Dive Brief:
- Indoor agriculture company AeroFarms filed for Chapter 11 bankruptcy protection, it announced last week. The company said it entered an agreement to secure liquidity with previous investors to pay $10 million in debtor-in-possession financing. Its board of directors will continue to explore other financing options in order to repay creditors.
- AeroFarms cited significant headwinds faced by the vertical farming industry as a major factor in its decision, but said its Danville, Virginia farm — which the company previously said it wanted to make the most technologically advanced indoor aeroponic farm in the world — is continuing to grow at scale.
- AeroFarms, which has raised $238 million in funding to date, according to Crunchbase, has faced dwindling interest from investors in recent years as the sector faces headwinds of an uncertain economy. In late 2021, a merger with a special purpose acquisition company that would have taken AeroFarms public was called off. The deal would have valued AeroFarms at $1.2 billion.
Dive Insight:
While once considered a technology movement that would revolutionize agriculture, the indoor farming sector has seen funding levels drop in recent years, coinciding with plummeting venture capital investment in the food and agriculture industry.
AeroFarms, which was founded in New Jersey in 2004, has faced fiscal challenges since 2021, when its bid to go public in a merger with Spring Valley Acquisition Corp. fell flat.
The indoor agriculture company is also making changes in its leadership. Co-founder David Rosenberg is stepping down as CEO and will be a special advisor to the board, while chief financial officer Guy Blanchard will also serve as president.
“We are fortunate to have existing investors who continue to believe in AeroFarms and are confident that we can hit our targeted profitable operations for our Danville farm,” Blanchard said in the press release.
Problems in the vertical farming sector extend beyond AeroFarms. The uncertainty of the economy and sky-high initial costs drive skepticism among investors, with several having shuttered or scaled back their operations over the past year.
AppHarvest, which went public on Nasdaq in 2021 in a SPAC deal, could run out of money by October of this year, the company wrote in its quarterly earnings filing in May. AppHarvest’s low share price led Nasdaq to issue a notice of delisting, and the company has until Oct. 16 to pull its share price over $1.
An AppHarvest creditor that loaned the company more than $90 million to build a tomato-growing facility in Kentucky is also trying to force the facility into foreclosure, claiming last month that construction delays and cost overruns caused the company to violate the loan terms.
Other issues AppHarvest has faced this year include high expenses and lower revenue from strawberries.
Still, interest remains in the nascent vertical farming space, with some continuing to see economic and sustainability benefits in its technologies despite the high costs. An analysis from Pitchbook in 2022 projected the segment to be worth $155.6 billion by 2026.
Other players in the space continue to open new vertical farms. Square Roots opened its fifth farm in Kentucky earlier this month. Bowery Farming opened its largest facility in Pennsylvania last year, and previously announced plans to open locations in Arlington, Texas and Locust Grove, Georgia in 2023. Last September, Plenty announced its intention to invest $300 million during next six years to build what it said would be the largest vertical farm in the world in Richmond, Virginia. The farming campus would grow crops including strawberries, tomatoes and greens, the company said.
Megan Poinski contributed to this report.
