As the present macro-environment requires vertical farms to reassess their strategy and operations to lower their cash burn rate and become viable, several have either initiated restructuring plans or shuttered buildings in recent weeks.
But how did things get to this point? What caused a notion that was touted as groundbreaking to turn into a financial trap? Has the era of “easy money,” during which start-ups and business owners could obtain loans with cheap interest rates or acquire funds from investors who had access to limitless funds as a result of governments printing money, contributed to this? Or is it a result of businesses attempting to re-invent existing processes?
Who Is Closing or Restructuring?
The Dutch firm Glowfarms announced that it will shut down operations after its final fundraising round failed, according to Vertical Farm daily’s Rebekka Boekhout. The team at Glowfarms, the firm alleges, was unable to raise enough cash to exist for the foreseeable future due to “external factors” relating to the macroeconomic environment (increasing energy costs).
The closure of Fifth Season, a Pittsburgh-based company, was also widely reported. Despite the possibility that the company’s Friday shutdown was influenced by macroeconomic pressure, as noted by bizjounral.com, management made no official justifications for the choice. This year’s failure follows that of Agricool, another vertical farming company.
The recent layoffs by prominent firms like InFarm, CubicFarms, or Iron-Ox are evidence that the sector is being impacted by the present market conditions as they aim to achieve positive cash flow or break even. In order to speed up its route to profitability, another firm, Kalera PLC, had to sell part of its assets. As a result, it is now in danger of being delisted from the NASDAQ, just like Edible Garden Ag or Agrify.
Why Did This Situation Develop?
The current macroeconomic trend is causing financial problems for the majority of indoor farming operations. While losses at vertical farms are increasing globally and several enterprises were forced to cease operations, greenhouses appear to be less affected.
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Image provided by Francesco Gallarotti on Unsplash
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