Investment

Vertical farming, family dynasties, and the vagaries of food tech

The Bonnier family of Sweden is standing up for vertical farms by participating in a $200 million fundraising by Infarm of Europe. So too is the German Haniel family dynasty. But food tech backed by prominent family investment groups has had some big failures in recent months. 

Their involvement follows a stunning year for the sector which cultivates crops under cover to boost yields. But the sector is becoming more competitive as more newcomers, including unmanned farms, enter the market.

But venture capital can never guarantee a smooth ride, the cost of lighting plants undercover can be high and the food sector has always been vulnerable to price competition

The Bonniers are better known for publishing activities, started in the early 19thCentury. Bonnier Group is now a leading Nordic media group.  

The largest family shareholders comprise Ake Bonnier, now Bishop of Skara, and Jonas Bonnier, a successful novelist. Peder Bonnier, who runs software group Storykit, and Felix Bonnier, who works for H&M, represent the next generation on the board.

Bonnier Group started a media venture arm in 2013, which diversified into new sectors in 2018. It was this venture business that backed Infarm, as confirmed on 16 December. Infarm’s other backers include Niklas Zennström’s  Atomico, Hanaco of Israel, sustainable investor Lightrock, German family business Haniel, and Qatar Investment Authority.

Qatar’s arrival as an investor illustrates the potential importance of vertical farming to the Middle East, which is deeply concerned about food security, as temperatures rise.

Infarm was founded in Berlin in 2013 by two brothers, Erez and Guy Golanska, plus a friend, Osnat Michaeli, who started growing vegetables in their own apartment. 

Their crops have now been scaled up to production units connecting modules to distribution centres. Grocers are offered access to growing units of their own to achieve freshness and flexibility.

Infarm says it has the technology to deploy a smaller unit, the size of a living room, in six weeks, with the potential to cultivate 500,000 plants a year, using 95% less food and water than traditional crops.  Its units are monitored by sensors, alert to issues like nutrition and food quality. The company partners with thirty retailers including Amazon Fresh, Kroger and Marks & Spencer and cuts distribution costs by cultivating crops in urban locations.

Vertical farms like Bowery Farming, Gotham Greens and Revol Greens have won backing from family enterprises, as well as venture capital firms, as reported in Family Capital last June. BrightFarms was bought by Cox Enterprises in August. Bayer and Temasek announced a joint-venture called Unfold to provide growers with access to innovative crops. 

But venture capital can never guarantee a smooth ride, the cost of lighting plants undercover can be high and the food sector has always been vulnerable to price competition.

Over the years, Ben Pugh’s delivery chain Farmdrop wooed a string of backers including Atomico, Wheatsheaf, former Saracens rugby club chairman Nigel Wray and Cazoo founder Alex Chesterman. But the company collapsed in December blaming: “An increasingly competitive sector bringing with it significant challenges to growth.” 

Kalera, backed by LGT in 2020, suffered a share price fall of 65% in 2021. It recently bought control of a German vertical farming company active in the Middle East. However, Kalera later lost its chief executive Dan Malechuk. In December interim CEO Curtis McWilliams gave an upbeat presentation on the company’s potential scale and efficiencies.

US-based AeroFarms, a leader in large-scale vertical cultivation, stresses the importance of vertical farming to meet future farming needs. It says it is moving forward and developing partnerships in Abu Dhabi. But its attempt to get a listing through a SPAC merger was terminated in October as funding dried up. 

AppHarvest has fallen 69% from the price at which it listed via a SPAC in February 2021, although it has seen good sales for key products and development progress.

For now, the sector’s growth prospects should provide a tailwind for vertical farms. But competition is developing and traditional farmers still provide plenty of competition.

SananBio, backed by the Chinese Academy of Sciences, has just developed a vertical farming system entirely operated by robots. Its new Uplift farm, based in Shaanxi, was erected in just 45 days.

US space agency Nasa is using research into space cultivation to advise US vertical farms. One of its clients is Plenty Unlimited, backed by Softbank and Jeff Bezos. 

Plenty says it can cultivate 1500 acres of crops in a building the size of a grocery store while saving a million gallons of water per week. Which is a big deal in drought-hit California.

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