Robotic arms harvesting hydroponic lettuce

What happened with Vertical Farming and how can we fix it?

My name is Albert Lin, the CEO of Vegbed and I have been involved in vertical farming since around 2014. It's been fascinating to see how the industry has grown over the past decade. I thought I might give my 2 cents on what has happened recently as a lot of positive and negative press has come to light.

Disclaimer: This is my take on the culmination of difficulties that have impacted the industry considerably at the moment. Also, I'm not calling out any company in particular or implying any negative aspects about them. I am trying to keep this as unbiased as possible.

Overall, it was a bit of a perfect storm with a recession, impacts of inflation/supply chain, and large increases in energy costs.

Things I've noticed:

1) Funding

The nature of VC funding has forced many vertical farming companies to overly focus on tech (e.g. robotics, AI, machine learning, computer vision). 

VCs don't want to fund a regular greenhouse operation. They want IP, SaaS, and things that can give them 100X returns. They want to hear the addressable market is in the billions and is growing at a fast rate.

There is nothing wrong with striving to increase technology in agriculture, but you need to be able to create a GOOD and CONSISTENT product above all else. Trying to force a vertical farm through a "VC lens" has caused many to make extreme claims to justify funding amounts and valuations.

2) Scalability

Vertical farms can't scale like a traditional SaaS business. No matter how efficient your tech/greenhouse is, you'll have to build a new one to increase capacity at some point. 

Are farms properly attributing future production capacity and potential radius of where the product will travel? In my opinion, ideally, you would have multiple vertical farm hubs that have slightly overlapping radii. 

If there was 1 mega vertical farm that tried to supply the entire country, that would literally be against the exact problem they are trying to solve - reducing food miles. The quicker the produce can get to the market, the longer it can last and potentially help reduce food waste.

Scaling a container farm operation seems to be the antithesis of its initial objective. Does it make sense to stack 100 container farms on top of one another? What does an ideal setup look like? There would be difficulties in maintaining optimal environments as well as the labor aspect (seeding, harvesting, packing).

I don't think exponential or explosive growth is possible in vertical farming.

3) Grow it and they will come.

Vertical farming is a 2 sided business. Creating new technology is only half the battle. The other half is the actual “growing the produce” part and how you're going to sell it. 

Produce margins are razor-thin. At some point automation/robotics will drive end product costs down, but can the farm survive until then? 

At the same time, vertical farms don't have the branding power normal tech companies do. At least for me, the price at the grocery store is one of the most important factors I look for. 

If there are 2 identical salads from competing vertical farms, I will choose the cheaper one (the general public probably won't even know or care that it comes from a vertical farm).

Farms won't have the brand loyalty that Apple or Chanel has. Leafy greens are a base-level CPG (consumer packaged good). Branding is more important when a new end product is created with these base-level ingredients into something that generally isn't quickly perishable (sauces, chips, cereal, bars, etc...). 

People know Heinz Ketchup, but do they know the farm where their tomatoes come from? Vertical farms will have to work with and convince distributors.

4) Greenwashing and a bit of repeat fluff.

Vertical farm companies have overly reliant pitches about 90% less water usage, 90% land usage, super high “x” amount of yields, and 365 days of farming. I've seen the same bullet points on pitch decks and websites over and over during the past 10 years. 

It's very commonplace and might captivate a VC that has no experience in the space. However, anyone that's been in the industry won't be easily impressed with these "innovations". It’s the nature of indoor hydroponic growing that’s been around for decades.

5) Learn from others' success.

There are tons of large-scale commercial greenhouses that have been in operation for 10-20+ years. They are obviously doing something right. Some are using a lot of high-tech equipment and methods that are also utilized in vertical farming.

6) Knowledge sharing.

Vertical farms have been notoriously secretive. I think that has stunted innovation and the path to profitability. No one is willing to share what they are doing. I can understand there are patents and IP however, the industry seems siloed.

For example - it takes quite a long time to design, build and start producing crops at a large-scale vertical farm. It can't be "copied" as easily as a normal tech business. 

Also, your customer base will be limited to a geographical radius. A vertical farm's customers in Asia will be completely separate from another vertical farm in the US. There will be minimal competition, if any, between them.

What would I like to see? How about let's talk:

Scalability - it would be great to see actual capex and opex numbers for the different styles of vertical farms. 

For example, container farms seem best suited for institutional and research purposes. It would be quite difficult to produce enough crops to fulfill a distributor’s or regional supermarket's needs.

Diversity of crops - Some companies are already experimenting with non-leafy greens (berries, mushrooms, etc…). If you're doing 100% leafy greens, it will be hard to compete with the traditional greenhouses that are already doing so. 

I would love to see a symbiosis between different crops on the farm. Adding higher-value crops can also help the farm achieve profitability faster. 

Energy - What innovations are being made on the renewables front? Energy is usually focused on LEDs and how more efficient they become every year (or new "lighting recipes"). I would love to see how a farm could utilize solar, wind, and geothermal more.

Downstream waste - part of the problem I am trying to tackle now with Vegbed. Vertical farms like to talk about sustainability and for the most part, the input side has been addressed (water, lighting, nutrients, IPM). 

However, many still utilize rockwool and peat. Part of being a circular/sustainable vertical farm should also require you to address this downstream waste. Rockwool isn’t compostable and takes an extremely long time to break down.

My goal is to try and get vertical farms to shift substrate usage to more sustainable materials that are also biodegradable. This way, if they don’t have a composting program, at least it will degrade on its own in a landfill. That’s where Vegbed can help out.

But for now, it seems like some farms are trying to do step 10 when they still have yet to do step 1. 

What do you think the next few years will be like for the vertical farming industry?

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