Summary:
Venture capital investment in vertical farming has significantly decreased after a peak period between 2019 and 2023.
Notable startups like AppHarvest have folded despite securing large funding rounds.
The best-known vertical farming startup, Plenty, has raised over $940 million but faces challenges in achieving profitability and scale.
The global market for indoor farming is still expected to grow, driven by the vision of sustainable and local produce.
The infrastructure-heavy and expensive nature of vertical farming makes it a long-term investment with uncertain returns for venture capitalists.
Vertical Farming: A Seedy Future?
While venture capital has poured over $6 billion into indoor farming startups, especially between 2019 and 2023, the returns have been meager. Large funding rounds have dried up in recent quarters, and some high-profile startups like AppHarvest have even folded.
Plenty, the best-known and best-capitalized startup, focuses on growing leafy greens and other produce in indoor, vertical farms. Their pitch centers around using minimal water, eliminating pesticides, and providing fresh produce in challenging environments. Despite attracting over $940 million in funding, Plenty has struggled to achieve the kind of scale and efficiency needed for profitability.
AppHarvest, which aimed to be a sustainable agriculture player and a job creator, raised over $135 million in funding before going public via SPAC. However, the company quickly faltered and filed for bankruptcy a year ago.
Iron Ox, a startup developing robotics-enabled greenhouses, also met a similar fate after raising $102 million. Despite the struggles, the global market for indoor farming is still expected to grow steadily. The vision of sustainable, organic, and local produce remains compelling.
However, the infrastructure-heavy and expensive nature of vertical farming has made it incompatible with venture capital's exit timeframes. While some startups might eventually produce big exits, the harvesting of returns will likely take longer than initially anticipated.
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