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URBAN FARMING MARKET RIPE WITH OPPORTUNITY

by Ed Lieber
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March 7, 2014


Urban farming is a burgeoning sector of rooftop food production and sustainable
agriculture that mostly utilizes hydroponics to achieve more efficiencies than
historical soil-based methods.

The cleantech needs for sustainable agriculture comprise a broad array of
products—from drones (yes, drones) to specialized LED lighting for plants. There
is certainly room for innovation and proprietary technology, and some companies
are already showcasing it.

Cleantech needs in the space includes remote monitors that enable teams to
observe rooftop crops from facilities miles away; adoption of cloud-based data
management and reporting systems; and software that locates, prevents and
controls diseases—which can be particularly troublesome due to the high-moisture
levels associated with hydroponics.

One company focusing on hydroponic systems specifically has developed a
proprietary stackable rotating trough design that includes sensors and is
designed to ensure that each individual trough gets its optimal amount of LED
lighting and water.

Looking at the larger picture—much larger—one company is even researching and
testing efforts to deploy agricultural-optimized drones.

3D Robotics is conducting tests with farmers to understand their needs and is
testing custom drones for agriculture.

“Our approach is to make a product that fits into a farmer’s actual equipment,”
Brandon Basso, lead researcher at 3D Robotics, told Forbes. “We want them to use
drones the same way that they use their other farming equipment.”

3D Robotics is working from estimates to help it break down typical cost
structures for farming to incentivize farmers to use drones.

One example of how drones could be of use to traditional farmers is by
facilitating targeted, uniform spraying of pesticides over crops to protect them
from fungal infections. Drones also are fitted with payloads such as cameras
that would enable farmers to get a bird’s eye-view of their crops.

And Agriculture sector startups are also getting more attention from investors,
experiencing a 61% increase in venture capital funding in 2013, versus the year
prior, to $533 million, according to the Cleantech Group. (see below for our
full list of Agriculture and Food Tech fundings.)

Rooftop Farms Reap Investor Funding

In the face of this growth in technology, the sector is also gaining momentum in
terms of reaping the harvest of investors’ dollars.

New York City-based BrightFarms, Inc., which funds the construction of
greenhouses atop or in proximity to partnering supermarkets to eliminate
inefficiencies in the produce supply chain, raised $4.9 million in Series B
financing in January, which lifts the company’s aggregate funding to $9.2
million.

NGEN Partners, Emil Capital Partners and BrightFarms founder Ted Caplow lead the
round, which also included the participation of investors such as Paragon Foods
president Elaine Bellin; New Ground Ventures founding principal Zac Zeitlin; and
Coskata founder Todd Kimmel, a former partner at Mayfield Fund and now founding
principal at Montage Ventures.

BrightFarms Plants

Specifically, BrightFarms builds and operates hydroponic greenhouses on or near
the rooftops of grocery stores in order to reduce time, distance and cost from
the produce supply chain. They sign a long-term fixed price contract
guaranteeing volumes of revenue with large regional and national supermarket
chains. This Produce Purchase Agreement (PPA) is then used to attract project
financing to construct greenhouse farms on behalf of clients. They are believed
to be the first company to attract institutional project finance capital for
commercial urban agriculture.

“We are trying to change the produce supply chain in this country (United
States),” Brightfarms CEO Paul Lightfoot told Forbes. “In five years, we will
have greenhouses covering the Midwest and East Coast corridors, displacing a
number of long-distance produce items that used to be sourced from the West
Coast.”

With its new capital, BrightFarms plans to fund construction of new greenhouses
as well as build out its team. It launched its first greenhouse in Bucks County,
Pennsylvania in January 2013. At present, eight more are in development, in
Washington, D.C., St. Louis, Mo., New York City, Chicago, Indianapolis, Kansas
City, Oklahoma City, and St. Paul, Minn. Retail partners include A&P, Cub and
Pathmark.

BrightFarms’ Series B arrives following the news last September that Montreal,
Quebec-based Lufa Farms had unveiled its second greenhouse, atop a new office
building in the Montreal metropolitan area.

Controlling Pests, Optimizing Sunlight

Lufa Farms started out in 2011 with a rooftop hydroponic greenhouse, also in
Montreal. In 2012 the company completed a $4.5 million financing round led by
Cycle Capital Management, with participation from Andrew Ferrier and the Kubo
Greenhouse Project of the Netherlands, as CleantechIQ reported.

Both Lufa Farms greenhouses are 43,000 square feet—though the company says its
greenhouse system is scalable and can be replicated on any rooftop in any
city—but the new one, located in Laval, nearly doubles the yield of the first
greenhouse, the company said. It can provide enough fresh produce to supply
6,000 people year-round.

Lufa’s new structure uses a special venting system to control pests and
temperature and to optimize vital sunlight. The greenhouse also has a
recirculating irrigation system for water and surface condensation.

Lufa Farms uses its own technology to remotely monitor the crops in Laval, about
four miles away. The team remotely monitors and manages the cultivation at both
its existing greenhouse and the new greenhouse site using a cloud-based data
management and reporting system. Though the use of a proprietary software
application, the team can quickly and accurately find, monitor, prevent, and
control diseases and other problems, the company said.

“There’s a very large global opportunity that has opened up in comprehensive
food production and distribution models for cities,” Dave Furneaux, a
Boston-based investor and chairman of the board for the company, told
MarketWatch. “This team has proven that their breakthrough business model works
in Montreal and that they have the technology and vision to continue to scale
both locally and globally.”

Lufa Farms is said to be in talks about rolling out a third rooftop greenhouse
in Boston.

Constructing “farms” atop buildings in cities saves on transportation and
storage costs, for example, which raises profit levels—as well as environmental
benefits. Urban greenhouses allow growers to reduce consumption of energy,
water, and soil. In some instances, companies are also able to power these
rooftop farms by harnessing the excess heat, waste and C02 created by cities.

Use of Hydroponic Systems Widespread

Then there is the common denominator among many of these companies, the
hydroponic systems. Hydroponics, simply put, is a method of growing plants using
mineral nutrient solutions in water; there is no inclusion of soil in the
process. This is considered a more environmentally friendly way of farming as it
requires the use of fewer natural resources compared to traditional soil-based
farming according to City Hydroponics. The company offered the following details
regarding hydroponics-based urban farming versus soil-based farming: The former
can provide a 30% faster growth rate than the latter; requires less space, as a
5,000-square-foot facility is capable of producing as much produce as one acre
of farmland, and it can provide a much larger yield, up to 10 times the size of
soil-based systems.

City Hydroponics produces hydroponic systems that are more efficient than
traditional hydroponic systems for growing leafy greens, such as kale and swiss
chard. Its flagship product, called the Vertically Oriented Hydroponic System
(VOHS), has the ability to produce a yield nine times larger than traditional
hydroponic systems, according to the company. The company is currently looking
to raise its first round of funding from strategic partners and venture capital
firms.



A key differentiator of City Hydroponics’ VOHS system is its stackable rotating
trough design, which ensures each trough gets an equal amount of both LED
lighting and water. The VOHS system also uses electric sensors to determine if
additional lighting is needed.

CEO Sandra Rodriguez, who is also an investor, started the company as a social
venture in Newark, New Jersey, where the company is based, to create local farms
and local jobs in the area.

Aside from selling its hydroponic system the company also designs and builds
greenhouses and agricultural technology for controlled environments. Clients
range from educational institutions to large-scale commercial businesses. City
Hydroponics also will take charge of operating the facilities that it
manufactures and sells, as well as training workers.

Going forward, the company will continue to focus on R&D to produce technology
solutions and services; it also is seeking to develop standardized technology
prototypes—all part of a larger effort to produce a hydroponic system
specifically optimized for urban farming.

Other Companies Playing in the Space

Other companies include Brooklyn Grange, an urban rooftop farm that cultivates a
one acre rooftop in Queens, New York and two-and-a-half acre rooftop in the
Brooklyn Navy Yard. These farms supply vegetables to restaurants, farmer’s
markets and have 40 CSA members. They use organic farming methods, using soil
developed for green roofs that is lightweight with porous stones that slowly
break down to add nutrients to the soil. The farm was financed through a
combination of private equity, loans, grassroots fundraising events and
crowdfunding platforms like Kickstarter.com. They broke even their first year
and showed 40% growth their second year.

Plantagon broke ground in Stockholm, Sweden in 2012. The spherical design of the
greenhouse maximizes available light. These are predicted to be produce three
times more crops than traditional methods. They believe that profitability lies
in the fact there will be no middlemen, storage or transportation costs.

AeroFarms, based in New York state, devised technology to plant leafy greens in
a cloth bed and irrigate with a nutrient-infused mist, a process they dub
 “aeroponics.” LED lamps provide light and can be set to emit wavelengths that
work as  pest control.  Using modules, produce can be can be grown year round in
old or vacant urban buildings.



 

Recent Agriculture and Food Tech Fundings

March 5– Mekitec raised $3M from Inventure Capital and Finnish Industry
Investment. The company, based in Finland, manufactures and distributes X-ray
food quality control systems for the food industry.

March 4 – Aseptia, received $28M in Series C funding from Lookout Capital, SJF
Ventures, Prudential, and the F.B. Heron Foundation. N.C.-based Aseptia’s 
patented aseptic technology enables the production of shelf-stable food products
that maintain the flavors and nutrients of fresh food without the use of
preservatives or refrigeration.

March 3 – JDC Phosphate raised $8M. The company, based in Florida, produces
high-purity phosphoric acid using low-grade phosphate rock for use in
agriculture.

Feb 20 – Granular raised $4.2M from Andreessen Horowitz, Google Ventures, and
Khosla Ventures. The company, based in San Francisco, develops cloud software
and analytics platform helps farmers become more efficient and make better
business decisions.

Feb 19 – Myco Technology raised a Series B funding (undisclosed) and $1.05M in
Debt from undisclosed investors. The company, based in Colorado, created a new
process using gourmet fungi that transforms agricultural products to improve
their taste and value.

Feb 7 – Hampton Creek Foods raised $23M in Series B funding from Horizons
Ventures, with participation from Jerry Yang and AME Cloud Ventures, Ali and
Hadi Partovi, Jessica Powell of Google, Scott Banister, and Ash Patel. The
company, based in Silicon Valley, focuses on finding new ways of utilizing
plants to replace eggs in a variety of different products.

Feb 4 – Foodpanda raised $20M from Phenomenon Ventures. The company, based in
Germany, is a leading online marketplace for food delivery.

Jan 29 – Brightfarms raise $4.9M in Series B funding from NGEN Partners, Emil
Capital Partners, and Brighfarms founder Ted Caplow. The New York-based
hydroponic grower contracts directly with supermarkets in building urban
greenhouses that can supply fresh, local produce year round.

Jan 28 – Food Genius raised $1M in Series B funding fom Hyde Park Venture
Partners, Pritzker Group Venture, Chicago Ventures. The Chicago-based big data
startup provides industry insights and analysis to the food industry.

Jan 22 – Drizly raised $2.25M in seed funding from Atlas Ventures, Abundance
Partners, Breakaway Ventures, Continental Advisors, Fairhaven Capital and
Reynolds & Company Venture Partners. The Boston-based on-demand alcohol delivery
startup allows users to order beer, wine and liquor through the Drizly ap.

Jan 14 – FarmLogs raised $4M from Drive Capital, Huron River Ventures, Hyde Park
Venture Partners and Hyde Park Angels. The Ann Arbor MI-based farm management
software and mobile app developer helps farmers digitally manage their farms in
order to increase yield and profitability.

Jan 6 – Plated raised $5m in Series A funding from ff Venture Capital, Lerer
Ventures, Founder Collective and Great Oaks Venture Capital and other angel
investors. The New York-based company develops a subscription service for
ready-to-cook meal ingredients and recipes.

 

Kazuha Kurosu, a graduate student in the The New School’s Environmental Policy
and Sustainability program in New York City, contributed to this article.

 

Tags: Agtech , Fundings+Deals
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