With the increase of global population and food demand, vertical farming has emerged as an innovative solution to food security. By growing crops in vertically stacked layers under controlled environments, vertical farming can achieve much higher yield on the same land area compared to conventional farming. This has attracted great investment interest in the recent years. However, there are also concerns about the high costs and risks involved. This article analyzes the investment trends, opportunities and risks in the vertical farming industry.
The investment scale in vertical farming keeps expanding
In recent years, investment in vertical farming has seen rapid growth globally. According to AgFunder data, investment in vertical farming reached $198 million in just the first half of 2017, a 560% year-on-year increase. Industry forecasts predict the vertical farming market will exceed $6 billion by 2022.
Large investments are pouring into major vertical farming startups like Plenty, AeroFarms and Bowery Farming from high-profile investors like Softbank Vision Fund, Goldman Sachs and Google Ventures. The modular and data-driven nature of vertical farms make them highly scalable and attractive to investors. Companies like Infarm have achieved unicorn status. Government funding and incentives also play an important role in driving vertical farming investment.
Vertical farming promises to solve food security challenges
Several factors are driving investors’ bullishness on vertical farming:
– Global population growth and rising food demand
– Pressure on land and water resources due to urbanization and climate change
– Vulnerabilities and uncertainties in conventional agriculture
By growing food indoors in stacked layers with precise environmental control, vertical farms can achieve higher productivity per square foot. They are less affected by climate, seasons or geography. The ability to locate vertical farms close to cities also reduces transportation costs and spoilage. These advantages make vertical farming an appealing solution to tackle future food security challenges.
But vertical farming still faces cost and scale-up hurdles
However, there are also valid concerns about the economic viability of vertical farms today. The high upfront costs for construction, lighting, HVAC and other systems present a major barrier. Operating costs like energy and labor are also substantial.
While costs are expected to fall with technological improvements over time, vertical farming products today still cost multiples more than conventional produce. The variety of crops that can be grown viably at scale is also limited currently.
More R&D is still needed to bring down system costs, improve energy efficiency and expand crop varieties. Execution risks also exist in scaling up vertical farms and developing sustainable business models. Investors need to look carefully at individual companies’ strategies.
Future trends to watch in vertical farming investment
Looking ahead, key trends to monitor in the vertical farming investment landscape include:
– Continued expansion in construction of new vertical farms globally, with Asia expected to drive a large share of growth
– M&A activity as consolidation occurs within the young industry
– Improvements in LED lighting, automation and AI to lower system costs and resource use
– Advances in genetics and breeding to expand the range of viable crops
– Innovative business models like vertical farming-as-a-service adopted by companies like Infarm
– Regulatory support through government subsidies and carbon pricing programs
While risks and uncertainties exist, vertical farming remains one of the most promising emerging solutions to sustainably feeding future populations. Prudent investors will stay abreast of new developments in this rapidly evolving industry.
Vertical farming has attracted surging investor interest, buoyed by its potential to enhance food security amidst global challenges. But scaling profitable business models still faces hurdles like high costs. Key trends to monitor include expansion plans, consolidation, technology improvements and innovative business models.