The Investment Case for Indoor Agriculture


Whenever we talk with indoor growers about their businesses, discussion eventually turns to the
cost of establishing and running an indoor farm. For all of their many benefits, indoor farms are
hampered by higher initial capital costs than outdoor farms, and the need for funding is accelerating as the industry transitions from a niche activity to a commonplace companion to outdoor farming, another tool in the commercial farmers’ tool kit.

Indoor farming is at a tipping point, as improved indoor farm economics and increased
mainstream acceptance of the industry mean larger vertical farming projects are becoming
commonplace. In 2014, we estimate that $33mn was raised by the US indoor produce industry as a whole; a single company – a stealth-stage vertical farmer – recently raised not much short of that total alone.

We estimate that a total build cost of $42bn would be needed to move 40% of just two crops –
lettuce and strawberries – into vertical farming systems, a goal which is less daunting when we
consider that the tomato industry moved from 10% under glass to 40% within the space of seven
years . In turn, this means a heightened need for capital to fund the wave of new indoor farm

This transition takes place against the backdrop of a period of rapid change in the financial services industry. The stable sources of funding on which startups have been able to rely for the past 20 years – traditional banks and wealth management firms – are ceding ground to newer forms of funding, such as, crowdfunding, microfinance and marketplace lending. In turn, this
opens funding opportunities for indoor farmers and entrepreneurs that go well beyond the venture capital, private equity and bank loans that are best known as capital sources.

The goal of this white paper is twofold; to outline the rationale for, and risks of investing in indoor
agriculture, and to examine potential funding sources. As such, it is intended for use by
entrepreneurs and investors alike. In preparing it, we have drawn on discussions with more than
fifty industry stakeholders, have conducted our own survey of industry financing needs and have
collated and analyzed data from crowdfunding platforms and from numerous industry, academic
and media sources.
The reason for our interest in this topic is simple: access to sufficient appropriate capital remains one of the greatest keys to success for indoor agriculture entrepreneurs. In our recent survey, more than half of respondents said that finding sufficient funding to operate or expand their firm was their greatest business challenge . Over three quarters of those who are planning to begin indoor farming say they will need to raise external funds before they do so .

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