms to raise money in multiple rounds as investors can clearly see a path back to profit. The contracts show them security in that as long as production continues at or cheaper than current costs, they know how much Bright will take in at a minimum thanks to its contracts. In addition, their greenhouse urban model is more attractive to investors because it doesn’t have to surmount the higher operational costs that indoor farmers have to face before being profitable. The money is at less risk, and it is being used more efficiently.
BrightFarms is a great model for other startups. They opened the door bringing more investor eyes into this space and really kick-started investor willingness to invest bigger dollar amounts in ag and agtech startups.