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From lighting cost to location, omni-Directional analysis Vertical Farm
- Nov 07, 2017 -

In July this year, the Softbank Vision Fund, the son of Japan's richest man, was ignited by a fire on the vertical farm when it smashed $200 million into the B-round financing of Plenty, an agricultural technology company in southern San Francisco, Calif.

The richest man originally planned to give Plenty's founder Matt Barnard 15 minutes, but unexpectedly, the final meeting time was more than 45 minutes. After two weeks, the investment was finalized.

A farming company, why so quickly attract sun justice to hit the heavy? Later, son issued a statement saying he believed the company had the potential to help raise crop yields around large cities, change the current food system and improve the quality of human life.

Plenty, an agricultural technology company with an indoor vertical farm, is headquartered in San Francisco, California. Their vegetables and fruits are grown from the side of the tower, not from the land. The special appearance of the tower, so that the first time son saw the tower from the car unloaded, all slightly puzzled.

With a vision of investment, plenty hopes to move from Silicon Valley, the world's top technology, to the periphery of more than 1 million permanent residents around the world, such as China, Japan and the Middle East. In less than 30 days, 500 of these farms were built: less than 1% of the land, 1% of the water, only synthetic fertilizers, no pesticides, and the freshest and most delicious produce.

The total population of San Francisco's Big Bay Area is close to 8 million people, but China's urban population is almost free to kill it: the latest figures for 2017 show that there are 102 cities with more than million people in China, 30 cities with a population of more than 8 million, and 13 urban populations. 2030, China's urban population is expected to reach 1 billion, accounting for 70% of the population. The United Nations Department of Economic and Social Affairs has updated the World Urbanization Outlook, with more than 4 billion people living in towns in the future.

Can 30% of the rural population feed 70% of the urban population? Facing the surging urban population and the increasingly scarce land, food and vegetables have become the problems that need to be faced in the urbanization era of the world's major cities.

The answer to the vertical farm is that the city can feed itself. Because, when the vegetables are no longer subject to the dry or flood of the weather, no longer need to worry about soil pollution and pest infestation, the fate of food can be mastered in the hands of humans. Vertical farms want to feed the 21st century urban population.

Can these vegetables from the air, the garage, the roof and the greenhouse really replace the vegetables we used to field in the future? Since the birth of the vertical farm has been nearly 20 years, why the current fire? What will the future be? This article tries to analyze your depth from many angles such as startups, investors, and consumers.

Vertical Farm Fire

Vertical farm, with the entire agricultural technology (Agtech) up.

In 2015, investors invested 4.6 billion of dollars in agricultural science and technology, more than $3.2 billion in 2016 years, and in the first half of 2017, the initial financing of agricultural technology start-ups was close to 2015 's total of $4.4 billion, up 6% per cent from a year earlier.

The new agricultural system, represented by vertical farms, raised $198 million in the year to 2017, up 560% per cent year-on-year. That's not the plenty $200 million that the vision throws. According to the current situation, it is expected that by 2022, only vertical agriculture of this category of companies, the market capitalisation is expected to exceed US $6 billion.

Combining Agfunder and crunchbase data, we screened the top ten companies in the world's current agricultural technology sector, with three of the top 10 companies doing vertical farms. One is the plenty, the other is the aero Farms that spies have interviewed earlier, and the other is the brightfarms in New York.

20 years of vertical farms

In fact, vertical farming is not a recent concept.

As early as 1999, Dickson Despommier, a professor of environmental science and Microbiology at Columbia University, joined his graduate students in the hope of providing food for the Manhattan population (about 2 million people) in New York with a rooftop garden. But the calculation found that 13 acres of roofs, probably only for 2% of the population of food. Prof Dickson then turned to the vertical plant, which, by 2001, had the first contour of a vertical farm.

Professor Dickson, as a staunch supporter of vertical farms, he believes that the emergence of vertical farms, so that farmers no longer need to worry about this year is drought or floods, soil has no pests, do not have to worry about the lack of water resources, food pollution, adequate nutrition and other problems, vertical farms will not completely replace traditional outdoor agriculture, But it will feed our 21st century.

Since the beginning of the 21st century, the American attempt to vertical farms has been around for nearly 20 years. If the light look at home than output, than figures, as if caught in an agricultural competition.

For example, the Aero Farms, which was previously interviewed by spies, began exploring vertical farms in 2003, with the world's largest "vertical farm", which produces 130 times times as much land as the same area. The $ more than 90 million in financing includes Goldman Sachs (Sachs), Prudential Finance (Prudential Financial) and many others. In the next 5 years, Aero Farms hopes to build 25 farms in 9 countries. Now New Zealand, the Middle East has appeared aero Farms figure.

Plenty, which has just been invested in SoftBank's fund, was founded in 2014, with a higher production rate of 350 times times.

As a strong competitor, the Bowery Farming, which was also founded in 2014, uses computer vision, automation and machine learning to monitor plants, saying that it has 95% less water than conventional farming, which is 100 times times more productive than the same farm area. It also has a large number of well-known investment institutions, including Google's VC fund of the GV, as well as Alibaba, potatoes and other well-known cross-border capital GGV GGV Capital.

Why do all kinds of vertical farms in the United States successive birth? The United States is a country that has long needed to import large quantities of vegetables and fruit from Mexico, which accounts for about 35% of imports. If you want to eat home-grown green leafy vegetables, most are produced in California, Arizona, State or North Carolina. Especially from November to March, 90% of green leafy vegetables consumed by American residents came from the southwest. This means that if you are a resident of the eastern United States, the vegetables that you eat may have been transported about 2000 miles away.

The chief financial officer of Aero Farms told the spies that in the current cost of selling a vegetable, transportation costs accounted for 20%, and the cost of the cold chain packaging accounted for 20%-30%, which is nearly half. This is also why vertical farms can exist, it not only solves the problem of urban residents can not eat fresh vegetables, but also to solve the vegetable production, transportation and other problems, if the same price to sell, urban residents can eat more fresh vegetables.

Japan, with the exception of the United States, is the country with the most attempts on vertical farms.

Dr. Toyoki Kozai of the University of Chiba, Japan, is known as "the father of modern plant plants". He defined the plant plant in Japan as a "man-made light source plant" (Plantfactory with Artificial Light, Pfal). These man-made light plant plants are characterized by: high gas tightness, high thermal insulation, high hygiene level, can produce clean, high-quality vegetables, no need to wash can be eaten.

He had disclosed in his speech that Japan's artificial light plant plants from 2009 onwards rapid growth, to 2014 years with 168, only 2015 year is expected to increase 200, but are small, can be small to school classrooms, the company's roof, garden, home and so on. Since 2014, vegetables from some plant plants have been exported to Singapore, Mongolia, Russia and other countries. In the Chinese market, the supply of some high-end Japanese restaurants.

In fact, such as the Middle East and Africa, such as the high water shortage, arid areas, as well as Russia, these perennial cold, not suitable for vegetable growing countries, has also been exerting strength or vertical farm technology to enter.

According to a 2017-2021 analysis of the vertical agricultural market in the Middle East and Africa, suppliers of vertical farms in the Middle East and Africa happen to be the current number of key players in vertical farms, such as the American Aero Farms, the Dutch Koninklijke Philips, Singapore Sky Greens and so on. As for the parent fund of the Plenty Vision Fund, there are sovereign wealth funds from the Middle East.

If you don't choose the right place, you'll die.

Of course, in such a fiery momentum, many who have already fallen on the road.

FarmedHere, which is located around Chicago, was founded in 2010 as the largest indoor farm in the United States and is expected to expand across the United States, but closed in January this year, announcing a shift to Kentucky State in August.

Podponics, an indoor farm in Atlanta, was also founded in 2010, raising $15 million from investors and declaring bankruptcy in 2016.

Localgarden, a rooftop farm in an indoor parking garage in Vancouver, Canada, was founded earlier in 2007, however, after 7 years of operation, suffered from problems of production and capital, and was declared bankrupt in 2014.

Why are they dead? The founders, co-founder or mentor of the three came to together at a meeting to try to sum up the causes of the "vertical farm" dead.

FarmedHere has been disclosed as an important factor in the death of LED lamp lighting costs. Imagine that seven years ago, if you needed to buy the same number of LEDs, the cost would be 64 times times higher.

However, lighting power costs are not the primary cause of failure. The three or so-called vertical farms that have failed or come back have mentioned one word: location, and important words three times: position, position, position. Three of the "location" behind the corresponding is actually three of the important issues, did not do, vertical farm failure is not far.

The first "position" behind the fact is: you plant vegetables, in the end is for who kind of. In other words, if you can't sell them, you shouldn't let them grow up. "Sell food, the rest is second." ”

This in GGV GGV Capital Vice President Andy Yu seems to be a word: "Production", can not be produced to sell out, agricultural product retention cycle is very short. Vertical farms, or this kind of fine-grained greenhouse farming, in both China and the United States, will eventually win, and it must be "dual skills". In addition to the "production skills" to win, such as the ability to achieve a technical production of the amount of the average number of times, "sales capacity" is very important.

The second "location" corresponds to the problem of shortening the supply chain when you know who to sell it to, as close to the demand side as possible.

Like the podponics of bankruptcy, although they say the final cost can be $1.36/lb, much less than the cost of long-distance vegetable delivery in California. But there are also problems with its supply chain.

Podponics chose to produce vegetables for local restaurants, but they also worked with wholesalers and distributors, so the farm products would go through the wholesalers ' warehouses and back to restaurants on the street. The founder looked back and said that this was actually a need to adjust the warehouse address, "not close to the consumer so simple, but close to the demand side, such as distributors."

The third "position" is to consider the location of the supply capacity, which is related to the site in a variety of heating, ventilation, disinfection equipment problems, whether to support a large number of power capacity.

Cost Analysis: Equipment + hydro + Manual

Once the city is chosen as the main battlefield, how can the cost of vertical farms be calculated?

According to Dr. Toyoki Kozai's data, in the Japanese market, 20%-25% of the cost of vegetables per 1 dollars is electricity costs, including lighting, air conditioning, ventilation, water pumps and many other costs. But this is not the highest, the highest cost is the upfront equipment investment and plant depreciation rate, accounting for the total cost of 30%-35%. These two parts add up to over half of the total cost.

But overall, the cost of electricity is bound to get lower, according to the U.S. Energy Information Administration report, the efficiency of LED lighting has increased by about 50% per cent from 2012 to 2014 alone. By 2020, the cost could rise by another 50% per cent. Aero Farms has hired the former chief technical officer of LED lighting to help design a custom LED lighting system that will improve lighting efficiency.

What is the cost of getting close to half? In Europe and the United States, Japan and other developed countries, labor costs are unavoidable. Dr. Toyoki Kozai, who has disclosed in his book that the labor costs of such plants in Japan account for 25%, because you need very high skills (knowledge, experience, etc.) to manage vertical farms. The last 20% is composed of seeds, fertilizers, packaging and transportation.

In other words, if the supply of vertical farms in the Chinese market, once the availability of technology, land and labor costs two will have an advantage, lower than the developed countries.

Andy has seen similar projects in China. The nature of vertical farms, he argues, is a productivity boost, and technology is already relatively mature from a technology-supply point of view. In terms of cost, if it is a 3000 square meters of plant, upfront investment will need about 25 million yuan. Even around large cities, the cost of land leasing is not high, 1.5 million or so, a year's water and electricity costs are around 1.5 million, that is, in the country, electricity and land costs accounted for only 10%.

As for labor costs, a factory may need 4-5 of workers, which are less likely to be used than the same area of farmland. From plant construction to capacity climbing to market sales, it will take at least a year to actually complete a full capacity farm. Consider the cost should be a vertical farm of the overall economic model to measure, rather than just look at fixed input cost comparison, the cost of production, the future of sales, transportation, loss, price and other factors to be considered in.

Price: Become another organic food

Although power, hardware facilities and other upfront investment accounted for more than half of the total investments, but it is foreseeable that the vertical farm hardware costs will be reduced year by generation. Will the Chinese market be a big player for vertical farms in the present and future 35?

Andy thinks it's important to be able to compete for quality and sales.

From the sales channels, a few of the world's most important players are in cooperation with supermarkets, restaurants or wholesalers. Like Aero Farms, it has been working with organic supermarkets near New York State (Foods), as well as a number of supermarket chains such as ShopRite and Freshdirect, where consumers can buy their own branded vegetables.

Plenty is meeting with 15 government officials from four continents, as well as executives at Wal-Mart and Amazon, who want to sell vegetables that are the quality of Whole Foods, Wal-Mart prices, Bloomberg reported.

There is no doubt that price is another key factor affecting sales.

At present, the price of the sale of such products in the United States can not be "Wal-Mart" Price, but Aero Farms revealed that the price has been the same as normal organic vegetables, as "another organic food", and consumers have been able to gradually accept. Like Bowery Farming, sell six of leafy greens, including butter, lettuce and beets. Pricing is similar to organic vegetables, with 5 ounces (about 150g) priced from 3.49 to 3.99 dollars.

Countries like Japan and New Zealand also belong to countries with high vegetable prices. At present, Japan's cabbage is about 170 yen (about 10 yuan), lettuce per kilogram of about 25 yuan, like New Zealand's cucumber can be sold to 20 yuan a root.

Dr. Toyoki Kozai that because of the high price of vegetables in Japan, where prices are about 30% higher than normal, some factories do make a good profit (roughly 25%), but those that are not able to keep their profits well include many of the reasons mentioned above, Lack of upfront design and management, high labor costs and so on.

In Beijing, such high-end supermarkets as Sam's Club, Ole and others have grown vegetables from "vertical farms", says Andy. South China, is in Guang Shen, the Hong Kong and Macao region some high-end supermarkets can find traces. From the price point of view, 500 grams of the price of about 15-20 yuan, there is no way to do with the ordinary market to buy vegetables as cheap, because the farm itself has headquarters costs, distribution channels to maintain profits. But consumers at the head can buy such high quality vegetables at such a price.

This is another important selling point that vertical farm products emphasize: no pesticides, no pollution, no pests. Because it is cheap, it is not the biggest advantage that vertical farm vegetables emphasize. These brands really attract consumers is that it does meet the needs of consumers to go to pesticide, organic, non-polluting, and so many of the demand, now is not the kind of everyone can enjoy the field to eat vegetables picked years.

Imagine if vegetables only absorb nutrient solution, in constant temperature, humidity, seal, dust and other environment cultivation, can do to eliminate pests, even the original soil may exist heavy metal pollution problems, also no longer exist. In other words, the safety of vegetables has the first safeguard.

Picky consumers may also care about the nutritional content of these vegetables compared to normal vegetables. A number of vertical farms have proved that the rate of nutrient uptake can be maximized by testing the proportion of fertilizers, giving light and growing time in different ways.

So, in addition to the consumer of another important customer-the restaurant to pay? Mompou, the boss of one of the most popular Spanish restaurants in the Newark area, has personally tasted the aero farms vegetables, thinking that in addition to a little bit of "wonderful nutty taste", the freshness and color of the supermarket in the degree of the comparison. So he became a customer of aero farms.

And Plenty's restaurant users, including the world famous Michelin Samsung restaurant "The French Laundry" former deputy chef Anthony Secviar, Anthony now in Silicon Valley Parooto opened a restaurant. In Anthony's view, he did not expect much of this, after all, the French laundry before the vegetables, is a restaurant on a street apart. At close range, it means fresh. But when Anthony found "every basil leaf is the same lush, crisp, tasty and flawless", he was moved.

At present, the United States, the vertical farm almost all main leaf green vegetables, aerofarms and carrots, cucumbers and other varieties, in general, Aerofarms's large shipments are spinach, lettuce, kale and sesame seed dishes. It is the common leaf vegetable variety in the Western-style salad.

In Andy's view, a vertical farm project would be the first economic model. Vegetables that can grow quickly and grow short are more suitable for planting, such as spices such as mint leaves, bean sprouts and lettuce. "What's inside the salad, kind of the category may be good, the consumption scene and the frequency exist." "After all, the current high-end supermarket or normal restaurant to eat a salad, 40 yuan is no good, it costs an estimated 10 yuan."

Aero Farms, Bowery farming, and even plenty have expressed their desire to enter the Asian market, in the end, how the Chinese market?

Andy believes that, regardless of any market, it is a comprehensive ability, such as technology, cost control, sales channels, customer positioning and even branding. Getting into a market is much more important than technology and productivity. In dealing with the local government, customers and other relations, the local enterprises may have more advantages.

At the same time, the founders should be thinking about how to use the lower cost of capital to open up and scale up the market. It's not the simple thing to build 30 vertical plants for $100 million, make the most of the cash flow that sells vegetables on hand and leverage the money to develop the future.

For vertical farms, this is the best of times and the worst of times.

Son, the head of SoftBank, had chosen vertical farms for the first time in his venture to subvert the traditional farming industry, which was a blessing for vertical farms. However, as the overall technology matures, the influx of many capital, who can better survive in the consumer market, there is still a round of testing and tough.

But at the end of the day, humans and cities are always lucky. Instead of son bullish on the vision of a plenty family, it is not said that the vision of a vertical farm, after all, to reshape the current food system, there are some efforts.