Vertical Farm Start-Up Plenty Raises $200m
It seems like yesterday we were celebrating Plenty for raising $26 million and their acquisition of Bright Agrotech, in fact, it was only 5 weeks ago. They’ve been busy ever since. Plenty now has over 100 employees and has just closed another round of venture capital funding. In this recent round, Plenty raises $200m from multiple venture funds, led by the Japanese media giant SoftBank.
In addition, their funding round included other notables such as Eric Schmidt’s Innovation Endeavors and Jeff Bezos’s Bezos Expeditions. Eric is of course famous for co-founding Google and later Alphabet. Jeff is infamous for his founding of Amazon.
With this much savvy investing behind them, it’s hard to envision Plenty not dominating the Urban and Indoor farming industry, at least for the next decade. The important takeaway here is that the precedent is set, Urban and Controlled Environment Agriculture are worthy of significant investment, and investors clearly see a pathway to a return on their investment if they are willing to put that much capital behind any one venture.
In fact, this is the largest-ever agriculture technology investment. This backing could give a big boost to vertical farming as this is the biggest bet on the model to date. Plenty, which recently acquired vertical farming industry leader Bright Agrotech, has the technology, the experts and now the capital to make a huge impact over the next few years.
Plenty plans to use its capital to open up farms in and around urban centers that are 2-5 acres in size but will be in warehouses. Plenty grows crops in 20-foot-tall columns from which the plants protrude out towards the grow lights. Nutrient filled water drops down the column of these towers directly to the roots of the plants. It’s hydroponics, just with much taller towers than usual. The company claims it can produce more crops per sqft and while using less energy than its competitors.
Their internet based control system customizes the environment, lights, and nutrients specifically for the crop(s) being grown. In this way, the company is able to exponentially reduce its water and nutrient inputs. The plants get exactly what they need, exactly when they need it, and not any more than they need. The water is recycled and recirculated through the system.
All of this specialization adds up to Plenty claiming that it can yield up to 350x more produce in a given area than a traditional field farm. Now that is a bit of a misleading claim, as they are growing volumetrically not on a single horizontal plane. Plenty grows it’s crops vertically, so if you have 1 plant per square foot in a field they essentially can grow 350 plants in that same square foot because they are growing in 20ft tall towers. If you took the field growers volumetric production and compared it to Plenty’s. Plenty would still be the winner in space efficiency but nowhere near as impressive as 350x more per square foot sounds.
So what’s the punchline with this plenty acquisition? Here are the positives to take away.
1) Venture Capital Sees The Reward As Higher Than The Risk
The big names in venture capital have shown that they are willing to put in big dollars on this deal. This isn’t a $1-10million dollar play, it’s a $200million investment. That type of investment gets much more scrutiny and due diligence than a smaller deal, especially when all these big players are involved. They are not investing on a wish or a moonshot. There’s technology in place that’s already been proving itself for 5 years now with the vertical towers. There are distribution contracts in place so that the produce coming off the farm isn’t at risk, they know where it will go and how much they will fetch for it. This mitigates most important investor question, how long will it take for them to get their investments back. In farming the ROI period is a lot longer than say a tech start-up’s out of Silicon Valley, but as long as the investor can see a low-risk path to a return, then the investment will make sense to them. That has been the hurdle for a lot of startups, especially without contracts in place for their produce.
2) Urban Farming Is On Venture Capitalists Radar
For urban farmers, this is like the investment heard round the world. Anytime there’s an investment of this magnitude you know the other Venture Capital funds are taking notice. No one wants to be the first in the water, but once it’s known that the water is warm the crowd comes in. It stands to reason that other venture capitalists who watch the moves of the Eric Schmidt’s and the Jeff Bezos’ of the world are now feeling that fear of missing out. These are people who are competitive and don’t like to be left out of an industry or an opportunity. The classic example is the race to space. Billionaires Richard Branson, Jeff Bezos, Elon Musk, Paul Allen, and Yuri Milner all have space companies. It’s the classic fomo, or fear of missing out.
The urban farming industry should draw similar fervor. All of these companies and investors are going to be who want to be able to take part in solving the big question: Can we feed 9.6 billion people by 2050? The good news for companies who are not Plenty, we have 2.6 billion more mouths to feed by then, another 1 billion estimated in the next ten years, it’s not going to be one company that will make up that difference. There will be many who will need tackle this issue and many who will see sizeable investments to accelerate their impact and get ahead of this dilemma for the sake of humanity.
Urban farming and indoor controlled environment agriculture are nascent industries at the start of years upon years of growth. Couple that with the trends of urbanization, rising populations, increased demand for local foods, rising international middle class populations and we see the demand for the products coming off of indoor farms is not slowing down anytime soon. This is the type of investing environment that is attractive to Venture Capitalists.
3) The Whole Industry Should Benefit
With Plenty looking to build over a dozen farms around the world in the next three years a few things should happen that will benefit the whole industry. For one, that’s going to be a lot of lights, timers, controllers, tanks etc. For things like LED lights, technologies that are still considered expensive, the large scale need of Plenty’s farms combined with the expected industry growth should bring the cost of these technologies down over the next few years making urban farming more economically viable and lowering the barrier to entry for others.
In addition to falling technology prices, we should see a benefit of new technology and knowledge from this venture. Plenty did acquire Bright Agrotech, and all signs seem to indicate that Bright will remain a separate entity selling the commoditized version of the technology used by Plenty for the rising wave of urban farmers. Any technology or knowledge that Plenty can commoditize without losing a competitive advantage should see the light of day through Bright Agrotech. This will allow others to start their own farms with proven technology and farming models, reducing the risk for the small-scale commercial urban farmer and their investors.
Plenty’s raising of $200m certainly caught a lot of attention last week. BBC, TechCrunch, Bloomberg, Inhabitat and AgFunder News all picked up the story. The excitement shows what this means for the industry. The challenge of redesigning our food system to meet the needs of our future population and urbanization projections needs significant investment to materialize in time to meet the rising demands over the next few decades. With this round, Plenty secures its stake as a leader in this charge. While they are among the first and now the biggest, they will not be alone as more will want to join this growing industry and tackle the issue of feeding 9.6 billion by 2050.
While they are among the first and now the biggest, they will not be alone as more will want to join this growing industry and tackle the issue of feeding 9.6 billion by 2050. The issue we face in the coming years is one that has inspired hundreds of small urban farmers, including ourselves, to start farming in cities and develop farms, technology, and services to overcome that challenge. We understand that we cannot do it alone, that no one company or individual will do it alone, but rather as an industry we can collaborate, work with others, learn from others, inspire others, and only through the power of many can we hope to find the answers needed to feed 9.6 billion by 2050. Plenty raises 200m in their efforts to tackle this issue, and at the end of the day, that is a win for us all looking to tackle the issue.