"The false promises and the negative economics have held the industry back"

To say that controlled environment agriculture is drawing a lot of interest and dollars from the investment world would be an understatement. Austin Webb, co-founder and CEO at Fifth Season, a vertical farm operation in Pittsburgh, Pa., estimates that over $3 billion has been invested in the CEA industry during the last four years alone, excluding debt and merger and accusations activities for greenhouse operations.

“For indoor ag overall, including both vertical farming and greenhouse, about half that equity investment has been for vertical farming,” Webb said. “There were a lot of dollars that came into this space early on. The unfortunate piece to that is there were a lot of overhype and false promises made in this space. A lot of those dollars came in too early for some of these companies and overall were wasted.

“There has been an industry-wide struggle to make the economics of vertical farming work. All of these companies talk about what they are going to do in the future, but the issue is they have negative unit economics. They lose money for every pound of produce they sell. In many cases, they will say that they will make the economics work in the future, but only after they build more production facilities.”

Webb said negative economics has had a major impact on the vertical farm industry. “The false promises and the negative economics have held the industry back, overshadowed companies that are building substantial vertical farming solutions that work and pushed additional dollars to incremental greenhouse solutions,” he said. “Moving forward we will continue to see more dollars come into CEA and into vertical farming specifically. This will include public markets and SPAC (special purpose acquisition company) activity.

“Overall, there will be more money invested in CEA. This will include investments that are mediocre. The important element will be investments made into tech platforms designed for scalability and repeatability. This is the only way that volume requirements for wholesale buyers can be met to unlock indoor ag as a material participant in overall market share.”