Investing in CEA with confidence

Investing in CEA with confidence

Controlled environment agriculture (CEA) is a rapidly growing segment of the farming industry. Demand for localized food systems and the products coming from them is rising, and companies are responding to it. Vertical farms and greenhouses are seeing much more capital investment than they had in the past, and CEA businesses are improving their unit economics through new technologies which attract investment, as well.

Many investments come from venture capitalists who want to treat vertical farming like a tech investment. However, a vertical farming company is a farming company after all, and those misaligned expectations have resulted in high-profile closures causing investors to pull back. Not unrelated to the previous challenge, a lot of people who are involved in this industry are coming from other industries that don't understand agriculture as fully and holistically as traditional farmers do. 

After completing multiple due diligence projects, which is essentially an auditing service for CEA operations, we've learned that many people make the same mistakes. In this article, I am sharing the six separate categories of assessment we use so that you can begin investing in CEA with confidence. 

1. Cultivation Technology

Cultivation technology lies at the center of many strategies and modern CEAs. When reviewing a CEA operation, we ask the questions: “What is the cultivation system being used? Is it providing a significant competitive advantage to their operation? Is it worth building or is it worth looking at off-the-shelf options?” 

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Photo provided by Agritecture