Feeding opportunity

The emerging innovation-intensive sector of urban farming is seeing heightened interest by venture capitalists, investments are growing faster than the crops: $2.4 billion so far this year at last count by PitchBook. That reflects a year over year (YoY) investment growth rate of 214 percent.  The number of individual deals also is rising 14 percent YoY. The sector is expected by many market analysts to capture an increasing share of the nation’s food supply for a number of reasons. Most notably, the historic drought in the western half of the U.S. is likely to have significant impact on the region’s agricultural industry, which currently accounts for up to 70 percent of the region’s water use.  Additionally, consumption of fresh vegetables tracks closely to income inequality and access to full service grocery stores and farmers’ markets, resulting in “food deserts” for many lower income neighborhoods. Thirdly, an ever increasing share of the world’s population is living in urban areas.

A fourth reason for the rapid growth in urban farming innovation is purely economic. There is a lot of cost and waste in the growing, harvesting, handling, transportation and distribution of produce, particularly light, water-intensive lettuces and greens. Growing closer to the market and in controlled environments allows producers to reduce their costs, decrease carbon footprints, and grow more flavorful varieties that appeal to a broader pool of potential consumers.

With the issues and opportunities mentioned above, it would seem arguments could easily be made for more regional tech-based economic development initiatives that cultivate cohesive innovation strategies integrating innovation-driven urban farming with stronger local rural-urban agricultural and food processing linkages to yield more resilient regional food systems, job creation and healthier communities.  

To date, though, the U.S. share of the urban farming tech companies receiving VC is surprisingly low, suggesting a vulnerability to letting other countries capture the leadership position in this emerging global market. While a few urban-grown food options may be found in some grocery stores across country, only 88 of the 262 firms with active VC positions, according to PitchBook, are based in the U.S.

The chart below shows the number of firms and active deals in 28 states and Puerto Rico. For purposes of classification, the “urban farming industry” also includes companies identified as “indoor farming” and “vertical farming.” All data is extracted from PitchBook as of earlier this week.