Indiana-based Co-Alliance LLP, a partnership of agricultural cooperatives, and one of the largest agricultural companies in the U.S., has deepened its relationship with Indoor Farms of America, taking an undisclosed equity stake in the company.

Indoor Farms of America, founded four years ago by a team with farming roots that reach back through multiple generations, is striving to advance the development of controlled environment farming systems. Through its cost-effective business model, Indoor Farms of America designs aeroponic vertical farming modules and products that have the potential to improve existing farmers’ ability to earn revenue by extending the growing season to a year-round cycle.

This investment by Co-Alliance comes only weeks after the group purchased two “warehouse” style farming units from the company which it plans to use in pilot programs with traditional farmers looking to diversify their income streams and mitigate risk.

“When we had our first visit from the folks at Co-Alliance late last year, we expressed our commitment to having traditional agriculture in the U.S. embrace this technology in a manner that would benefit them, and we discussed in detail just how that would take shape,” explained David Martin, CEO of Indoor Farms of America.

“We are evaluating the commercial application and income generating potential of the farms here in Indiana so when we introduce the technology to our member-growers on a larger scale, we have a turnkey, replicable, scalable complete production process in place,” noted John Graham, CFO of Co-Alliance.

Co-Alliance sees this technology as key to helping traditional farmers gain exposure and benefit from the “locally grown” food movement, while benefitting their overall business through year-round production.

“Co-Alliance is positioning itself and its farmer owners to be able to capitalize on the growing consumer demands for truly fresh, locally grown, and high-quality products available to them from local farmers they know and trust, year-round,” said Co-Alliance CEO Kevin Still. “And to do so, we believe investing in Indoor Farms of America is the right way to go about it.”

The Indoor Ag Arena

Population trends, and the ability to extend traditional farmers’ production year-round aside, there are various macro dynamics behind the decision to invest in indoor agriculture.

Since 1982, 24 million acres of U.S. farmland have been lost to development, and the loss continues at a rate of 40 acres of farm and ranch land every hour, according to the American Farmland Trust. More specifically, the California Climate & Agriculture Network states that California, one of the top-producing agricultural states in the country, has lost an average of 50,000 acres of farmland each year for the past 30 years due to urbanization and development.

Furthermore, traditional agriculture accounts for the use of 70 percent of all the available global water supply, and the U.S. alone uses over 700 million pounds of pesticides per year – all factors that Bowery Farming feels its business model can alleviate.

“In agriculture, everyone agrees that maybe not right away but say in 15 years, water will be expensive, healthy soil will be scarce, and it will be more expensive to farm outdoors than inside. Why wait to work on that problem until it’s a crisis?” Rob Hayes, partner with First Round, pointed out to Tech Crunch in February of this year.

Reflecting the attention this segment of the agtech world is gaining in the investment space – in August of last year, Kimbal Musk,  younger brother of Tesla and SpaceX founder, Elon Musk, and his business partner, Tobias Peggs, announced the planned launch of Square Roots– an accelerator for urban, vertical farming startups.

Key investors and backers of the accelerator include Los Angeles-based Powerplant Ventures, Lightbank, FoodTech Angels, GroundUp, Techstars CTO Jud Valeski, and Ann Marie Gardner, the founder of Modern Farmer.

A Summer to Remember

This summer has been one to remember for investment in the vertical and indoor farming industry as rounds grow in size.

In June of this year, New Jersey-based vertical farming startup Bowery Farming announced it had raised $20 million in a Series A1 co-led by General Catalyst and GGV Capital, and including GV, First Round Capital, and other seed round investors. This round brought the company’s total earning to $27.5 million.

Just one month later, Paris-based container farming startup, Agricool, announced it had raised US$9.1 million1 through a funding round that includes Jacques-Antoine Granjon, the founder of  Vente-Privee.com; entrepreneur, Thibault Elziere; and existing investors, Henri Seydoux, the founder of drone company, Parrot, and venture capital firm, Daphni.

This round came only a matter of months after the company announced it had raised $4.3 million in the fourth quarter of 2016 through a round led by Daphni, and included Hemri Seydoux and Jean-Daniel Guyot, a co-founder of Capital Train.

However, it was San Francisco-based indoor vertical farming startup Plenty which set the benchmark in July when it announced it had raised the largest agtech funding round in history – raising $200 million in a Series B led by SoftBank Vision Fund – the $93 billion all-stage tech fund headed by Japanese billionaire Masayoshi Son. Other participants in the round include affiliates of Louis M. Bacon, the founder of Moore Capital Management, and existing investors Eric Schmidt’s Innovation Endeavors, Finistere, DCM, Data Collective, and Bezos Expeditions.

 

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.