Consumers can easily make garden salads year round because grocery stores get their greens from farms across the country where items like lettuce are always in season. But those leafy greens and tomatoes don’t necessarily have to travel hundreds of miles to reach salad plates.
Agtech startup BrightFarms uses indoor farming to try to shorten grocery store supply chains, and also lower costs by using less land, water, transportation fuel, and pesticides than traditional farming. The New York-based company announced last week that it raised $30.1 million from investors to take this greenhouse model to new markets across the country.
The BrightFarms investment eclipses the $18 million raised by Harrisonburg, VA-based Shenandoah Growers earlier this year. That company, which sells herbs and herb plants grown in its greenhouses, raised funds from S2G Ventures and Middleland Capital, according to AgFunder. Despite those deals, indoor agriculture remains a small part of overall agtech investment.
The technologies claiming most of the $1.8 billion in global agtech investments in the first half of the year were food e-commerce, biomaterials and biochemicals, soil and crop technology, and precision agriculture, according to AgFunder. That six-month total marked a 20 percent decline compared to the same period in 2015. Indoor agriculture accounted for $21 million across 10 deals in the first half of 2016—just 1 percent of all agtech funding raised and just 3 percent of all deal flow, according to AgFunder. Still, a number of startups, including BrightFarms, are betting on consumer and investor interest in indoor farming.
The indoor farming market is shaking out into several segments. BrightFarms is a food supplier, distributing the food it grows to contracted retailers, who in turn sell the produce to consumers. That’s the same approach taken by Brooklyn, NY-based startup Edenworks, which grows produce inside a warehouse and supplies stores in New York. Other companies are providing businesses with the hardware to do their own indoor farming. Atlanta-based PodPonics, for example, sells shipping containers and software to manage food-growing operations inside them. Boston-based Freight Farms also sells refashioned shipping containers outfitted with LED lights and climate controls.
Some startups are bringing indoor growing options directly to consumers. Somerville, MA-based Grove sells high-tech growing cabinets that consumers can place in their homes. And Cambridge, MA-based SproutsIO, which like Grove shares MIT roots, has developed a microfarming system that fits on a kitchen countertop.
All of these startups pledge to provide locally grown food that reduces water use and eliminates pesticides. For its part, BrightFarms claims its greenhouses use 80 percent less water, 90 percent less land, and 95 percent less shipping fuel compared with crops grown outdoors and shipped to market via conventional supply chains.
BrightFarms currently operates greenhouses near Chicago, Philadelphia, and Washington, DC. It says it has long-term, fixed price contracts to provide produce to several supermarket companies including Mariano’s, a Chicago-area grocery retailer owned by Kroger (NYSE: [[ticker:KR]]); ShopRite, whose footprint includes New York and New Jersey; and Giant Foods, which has stores in the central Atlantic states.
When BrightFarms opened its newest greenhouse in Illinois, CEO Paul Lightfoot told the Chicago Tribune that the 160,000 square-foot facility cost about $10 million, which included land acquisition and construction. In the funding announcement, the company did not say where it will use the fresh capital to expand.
