vertical Farms were supposed to be the answer another vertical Farm files for bankruptcy
vertical Farm startup files for chapter 11 bankruptcy bankrupt a way of feeding a ever
increasing world population and do it all with less water and by stacking vertically grow more
produce on less acreage it all sounds like a brilliant idea and yet fast forward to 2024
and vertical Farm after vertical Farm is failing and going bankrupt so what happened this sounds
s like such a good idea on paper but clearly something's not working so we need to get to
the bottom of what exactly is going on cuz this one surprised me and there's actually
a little bit more to the story than I realized so stick around till the end I'm Ricky and this tuid
adventure this video is sponsored by ground news over $2 billion were invested in vertical farms
in 2022 with hundreds of startups and vertical Farms promising to make farming possible in large
Urban hubs by 2023 the vertical farming Market was already worth over 5 billion seemingly with every
Venture Capital firm around the world with fear of missing out looking to invest in the next big
vertical farming unicorn this story actually goes back further than you might think vertical Farms
have been popular since the mid 1990s in 20120 there were only about 100 well-funded vertical
farming companies but fast forward to 2023 and there were over 2,000 of them in the us alone
and many more in Europe Asia and the Middle East some of these companies were on a rocket SHP ride
to reaching unicorn status which is basically a private company startup that's worth over a
billion dollars for example the German company infarm founded in 2013 was the first unicorn
vertical farming startup raising over $600 million and reaching a valuation of over 1 billion in
2021 bowy farming was the second unicorn worth around $2.3 billion in 2021 there was real buzz
in the air and the excitement was palpable people actually thought that Silicon Valley might have
finally solved the farming sustainability problem the benefits of vertical farming were widely
publicized better crop yields for example where vertical Farms could produce multiple times higher
output than regular Farms or even Greenhouse farming another big key point was the reduction
in water use up to 90% or more and this is really really important because depending on where you're
trying to build this Farm water might become increasingly scarce and of course there was year-
round production where it didn't really matter what season it was or what the weather was like
outside you could grow your crops all the time another big thing was land use reduction using
up just a fraction of the land and by building upward you could have similar outputs on much less
land this really mattered because this allowed you to grow food in more densely populated urban
areas as opposed to from Halfway Around the World it also actually minimize the use of pesticides
because you can control the environment and it was indoors you wouldn't have as much bugs and
bacteria to contend with and finally vertical Farms have the potential at least to be highly
automated by the way have you ever wondered how we do our research for our videos just put up on
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just about $5 a month huge thanks to ground news and you now back to the show that was the promise
but the reality unfortunately is starting to sink in in 2023 impatient investors started
dropping out of the market and we'll get to why they did in a minute venture capital investment
fell from 2.1 billion in the first 3 qus of 2022 to just 275 million in the same period in 2023
a drop of almost 90% but why does that matter I mean in most Industries yes less investment
means things will take longer there's less growth but it doesn't mean that companies will just come
crashing down however that's precisely what's happening with the vertical farming industry
fifth season a robo farming company was among the first to go Belly Up in late 2022 here's how the
former VP at fth season Chris ceni explains what happened to the company we had Tech investors in
Silicon Valley and they had expectations of how fast things were going to come out everybody was
pulling back so the funding was not readily available also the burn in vertical farming
is very high but that was only the beginning all major players were failing in March 2023 upward
Farms which had raised almost $150 million and had broken ground on a new 250,000 ft vertical Farm in
Pennsylvania in 2022 announced it would seize all vertical farming operations also New Jersey's Aero
Farms kuy's app Harvest and planted Detroit all filed for bankruptcy in farm the German unicorn
also closed operations in Denmark the UK France the Netherlands Germany completely exiting the
European market Kera the company with the most vertical farms around the world also filed for
chapter 11 bankruptcy in April and one of the biggest of all Bowery Farms took a heavy blow
to its valuation while they didn't file for bankruptcy the company that was valued at 2.3
billion in 2021 was written down to just under 350 Million by the end of 2023 and had to do two
massive layoffs to stay afloat that really sucks this is a technology that I was really rooting
for but to better understand why this is happening we should probably learn a little bit more about
vertical farming imagine growing plants in a sealed skyscraper or building instead of a field
that's the essence of vertical farming in vertical farming crops grow vertically and stack trays or
containers maximizing the use of surface area plants don't need soil they get their nutrients
from a special water solution delivered directly to the roots by Hydroponics or aeroponic but the
key is lighting we replace regular sunlight with special LED lights that mimic the natural light
spectrum plants need to grow lighting in vertical Farms takes advantage of a certain principle that
plants don't actually use all the light from the sun it's only special wavelengths so vertical
Farms use special LEDs that produce light in two colors that plants love blue LEDs provide blue
light that help plants grow while red LEDs promote flowering and fruiting by adjusting the amount of
red and blue light farmers can optimize plant growth depending on the crop that's that's why
whenever you see a picture of a vertical Farm they always look sort of purple combination of both
finally vertical Farms also closely Monitor and control temperature humidity and air circulation
to create the perfect environment for each crop regardless of season or what's happening outside
after looking at the technology and comparing it to normal agriculture I noticed several clear
cons you need a lot more high-tech equipment and sensors which are just more expensive up front it
seems of silly to buy high-tech LEDs in red and blue to mimic sunlight when we could just use the
Sun for free and operating a vertical Farm also requires much more skilled workers with knowledge
of plant science engineering and controlled environment agriculture not only are these
skills harder to find but they also need much higher labor cost compared to hiring some field
hands to work a farm and after a bit of digging I also discovered that vertical Farms are much more
prone to certain risk like Pest and disease since both the water and the air are circulated in a
closed loop system so the very benefit that they were trying to go for controlling the environment
can very quickly turn on you as well also have you noticed that practically all the stuff that comes
out of a vertical Farm is lettuce basil and other leafy greens how on Earth are we going to feed the
world with nothing but green salad where are the fruits and vegetables at well that has to do with
vertical Farm's biggest Achilles [Music] he let's use vertical farming's most beloved and popular
crop as an example lettuce this table shows an average yield of lettuce in different types of
farms you can see that the vertical Farms have much higher productivity than traditional farming
a small container vertical Farm can yield 14 lb of lettuce per square foot as much as 33 times more
than the industrial open field farming and over 20 times more than a high hopon a greenhouse this
doesn't just work with lettuce it happens with most other crops you can grow in a vertical farm
so yes vertical Farms are way more productive than normal Farms per square acre but that doesn't make
them profitable there's more to the equation than just growing more lettuce per acre of land what if
you have no shortage of land then that doesn't really matter right it comes down to the price
of a head of lettuce no one's paying more for the same Lettuce grown in a vertical farm and this is
where it gets complicated because vertical Farms have costs that traditional Farms don't how about
electricity running all those LED lights in robot 24/7 so that's going to eat into your profit well
here's what I found for a full year of vertical farming notice that contrary to what I initially
thought electricity doesn't make up most of the cost it's less than 10% of the total cost of a
head of lettuce the highest cost comes from labor which as I mentioned before is more expensive than
a normal Farm in this case contributes almost half of the overall cost the second highest expense is
capital expenses this comes from high initial investment in everything from equipment sensors
heat pumps AC heating cooling and the like and then there's the maintenance of all that equipment
and that works out to a cost of $526 per pound of lettuce or about $4 per head and that's the price
at the farm imagine what you might end up paying at the supermarket take a minute to think about
how much you paid for your last head of lettuce let me know in the comments below this will depend
on where you live obviously I'm guessing it's less than 525 how about in a traditional open
Field farm here's what the cost would look like the numbers speak for themselves producing a pound
of lettuce on a field cost six times less than a vertical Farm yes you can argue that there are
higher shipping cost because Farms are further away from the people that need them but these
Supply chains are super optim and add very little to the actual end price of lettuce vertical Farm's
problem isn't that we're using LEDs instead of free sunlight it's that labor and capital costs
are way too high in farms you don't even have to worry about how much your land losing value
will cost you every year because it doesn't lose value it's Farmland in a vertical Farm not only
do you have to spend hundreds sometimes millions of dollars to set up a vertical Farm but that farm
loses value over time as your assets and Equipment depreciate and if you're wondering what is a head
of lettuce or a pound of lettuce cost here in the US about $260 and that's to the consumer
which means that the wholesale price that the farmers are selling it at is 63 to126 per pound
and that's why these Farms just cannot compete especially if where they're established have high
labor cost easy access to normal Farm produce and high electricity prices which describes a lot of
the European markets that this was targeted for ultimately the entire industry was predicated on
a bet that vertical Farms established right near customers with higher levels of sustainability
and better Water Management which is all true could produce a product that was cheaper than
a developing Nation with copious amounts of sunshine and Rain normally and the cost of
shipping it and that gamble just didn't pay off but there is a Silver Lining most large vertical
farming companies are relocating in hot and Aid climates where there's a lot of renewable energy
like in the Middle East this is what's making huge construction projects like Saudi Arabia's
line possible how else do you feed millions of people in a linear City also while many companies
are going under the vertical farming industry at large is actually still growing with a compound
annual growth rate of about 25% if we figure out how to further automate these Farms and
the hardware and prices go down as economies of scale are reached could we actually see this work
and the answer is kind of maybe ultimately this is still a wager between humans and Engineering
versus mother nature and the Sun and where you fall kind of depends upon your outlook but if
you thought this was interesting you're not going to believe this video got to watch next