Newsletter #30 - Where are we ?
The vertical farming industry is further in the "through the disillusionment"-phase
A very happy new year to you all !
We hope you had a great holiday and are already on track on making 2022 a great year.
During the holidays or just before Christmas you probably read the following article:
Vertical farming is headed for the ‘trough of disillusionment.’ Here’s why that’s a good thing.
You can read it here.
A short summary:
A lot of capital went in the vertical farming / CEA sector already
The industry is immature in scaling
Mainly due to difficult operational challenges
Vertical farming / CEA takes time on many different aspects
There is a tension between fast expectations and the core speed of agriculture
So in the article the conclusion is that CEA / vertical farming is here:
This is based on the Gartner Hype Cycle. Read more about here.
The “claim” of many CEA / vertical farming companies is that they are profitable, feeding the world and sustainable. Which we do not know due to the lack of transparency and sharing of common insights.
But again……….read the full article.
In this article there are many true points. However we disagree with the following:
The “WE ARE HERE” position is not correct on the Gartner Hype Cycle.
Have a look at the graph from Wikipedia and its definitions:
We argue that the right position is already near the bottom of the downward slope. In general CEA / vertical farming is further in time and further into the area of “through the disillusionment”.
Note: this is not about the exact position of “where we are” on the curve, but about the underlying perspective of the industry.
There are a few arguments for this:
We see more 2nd and 3rd rounds of funding in vertical farming worldwide (more aggressive large amounts of publicly communicated capital AND smaller patient long term focused capital)
The number of farms (usually smaller) selling produce successfully is growing per quarter
The number of traditional greenhouses embracing small scale vertical farming / CEA tools (applied for multiple objectives) are increasing.
More 2nd generation products / technologies are being developed.
Unclear reasons why the SPAC of Aerofarms did not go through. As mentioned already and stated in the article this could also be related to pure capital market reasons only.
The earlier mentioned gap in expectations between financial / VC’s and the so called core developing / operating speed of agriculture is still too wide. In other words; the financial valuations are too high and returns are expected too early / fast for the industry. Are they projecting SaaS metrics to agriculture?
So in general there is a distinction between financial expectations and industry expectations. And the Gartner model is a mix of course.
The pure financial expectations (capital invested, fast returns & valuations) are too high and therefor maybe higher on the curve (to the left).
However pure industry expectations (performance metrics, general usage of technology) are more at the bottom of the curve (more to the right).
We hope to hear your thoughts as a reply on this email.
Have a great year.
Ps. at the end of last year we communicated an opportunity. An opportunity to run crop / seed tests in a small scale vertical farm in The Netherlands. There are still a few slots open. If you are interested, just reply on this e-mail.
Hope you enjoy it. You can find earlier newsletters here, you can follow us on Twitter and please ….. :
See you next time.
The Real Plant team
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