Urban farming, or more precisely, vertical farming is increasingly appealing to venture capitalists embracing agriculture-tech.
Global population growth and the need to feed a hungry world is one of the major reasons behind the development of vertical farming, a totally controlled form of agriculture using technology.
One vertical farming startup backed by VC funding is Square Roots. Founded by Kimbal Musk and Tobias Peggs, the company sprouted up in a parking lot outside a former pharmaceutical factory in the Brooklyn, New York last August. Today, the company has raised $5.4 million in a seed round, led by New York City-based Collaborative Fund.
Musk, the younger brother of Elon Musk, says he wants to get fresher food to more Americans, building trust between consumers and the farmers who supply their produce, as well as identifying problems and developing solutions to the modern challenges of this new industry.
In an interview with VentureBeat, Musk said, “We want to bring the farm to a new generation of farmers.” He says he has been meeting with farmers across the country over the past several years as he grew restaurant chain, which includes The Kitchen, an upscale bistro, and Next Door, a more casual eatery with a lower price point.
He is hoping his “business in a box” idea will get more young people involved in farming. He agrees it is the younger generation that will come up with the innovations and high-tech solutions needed to overcome the problems modern farmers face.
“You have these 180-acre family farms, where you might only make $23,000 a year, and it’s so unattractive to the younger generation,” Musk says. “It’s about how do we get farmers to have a higher crop yield, to get more profitable? I’ve gotten to spend a lot of time with farmers, but I don’t have all the answers.”
Investments in vertical farming start-ups growing
Square Roots isn’t the only recipient of funding this year. Plenty, founded in 2014, is a Silicon Valley-based urban farming startup that raised $200 million in July, led by SoftBank’s Vision Fund.
Plenty CEO Matt Barnard told Business Insider their goal is to revolutionize the way the world grows food and sell that food for lower prices than typical produce is sold in grocery stores.
This vision is all well and good, but there are problems with energy costs. This new method requires a large amount of LED lighting to grow the produce, and this ends up making the cost of vertically farmed produce the same price as organic produce (sometimes even more).
Rob Leclerc, the co-founder, and CEO of Agfunder, an online investment platform for ag-tech start-ups says that while vertical farming does have plenty of advantages over traditional agriculture methods, they are still costly ventures until they can become fully automated.
“Vertical farms layer on an energy cost which makes it hard to compete with traditional greenhouses and outdoor growers, which get free energy from the sun,” Leclerc tells VentureBeat in an email.
The cost of LED lighting is coming down
In June 2016, Quartz ran a story on AeroFarms, a New Jersey-based vertical farming company. At that time, it was shipping arugula, kale, and spinach from a farm inside a former Newark nightclub to grocery shelves around New York City. At that time, a five-ounce bag of their greens was selling for $3.99, the same price as EarthBound, an organic grower in California.
Square Roots’ green produce isn’t cheap, not by a long-shot. A single serving bag of greens costs $7.00, although Peggs says customers have the added advantage of knowing who grows their produce.
The advancements in light-emitting diodes (LEDs) since 2010 has also led to dramatic decreases in their cost, falling 90 percent in the last seven years, according to the Department of Energy. The DOE also says LED efficiency and lifetimes have doubled.
