High-Tech Farm Startups Are Laid Low by Financing Drought, Pests

Ventures represent latest attempts by tech to transform established industries

By Amrith Ramkumar and Patrick Thomas | Updated May 25, 2023 6:49 pm ET

The Wall Street Journal

AppHarvest, which grows crops in indoor facilities, was once valued above $3.5 billion. Its market value is now down to about $75 million. PHOTO: APPHARVEST/REUTERS

Startups that promised to make farming a high-tech business are withering, suffering from rising costs, tight financing, pests and other problems that have troubled traditional agriculture for centuries.

Investors poured billions of dollars into companies such as AppHarvest APPH -2.76%decrease; red down pointing triangle and Local Bounti LOCL -5.76%decrease; red down pointing triangle that grow lettuce, tomatoes and other crops in indoor farms that use advanced technology such as sensors and robots to offset weather-related risks, use less water and produce more consistent crops. Shares of the two companies are down more than 95% since they went public in 2021, and in recent months at least four companies in the sector have shut down or filed for bankruptcy.

Funding has all but dried up. The industry raised a record $895 million in last year’s first quarter. So far in the current quarter, the figure is about $10 million, according to research provided by the firm AgFunder.

“Their business model was selling a vegetable, but they somehow described themselves as a technology company,” said Paul Sellew, chief executive of Little Leaf Farms, a Massachusetts startup that grows lettuce using high-tech greenhouses.

He says his company has avoided the sector’s difficulties by making day-to-day farming the priority rather than growth. It expects to hit $100 million in sales this year and says it is profitable.

The struggles of the indoor-agriculture companies mark the latest faltering efforts by entrepreneurs to use technology to upend established industries. WeWork said it was a technology company, not a landlord. That didn’t work. Carvana said it would use technology to reinvent the used-car market. Its shares are down more than 95% from their peak. Katerra was going to reinvent construction. It went bankrupt in 2021. (continue to The Wall Street Journal for the full article)