Controlled Environment Agriculture

Musk’s Square Roots Joins CEA Companies Struggling Financially

Vertical Farming Startups Layoffs Continues

A Tale of Two Cities: Tech Farming Startups Square Roots and AppHarvest Face Operational Overhauls; Planted Detroit Winds Down

Vertical Farming Startup Square Roots: Navigating Layoffs and Restructuring

Square Roots, the vertical farming startup co-founded by Kimbal Musk, Elon Musk’s brother, is facing significant operational changes, according to a recent Business Insider report. The tech farming company, established in 2016, is known for utilizing shipping containers and artificial light to create localized, year-round farming processes.

Having expanded to five locations by 2019 and announced a partnership with Gordon Food Service, Square Roots appeared to be on an upward trajectory, securing over $90 million in funding as of April 2022. However, recent events have drastically altered the company’s direction. CEO Tobias Peggs recently announced the cessation of operations at locations in Springfield, Ohio, Shepherdsville, Kentucky, and Kenosha, Wisconsin, via a company-wide Zoom call. Additionally, the majority of employees at the Grand Rapids location were laid off.

Square Roots aims to shift its focus towards supporting its business partners, such as Gordon Food Service, and transition its business model from packaging its products to “farming as a service.” This sudden pivot has left many employees facing an uncertain future, particularly in Michigan, where few hydroponic startups exist.

AppHarvest: Seeking Protection and Preparing for Financial Transition

In contrast, AppHarvest, a public benefit corporation and a Certified B Corporation, announced its plans to navigate a financial and operational transition to decrease its outstanding liabilities. Despite facing this challenge, AppHarvest intends to maintain operations at all of its farm locations and continue supplying its products to leading national grocery chains, restaurants, and food service providers.

To facilitate this transition, AppHarvest has voluntarily filed petitions for Chapter 11 protection under the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The company has secured a commitment from its largest secured creditor, Equilibrium, for debtor-in-possession (DIP) financing of about $30 million. This financing is aimed at sustaining operations at its Morehead, Richmond, and Somerset farms during the Chapter 11 process.

Planted Detroit: Bidding Farewell

On a more somber note, the community-supported agriculture (CSA) company, Planted Detroit, announced its impending closure due to budget constraints. In a message to the Planted Detroit community, CEO & Founder Tom Adamczyk expressed his regret over the company’s unfortunate circumstance.

Despite these challenges, Planted Detroit remains committed to fulfilling its obligations to its customers. The company will continue to provide salads and greens until July 28th, honoring all subscriptions, farmers market commitments, and delivery orders placed on their website. Products will be available for pickup at the farm from July 31st to August 4th, which will mark the final day of operations.

In conclusion, the recent changes seen in Square Roots, AppHarvest, and Planted Detroit highlight the volatility and challenges within the vertical farming and tech farming industries. Each company is navigating its unique path and striving to maintain its commitment to sustainable and localized food production, while adapting to the financial realities of the sector.

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