This week, Harvest Returns, the Texas-based, veteran-owned agriculture investment crowdfunding platform (recently featured on the Investable Universe podcast) announced a new partnership with Agritecture LLC, an urban farming consulting and digital services firm.
The two companies will work together to accelerate the urban farming and controlled environment agriculture (CEA) industry across the United States by offering new entrepreneurs a more accessible way to raise capital. The firms note that this type of agriculture–also known as “vertical farming“–can reduce the environmental impact of the food system and increase local food security.
“The covid-19 pandemic has revealed the fragility of centralized food production,” said Chris Rawley, co-founder and CEO of Harvest Returns. “Developing additional indoor farms will distribute growing operations closer to where food is consumed, creating a more resilient food system.”
In 2020, the U.S. Department of Agriculture made just $3 million in total grants available for urban agriculture and innovative production initiatives. Agritecture notes that the average startup cost for controlled environment farms modeled via their digital platform is $512,000, and nearly one-third are over $1 million, putting them out of reach, cost-wise for many independent operators.
“Since our founding in 2014, we’ve seen sustained, year-over-year growth in interest toward urban agriculture, especially amongst industry newcomers,” said Henry Gordon-Smith, Founder and CEO of Agritecture.
This growth has only accelerated since the onset of the pandemic, according to the team at Agritecture, which reported nearly a twofold increase in website traffic since the first quarter of 2020.
“Despite this increasing interest and the record levels of funding for the handful of indoor mega farms, financing continues to be one of the primary challenges for small and medium-scale CEA businesses,” Gordon-Smith notes. “Yet, we know these farms can achieve profitability with competitive payback periods, while still serving their local markets and communities.”
Gordon-Smith cites Agritecture’s 2019 and 2020 Global CEA Census Reports, produced alongside agtech solutions provider Autogrow, which show that nearly half of all CEA facilities are being started by those with no previous farming experience (88 percent of them below age 50). Furthermore, per their recent census, 78 percent of CEA business founders who attempted to raise money were unsuccessful in doing so through traditional financing sources, such as banks. Two-thirds of funds came from friends, family and angel investors.
Agritecture’s latest (2020) global census pointed to a robust outlook for CEA operators in 2021, particularly in India, where the fresh vegetable market is expected to grow 7.6 percent annually through 2025, compared to a 1.7 percent CAGR for vegetables in the U.S. for the same period. That report also notes that the Indian government is subsidizing greenhouse installation costs for farmers, with subsidies of up to 50 percent of upfront cost, directly benefiting the 20 percent of the farm sector that could be classified as large and medium-sized commercial farmers. Agritecture cites Agfunder research putting the value of agtech-related investment in India at $250 million in 2019, ranking 4th behind the U.S., France and Canada for global farm technology investment.
Last June, as was noted in the podcast, Harvest Returns reached a key milestone of $5 million in global private placement farming opportunities, helping grass-fed cattle and sheep producers alone to raise $2.5 million, while also funding vertical farms and other specialty growers in the United States and overseas markets. Since its inception in 2016, the firm has distributed over $600,000 in returns to platform investors.
