After 2008, CleanTech became a dirty word in venture capital circles after a bunch of solar companies went bust. Unfortunately, for hydroponics and other AgTech industries, this meant their potential pool of capital dried up as well. Whether it was growing food or marijuana, "hydropreneurs" had to rely on other means to fund their startups.
Today, AgTech has successfully split off of the umbrella of CleanTech, and the venture capitalists are listening. Click to read more below
With more attention being given directly to food-growing operations, new opportunities are opening up for startups to get funding. One of the main reasons for this switch has been a growing mindset in what future businesses will be successful. According to some sources, "sustainability" is the new buzzword, joining ranks with others such as "disruption". This new focus makes a lot of sense. With venture capitalists investing in companies that will be able to not only survive, but thrive by providing necessary goods and services in a changed climate, they will be financially positioned to capitalize when our couple of centuries of unsustainable living catches up with us.
To date, venture capital and private (angel and family office) investment in hydroponics has largely been going to the growers themselves. Creative warehouse and container-growing companies such as Aerofarms and PodPonics, respectively, have put together significant rounds to get their operations up and running. With a predicted additional 30 indoor agriculture business set to be launched over the next couple of years, we will certainly be hearing of more significant funding rounds going to the growers.
Equally excitingly, investment in growing technology has also picked up, especially for users looking for the idiot-proof way to grow veggies in your kitchen. Last year, hydroponic startup, Grove Labs, put together a $2.05m seed round for their kitchen-based growing setup. A potential competitor of theirs, Niwa, also put together an undisclosed seed round after participating in the Bay-Area based hardware accelerator Hax.
There are still only a handful of venture capital firms devoted to AgTech and still fewer with a singular focus on Hydroponics. New Bean Capital in Nevada may be the only one to be focusing largely in hydroponics. That said, the word is getting out on the opportunity for hydroponics to play a major role in how we grow food. When the first big hydroponic company IPO's, we can all expect the capital floodgates to blow open.
The two biggest names to enter the field share little in common in their career paths, except for their penchant for recognizing a significant opportunity and capitalizing on it. The first, Peter Thiel, former CEO of PayPal, author, and well known investor has directed his venture capital fund, Founders Fund, to invest an undisclosed amount in Privateer - a marijuana-focused investment fund. Privateer finished raising a $75 million second round last year, and while the amount of Founders Fund's investment can only be speculated, the significance of the move is significant.
As an aside, I watched Peter Thiel give a web-casted speech to Wharton Business School last year and one point he made has stuck with me that I will attempt to paraphrase. He said he hates competition. To his logic, when there is competition in an industry, it means that entering players have far less of an opportunity to dominate it. The analogy that he used was the restaurant industry - a multi-trillion dollar industry today. He told the Wharton students that if they like competition, they should go open a restaurant, but if they don't they should find an opportunity that nobody is really looking at. With marijuana, it looks like Mr. Thiel has found an opportunity worth investing in.
The other big name that has invested in marijuana is Snoop Dogg. According to a recent article, the megastar hip-hop artist put $10m into a marijuana delivery app called Eaze.
Ok, Snoop's investment is not at all directly related to do with hydroponics, but it also signifies the explosive growth and, therefore, opportunity in this market. Entrepreneurs are raising money for all kinds of supporting products, from smell-locking bags to a marijuana vending machine that requires a finger print. With cannabis-focus investment funds emerging, such as Emerald Ocean, entrepreneurs pitching hydroponic technology geared towards cultivating marijuana have a lot more options than they used to.