- Currently less than 1% of fresh produce is grown through hydroponics systems versus open-field agriculture, but this segment is forecast by Mordor Intelligence to grow by nearly 11% yearly to about $600 million by 2025 and Walmart has invested $400 million in Plenty Unlimited.
- Vertical farming start-up Fifth Season is backed by billionaire Nicholas Pritzker's Tao Capital and planning to disrupt the $60 billion U.S. produce market through food partners include Sabra, Kroger, Shoprite and Giant Eagle.
- "The tech multiplier doesn't lift all boats but it is spreading in the heartland," says Congressman Ro Khanna of Silicon Valley.
Next to the last steel mill in the poor industrial town of Braddock along the Monongahela River just nine miles from Pittsburgh's U.S. Steel Tower, a vertical farming business backed by billionaire Nicholas Pritzker's Tao Capital is sprouting as an agritech innovator.
The start-up, founded in 2016 as RoBotany by MBA student Austin Webb and incubated at Carnegie Mellon University, is aiming to disrupt the $60 billion U.S. produce market. Now named the more consumer-friendly sounding Fifth Season, the emerging business is leveraging advanced technology, $75 million in venture capital, increased distribution, a planned new Columbus, Ohio, facility, and an expanded management team to score in the fast-growth vertical farming market. CEO Webb confidently projects Fifth Season could be a $15 million business in Pittsburgh within five years and $500 million through geographic expansion plans, and estimates sales will hit a double-digit revenue rate this year and a 600% revenue increase.
"Our smart manufacturing facility improves the yield, taste and texture of the vegetables, and does that with 95% less water, 95% less land, and uses no pesticides or chemicals," said Webb, who is 33. Fifth Season's automated proprietary system grows fresh produce year-round indoors in vertical trays, relying on artificial intelligence, robotics and data to control light, water and nutrients, and harvest leafy greens.
Hydroponics is growing quickly as food source
Currently less than 1% of fresh produce is grown through hydroponics systems versus open-field agriculture, but this segment is forecast by Mordor Intelligence to grow by nearly 11% yearly to about $600 million by 2025. "There's tremendous runway as the price comes down and more reliable operations remove the risk," said Brian Holland, managing director of Cowen & Co. in New York. "It's a race to scale with potentially multiple winners who can prove the economic model for automatic, robotic growing," he added. "Fifth Season is more advanced, if not the most advanced, in the market in marrying technology and robotics to grow vegetables indoors at a lower cost."
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Fifth Season is competing in a capital intensive, highly fragmented market with more than 2,000, mostly smaller farms and a handful of larger scale players. Among the largest is San Francisco-based Plenty Unlimited, which recently inked $400 million in strategic funding from Walmart and plans to sell its fresh produce from its Compton facility at the retailer's California stores. Another major rival is AeroFarms in Newark, New Jersey, which scrapped a SPAC deal to go public in October 2021 and is continuing to build out capacity at a Danville, Virginia farm.
"Market leadership is just a function of time and a function of capital," said Webb.
Racing to build out its business and keep pace with competitors, Fifth Season plans to construct its second indoor growing farm in 2023, and is negotiating for a land parcel in Columbus, Ohio, near the John Glenn Airport. Through a partnership with hummus maker Sabra in December 2021, the company also has introduced a new product line of co-branded, grab 'n go salad kits, priced at $6 to $8. Distribution of its products are being expanded this March at more Giant Eagle outlets as well as Kroger and ShopRite across 10 states and 1,000 locations, with a goal of reaching 3,000 grocery stores in 2023. In its initial year of commercial operation in 2020, some 500,000 pounds of its produce were supplied to nearby restaurants and campus dining locations from its 60,000-square foot growing space on a half-acre of land.
A new Rust Belt boom
Fifth Season's growth spurt signals a new high-tech era for the former steel-making capital. Dozens of regional tech start-ups are emerging in Pittsburgh and throughout the former Rust Belt as blue-collar factory work transitions to technical jobs and older, industrial towns are rebooted.
"The tech multiplier doesn't lift all boats but it is spreading in the heartland," said Congressman Ro Khanna of Silicon Valley, author of "Dignity In A Digital Age."
"The factory workers and technicians know how to make things and have an extraordinary work ethnic and sense of community. They are defying past conventions," he said.
Gearing up, Fifth Season expanded its leadership team in January, while employee count is expected to increase to 100 next year from 80 now. Finance and tech veteran Brian Griffiths came on board as CFO from semiconductor company Skorpios Technologies with experience at Credit Suisse and Guggenheim Partners. Varun Khanna was hired as vice president of food products from leadership posts at Chobani and Sabra. Glenn Wells joined as senior vice present of sales and previously worked at Quaker Oats, Welch's and Dole.
Another prong in its growth strategy is a planned $70 million expenditure on a new Columbus vertical farm that is three times larger than the $27 million Braddock plant, including real estate development for land, a building and equipment. The company's highly automated farms only require 35 to 50 production workers. The Pittsburgh plant makes four million salad meals annually, while the larger central Ohio location is expected to produce 15 million. Fifth Season is working with economic development groups One Columbus and Jobs Ohio on the new location.
The Carnegie Mellon connection
The foundation for Fifth Season's game-changing business comes from the intellectual power at Carnegie Mellon University and Pittsburgh's tech entrepreneurial cluster in computer science, robotics and engineering. Webb developed a prototype in his last year of the MBA program and launched the business upon graduation with co-founder Austin Lawrence, an environmental scientist and mechanical engineer he met on campus.
A third co-founder, Webb's brother Brac, is CTO. He designed the production software. The system was stress-tested for two years in a converted steel mill on the south side of Pittsburgh before the Braddock farm started operations in 2020.
Webb was mentored by Dave Mawhinney, executive director of CMU's Schwartz Center for Entrepreneurship, who helped him connect with investors and role models such as serial entrepreneur Luis von Ahn, the Pittsburgh-based founder of Nasdaq-listed edtech company Duolingo. He also introduced MBA student, Grant Vandenbussche, a former General Mills global strategy coordinator, who joined the team in 2018 as a business development manager and is now chief category officer. "Fifth Season is a testament to CMU's ability to attract very talented young people and grow entrepreneurs through its MBA program," said Mawhinney. "It's all about the network."
Even before graduating in 2017, Webb lined up capital from angel investors, most of them connected to CMU. The network effect also played out as Mawhinney introduced Webb to the Columbus-based VC firm Drive Capital, which seeded the start-up with $1 million in 2017 and led a $35 million round in 2019 as it came out of stealth mode, changed its name from RoBotany, and Drive partner Chris Olsen joined as a board member.
"Chris has pushed us to be thoughtful about the market and to think bigger nationally, not just locally or regionally, and to build a long-lasting company and a new product line," said Vandenbussche.
The $75 million it has raised to date from investors includes not only Pritzker's Tao Capital Partners in San Francisco but eight different investor groups that joined in during 2021.
"Pittsburgh is coming together as an ecosystem. One of the reasons it's doubling down is because of its strengths in AI, machine learning and legacy with biosciences," said Kit Mueller, who heads community networking group RustBuilt and recently became vice president of crypto asset company Stronghold Digital Mining in Pittsburgh.
No longer dependent on steel, iron, and its rivers as competitive advantages, the city is transitioning from gritty industries and robotics start-ups are crowding into the so-called Silicon Strip of former warehouses. This mid-sized city of 303,000, less than half its peak population of 677,000 in 1950, has emerged as a technology testbed for self-driving technology from Ford-invested Argo AI and Amazon-backed Aurora, and Uber's technology unit acquired by Aurora. It's also an anchor for R&D labs at Facebook, Apple, Google, Zoom, and Intel.
A lingering issue facing Midwestern start-ups is a shortage of venture capital. California, New York and Boston logged about two-thirds of $329.9 billion in start-up investments in 2021. This imbalance is beginning to shift toward specialized inland hubs as strongholds take shape such as Pittsburgh with robotics as well as Cleveland with biotech and Indianapolis with SaaS.
Improved lifestyle amenities, increased opportunities and the lower costs of living are draws for millennial tech talent to inland hubs. The co-founders of Fifth Season, and many others, came to Pittsburgh to pursue entrepreneurship and have stayed.
"The only ones who don't like Pittsburgh are those who never came here and those who left but never came back," said Lynsie Campbell, a serial founder who bounced around New York, Los Angeles, and San Francisco but returned home as a Pittsburgh-based partner with The Fund Midwest, and is a leader in city's venture capital and start-up sphere.
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