BY Fast Company Contributor 3 MINUTE READ

Four years ago, the vertical farming startup Bowery opened what it called the first “post-organic” farm, growing pesticide-free leafy greens inside a warehouse in New Jersey, United States. Now its products are in 850 stores, and the company just announced a new $US300 million round of funding. Has indoor farming reached a tipping point?

The business model is feasible now, says venture capitalist Hans Tung, a managing partner at GGV Capital, one of the investors in the new round and an early investor in the startup. Lighting is one of the biggest expenses for indoor farming, but the cost of ultra-efficient LED lights has fallen steeply over the past decade. Automation has advanced enough that it’s cost-effective to do much of the work inside an indoor farm with robots. Software to manage complicated growing systems has also advanced. “A combination of software, hardware, and the price of key inputs [can] make it affordable,” he says. “Otherwise, it’s too expensive.”

Growing food in a warehouse has some advantages over traditional agriculture. With crops in stacked trays or planted on vertical walls, many more plants can fit in the same footprint. LED lights tuned to shades of pink or purple help plants grow faster and can be tweaked to change the nutrition or taste. Because the plants are in a controlled environment, no pesticides are needed, and with no limitations from the seasons or weather, crops can grow year-round. Instead of growing greens in drought-prone areas and then shipping them elsewhere, it’s possible to use a hydroponic system with 95% less water and deliver produce the same day it’s picked. (The system also has some disadvantages, including the energy needed for lights instead of sunshine, though it’s possible for indoor farms to use renewable electricity.)

Other companies in the space are also growing. Gotham Greens, for example, which has a different farming model with greenhouses that use natural light, recently raised an additional $US87 million to continue its expansion. Bowery isn’t the only company in the space to get a huge infusion of cash—Softbank led a $US200 million investment in Plenty, a Bay Area-based startup, in 2017. Both Plenty and Bowery use complex, expensive robotics and AI to run their farms; neither will share financial details about how challenging it is to profitably sell spinach with such a capital-intensive approach. But Tung says it can work. “Based on their productivity and efficiency, we definitely see a path of being profitable,” he says. (Right now, Bowery charges a price it says is comparable to organic greens grown in the field, though it aims to eventually compete with conventionally grown produce.)

Vertically farmed greens are becoming widely available in some markets. If you pull up Instacart to order groceries from Safeway in the Bay Area and search for kale, Plenty shows up. In some East Coast cities, Bowery is in stores from Whole Foods to Walmart; the company says that it has seen 750% retail growth since January 2020. Bowery also sells in Tom Colicchio’s Craft restaurants (Colicchio is an investor) and plans to expand that part of its business. While vertical farming companies focus on selling greens now, they’re also preparing to sell other types of food. At Bowery’s R&D farm, for example, researchers are testing strawberries, tomatoes, peppers, and multiple other crops.

It will never be a full replacement for traditional farming, says Bowery CEO Irving Fain. Some crops, such as corn and wheat, don’t make economic sense to grow indoors. But he thinks that this type of agriculture will be an increasingly important part of the system. “Agriculture is the largest consumer of resources globally,” he says. “Seventy percent of the world’s water every year goes to agriculture. We put about a billion pounds of pesticides down just in the US every year, 6 billion globally.

And because of the way we farm and just the chemical intensive nature, we’ve lost 30% of all of our arable farmland. You juxtapose that against a growing population: We’re going to have somewhere between 9 and 10 million people on the planet in the next 30 years. And you need more food to feed a growing population.”

At the same time, he says, it’s getting harder to grow food outside as climate change makes it more likely that farms face droughts, heat waves, flooding, and other disasters. Corn and wheat and other crops that likely don’t make sense to grow inside will have to find other solutions—such as new varieties that can better resist drought, for example—but for some foods, vertical farming could help fill a gap. “How do you build a resilient and durable supply chain in the face of an increasingly dire climate crisis and a growing population?” Fain says. “Change is needed. There has to be a better system. That recognition is happening from consumers, that recognition is happening from retailers and other partners. And that’s filtered down now, in a great way, to investors who are interested in agriculture technology in general.”

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Author: Adele Peters. Article published in partnership with fastcompany.com.