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In this sustainability boom, why aren’t VC dollars pointed at greenhouses?

(BUSINESS) Venture capitalists eyeball booming industries while salivating, but one niche is being ignored. Why is that?

greenhouses boom

If you’ve been consumed by all news regarding the housing bubble, anything related to cryptocurrency, and a myriad of new startups fighting for VC real estate, you could be forgiven for not realizing that the greenhouse industry – comprising arguably one of the less-shiny types of technology – is on the rise.

Homesteading is increasingly common, and the pandemic pushed some folks into having to grow some of their own food while simultaneously allowing others the time to explore their own food production. Regardless of the reason, 30 seconds on Instagram will show you the wild popularity of this old practice.

With this rapidly spiking trend comes a variety of questions, the most pertinent of which is this: Why aren’t venture capitalists investing in greenhouses?

Sifted’s Sarah Drumm references Dirk Aleven, a Dutch entrepreneur responsible for the startup FoodVentures, in a deep dive regarding the greenhouse boom – and why it matters.

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Sustainability is at the forefront of the movement, with the destabilization of weather cycles and the extreme droughts of the last year on the mind of many.

“There is no more sustainable way of producing tomatoes, cucumbers, bell peppers or strawberries than in greenhouses, because it’s way more efficient on fertilisers and water usage,” says Aleven. “All the inputs are lower and your outputs are way higher.”

Dutch-backed greenhouse technology is sweeping the globe, with greenhouse projects from VentureFood launching in various Asian and Eastern European locations.

Aleven has his sights set on the United States and the Middle East as future locations as well. His faith in their mission (to make sustainably grown food more available in these areas) is largely backed by his confidence in the power of Dutch innovation in this area.

Jonathan Webb, founder of AppHarvest, a United States-based greenhouse startup, has that same confidence. “[T]he top scientists, researchers and technologists are not in startups in San Francisco or New York, they’re not at the universities in the US, they’re in the Netherlands,” he says.

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For VCs, though, one of the main issues with this boom is its lack of scaling.

It’s easier to invest in something that has clear upward mobility; greenhouses, in sharp contrast to digital technology and comparatively small startups, have an upper limit on how much physical space they can occupy.

Farming is also expensive, with Aleven’s startup having to invest around $5 million of their own money in their first greenhouse.

And with the rise of more sustainable plant-based proteins – something with increasing cachet in VC circles – the idea of pouring tons of money into something that won’t show returns for 18 months, weather willing, isn’t particularly attractive.

Another problem is that VCs find themselves drawn to more visually impressive forms of sustainable growth, such as vertical farming. Aleven has his doubts. “It sounds appealing to [investors] to be in vertical farming — but that’s not going to work,” he says, alleging that greenhouses are, comparatively, much cheaper to build.

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Aleven also eschews the sex appeal of something like vertical farming by invoking simple yet effective logic. “It’s a niche market… why would you take away the sun?”

Aleven’s confidence is inspiring, but it’s clear that while sustainable farming may be the future of food production, such projects will need to make much larger splashes before becoming the future of VC investments.

Jack Lloyd has a BA in Creative Writing from Forest Grove's Pacific University; he spends his writing days using his degree to pursue semicolons, freelance writing and editing, oxford commas, and enough coffee to kill a bear. His infatuation with rain is matched only by his dry sense of humor.

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