Saturday, April 20, 2024

For A Successful Vertical Farming Tech Business Put Farming First

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If you wish to sell technology to verticals like healthcare and education, you have to learn to push technology to the background. What is more important is to understand the market, sync with its psyche and build a mutual trust with the customer base. Technology will automatically fall into place and earn you the due profits.

Well, the emerging space of vertical (indoor) farming is no different. Although a lot of exciting technology goes into controlling the environment and managing the crop, the key to succeeding in this business relies on how well you are able to forget that you are a technologist and focus on the farming requirements instead, so you can eventually provide the customer with the right amount of the right tech. Overdo it, and you will not get your next customer!

Getting down to business

Vertical farming seems to be a fast emerging business worldwide, especially in urban areas that yearn for safe, organic and fresh food. The modern notion of vertical farming or controlled-environment farming involves growing crops and sometimes even fish and other food products in indoor spaces, using technology like LED lighting, heating, ventilation and air-conditioning (HVAC) systems, sensors and smart software to maintain total control over the environment.

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Fig. 1: Growing crops vertically in trays at Spread, Japan (Image courtesy: Spread Co. Ltd)

“The Internet of Things (IoT), drones, mobile apps and social technologies can be brought together to create value concepts that empower farmers with timely information about crop cycles and health. This is pertinent in the context of indoor vertical farming since walking around to check how things are, is rarely an option. Data-driven knowledge, delivered in real time and based on location context is what farmers will need for making decisions in almost the same way that the Japanese made an art of just-in-time (JIT) manufacturing, since Japan lacked space to build big factories loaded with inventory,” adds Sunil Malhotra, chief executive officer of Ideafarms, an Indian design-in-tech company focused on innovation and social impact.

Vertical farms grow food in such tech-enabled setups and take it to the market through regular supply chains. Over time, they become preferred vendors because their food is organic, of high quality and the supply is predictable. Several tech-enabled vertical farms have proven to be successful. Some examples include Aerofarms and Green Sense in the USA; Deliscious in The Netherlands; Sharp’s strawberry farm in Dubai; Spread, Toshiba and over 100-plus vertical farms in Japan; and not to forget Packet Greens of Singapore. According to news reports, vertical farming is doing well in Singapore. In the past decade, the number of licensed vertical farms there has risen from one to seven.

This emerging vertical opens up several business opportunities for technopreneurs. One of the most obvious options is to set up a tech-enabled vertical farm, grow stuff and sell it, like Aerofarms and Spread. Other options include designing and implementing tech solutions for emerging vertical farms, or selling individual technologies for the same.

Off-the-shelf products for individuals and farms. Developing a vertical farming solution need not necessarily be complex. Look at what Bengaluru based startup Greenopia has done. They sell kits with smart self-watering pots, enriched soil and the right seeds. The sensor-embedded pots replenish moisture in the soil on a need basis, and notify you when you need to refill water externally (once in a few days).

The solution comes with a mobile app, which not only helps you be in control of your plants—be it flowers or herbs—but also share information with a growing community. For example, if somebody has managed to consistently grow the perfect mint in their kitchen garden, they can share the parameters that led to the perfect crop, so others can replicate it.

You could start with a simple product and, as your business gains traction, you could expand your portfolio with more products. One well-known example of this model is Wyoming (USA) based Bright AgroTech. They sell a variety of technology products ranging from vertical growing towers and LED lights to software. They also offer consultation, which is very important for a nascent vertical like this.

Focusing on one of the supporting technologies. You can develop and sell solutions focused on any one aspect of vertical farming, like air-conditioning, lighting or intelligence. However, you need to think carefully before entering into a business that covers only one tech component, because your success might depend on the availability of other supporting technologies in that region.

In most cases, you might have to supply your tech to a larger player, who offers an end-to-end platform. That is, you become a vendor. Plus, in an emerging market like India, you cannot expect a large enough market to sustain your business if you plan to sell only to vertical farmers. This option makes sense if vertical farming is a logical extension to an already existing product line; like when Philips or Illumitex forayed into horticultural lighting solutions.

Platform approach. A more holistic business would be to aggregate all the technologies required for vertical farming onto one platform. To achieve this, you would have to put together a multi-disciplinary team to design and implement the solution. When doing so, it is clear that you cannot succeed if you focus only on technology aspects. You need to pay more attention to farming aspects and use technology as it is meant to be—merely an enabler.

Dr Dickson Despommier, author of The Vertical Farm, hits the nail on the head, when he says, “Chances are, none of the fanciful, futuristic Jetsons vertical farms that you will find on Google Images [will] be built, as they are not considering the reality of farming on a commercial scale. Many of these designs are proposed by architects and designers, not the farmers themselves.”

So if you want to succeed, ensure that your team has a farmer or two. This is a good business model, which has worked for companies like Houston (USA) based Indoor Harvest Corp. They partner with companies like Illumitex, Dosatron and Hort Americas to work out all aspects of a vertical farm, right from watering, nutrient delivery, lighting and HVAC, to constructing expandable and upgradable modular infrastructure to house it all.

Technology as a service. Vertical farming need not always be on a commercial scale, conducted in specially-architected greenhouses. It can even be done in a common room, on the terrace or basement of an apartment complex, office or factory, just growing enough to feed the folks who live or work there.

However, if you look at the time-pressed urban population, they will hardly be motivated to implement vertical farming if its maintenance is too tiresome. So Sanjay Aggarwal, founder and chief executive officer of Clover Organic, a pioneer in vertical farming in India, suggests, “It would make sense for a person to sell the infrastructure and then charge a monthly fee for looking after the infrastructure.”

This kind of facility would also be very helpful for a traditional farmer who decides to try out vertical farming. The farmer might be great at farming, but might not know technology. So if you are able to install and maintain the tech infrastructure, the farmer can put his farming knowledge to great use.

Set an example and sell the tech. Factory farming seems to be the fad now. Tech industry majors like Toshiba, Sharp and Fujitsu are all into vertical farming. Fujitsu grows lettuce in a former silicon chip manufacturing plant, and Sharp grows strawberries in Dubai.

Interestingly, Fujitsu’s facility is less than 100km away from the location of the 2011 Fukushima nuclear disaster, and it grows 3000 heads of lettuce a day, which sell for three times the price of other lettuce.

Fig. 2: Each crop has an ideal light recipe for best quality, taste and yield (Image courtesy: Philips)

Toshiba has a high-tech vertical farm near Tokyo where it grows lettuces—it projects that the produce will be around three million heads of lettuce per year. Basically, these vertical farming setups have a two-fold benefit. Not only can the produce be sold in the market, but once the systems are fine-tuned, these can be sold to several vertical farms, worldwide.

Tech based enablers. There are technologies that can help all kinds of vertical farmers, whether or not they use technology to control the environment. If you can think up innovative technologies that can help this segment, say a mobile-enabled sensor network to monitor the nutrient levels or a mobile app to exclusively shop for vertical farming needs, then you have an existing market to tap, and might get quicker returns.

Raising money to raise crops

In India, tech based vertical farming is a greenfield. Internationally, startups in this space are hopeful of being very profitable, but most are still in their first year of operation. So there is no clear business model for you to follow; no black-and-white instruction on what is right or what is wrong.

Here are some tips gleaned from here and there, for those who wish to foray into this unexplored terrain:

1. If you are developing off-the-shelf products for vertical farming, you can start small by crowd-sourcing funds. After developing one or two successful products, you can expand your product range later with the profits earned from initial products. Greenopia, for instance, raised funds on Wishberry. They crossed their funding goal in just two months, raising ` 958,500, contributed by 17 backers from six countries. Their campaign was backed by popular names like Rajan Anandhan, managing director and vice president of Google India, Sarad Sharma, former chief executive officer of Yahoo India, Dori Tunstall, a renowned professor in design anthropology, Diana Greenberg, a well-known user experience designer, and Margaret Atwood, the famous writer.

2. If you want to do vertical farming yourself, in a tech-intensive setup, a small terrace area will not make sense because the volume of business will not justify the heavy investment. You need to go for a larger infrastructure, preferably situated close to a city.

Learning from their past mistakes, Paul Lightfoot, chief executive of BrightFarms, stated in a Wall Street Journal story that, “Building farms on city rooftops is a foolish endeavour because of higher costs and additional time for permitting.” The firm, which has raised more than US$ 25 million in equity and more than US$ 15 million in project finance, is now focusing on greenhouse farms in locations outside of urban centres. Speaking of city terrace based farms, Lightfoot says, “You would scale very slowly, and waste investors’ money.”

3. AeroFarms, one of the global pioneers in this space, has raised US$ 70 million in corporate and project financing. The company is not yet profitable, but expects to become cash-flow positive in its first year of operation. In a financial news report last year, chief executive officer of Aerofarms quipped that, they are always in capital-raising mode due to the nature of the business. When planning the finances of a vertical farming startup, you need to remember that even business activities like planning and hiring need money.

4. Funding experts suggest that if you wish to go into the business of vertical farming or vertical farming technology, you would have to start small and set a track record, while gradually increasing the size and complexity of projects. That way, your funding model will also be more manageable, as your growth can be partly organic and partly funded.
Second, you need to remember that most investors do not fund farms; they fund farming mechanisms and infrastructure!

5. Being an emerging field and one that the government is interested in promoting, you can expect funding from industry bodies like Confederation of Indian Industry, too. Some of the organic farming startups in the North East, for example, are funded by Confederation of Indian Industry-Ahmedabad and organisations like Village Capital, USA.

The wait before the cash register chimes

“I think commercial viability of vertical farming, its reliability, potential to scale to meet demand and the like are yet to be proven. Not to mention proof-of-value of soil-less agriculture from nutrition and health perspectives. Consequently, like any other revolution, we need both an abundance of timely resources and a good measure of restraint. We also need a concerted effort from several stakeholders, especially the government—not just subsidies, but rather complete ownership of infrastructure and policy pieces with respect to space, power, regulation, policy and tax breaks. This is about creating the ecosystem, not just funding pieces of the puzzle. The business model, ideally, should be a private and public partnership, for it to work in the long term,” says Malhotra.
The good news is that the government is in favour of vertical farming. Last year’s Vertical Farming Conference in Bengaluru was a step towards getting hi-tech agriculture within the reach of local farmers. Speaking to The Hindu at the conference, N.K. Krishna Kumar, deputy director general of ICAR, mentioned that the scope of vertical farming goes far beyond terrace gardening. It involves cultivation of various horticultural crops—fruits and vegetables, besides rare varieties of flowers such as orchids in multiple layers—with the help of proper supporting structures. He said it is possible to grow enough vegetables and fruits or flowers even in apartments through vertical gardening. Urban residents can grow their own food, or even take up commercial farming.

Irrespective of the business model, Malhotra has a word of caution for technopreneurs, “Technology players will fail regardless of the amount and term of funding if they continue to be siloed in their approach, as has been endemic in the sector. Technology companies, including information technology, try to avoid solving the larger business problem and are reluctant to go beyond the scope of their own narrow expertise.

“Additionally, technology can help in forecasting demand and understanding customers’ real needs. Focus has to be more on the consumer. Put simply, any technology needed to support the vertical farming business must be oriented to the customer (farmer), and prototype solutions should be quickly tested for efficacy.

“A design-thinking intervention, done seriously at the beginning of each exercise, will ensure a holistic view to bring out a coherent and sustainable solution, tested beforehand for efficacy and need fulfilment.”

Vertical farming is fresh pasture for technopreneurs in India. Its benefits have, however, been proven abroad, especially in land-scarce regions like Singapore. With the right team and tech in place, it is possible to enter this segment profitably in India, too. But as Malhotra says, the key would be to set the business up in partnership with the right government bodies, to lower the risk and improve market reach. Even more important is the technologist’s mindset—the ability to put aside technology and think like a farmer.

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Janani Gopalakrishnan Vikram is a technically-qualified freelance writer, editor and hands-on mom based in Chennai


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