State of Indoor Farming

August
2017 2016
About the Authors
Agrilyst is a management and analytics platform for indoor
farms. The SaaS platform tracks and analyzes all farm
data in one place, enabling growers to optimize plant
performance and reduce operating expenses. Agrilyst is
focused on turning data management from a burden into
a grower’s most useful tool.

For questions or comments, please reach out to:

akopf@agrilyst.com www.agrilyst.com

Acknowledgments
We would like to thank the following people for their input
and contributions to this report: Chris Higgins, Urban Ag
News, Henry Gordon-Smith, Dr. Neil Mattson, Cornell
University, Nick Burton, AgFunder News, Newbean Capital,
Andrea Tolu, and Jordan Koschei.

2
Introduction
The purpose of this report is to look at the emerging trends, challenges, and
benefits of farming indoors. This report not only provides an overview of the
indoor farming industry, it also gives a new, updated analysis of the industry,
following our 2016 report. This year, we received over 150 responses from
growers around the world. We had growers participate from 8 countries,
with 81% coming from the United States, 12% coming from Canada, and the
remainder coming from other countries. For the most part, our analyses
focused on all participating farms. Exceptions were made whenever a dataset
was too small to provide anonymity.

The resulting report is both quantitative - based on data provided by

survey participants - and qualitative, as it’s based on farmers’ opinions and
perceptions.

Data from the survey was supplemented by additional research conducted by

our team.

Our Partners:

3
1 The Landscape
The crops and facilities that make up the indoor
farming industry.
A growing industry in a challenging scenario
During 2017, the indoor farming industry kept growing.

Plenty raised $200 million, with notable backers such as the SoftBank Vision
Fund and Jeff Bezos1;

AeroFarms raised over $80 million from two funding rounds and a $1 million
grant from the Foundation for Food and Agriculture Research2;

Bowery secured $27 million in a seed and a series A round3.

The size of these investments and the interest of notable private and
institutional backers is evidence the industry is showing signs of maturation.

This increasing interest in indoor farming comes at a critical point for our food
supply chain: the world population is expected to reach 9.8 billion by 20504,
and we’re starting to investigate the effects of global warming on nutrient
depletion in crops5.

Indoor farming is proving to be an efficient way to produce more food with

fewer resources than conventional farming, without being dependent on
arable land availability and external climate conditions.

Types, locations, and size of indoor farms

Indoor farms can use different growing systems and structures, from urban
and small-scale farming, to high-tech fully controlled and semi-automated
greenhouses in rural areas, to everything in between.

1 — SoftBank Vision Fund Leads $200 Million Bet on Indoor Farms

2 — Aerofarms | Crunchbase
3 — Bowery secures $20 million to grow indoor farming
4 — World population projected to reach 9.8 billion in 2050, and 11.2 billion in 2100
5 — Estimated Effects of Future Atmospheric CO2 Concentrations on Protein Intake and the Risk of Protein
Deficiency by Country and Region

5
Growing Systems and Facility Types

Hydroponics Glass or poly Greenhouse

Plants are grown in water as Transparent, enclosed structure made
opposed to soil. of glass or polycarbonate.

Aeroponics Indoor vertical farm

Plant roots are suspended in the air and Fully enclosed and opaque room with
misted with a nutrient solution. a vertical growing system (hydroponic,
aeroponic, and/or aquaponic).
Artificial lights are used.

Aquaponics Low-tech plastic hoop house

Plants are grown in water that has been used to Semi-circular, tunnel-shaped structure
cultivate aquatic organisms (typically, fish) made of steel and polythene.

Soil-based Container farm

Plants are grown in soil. Standardized, self-contained growing
unit that employs vertical farming
systems and artificial lighting.

Hybrid (Aquaponics, Hydroponics, Indoor DWC

Aeroponics) Fully enclosed and opaque room with
Plants are grown in multiple a non-vertical growing system where
systems in one facility. plants are grown in a deep-water
culture system.

As in last year’s report, respondents primarily operate greenhouses and indoor

vertical farms and the majority of respondents use hydroponics as their
growing system. Throughout this report, we dive into comparisons between
these systems and structures.

6
Growing System Aquaponics, Hydroponics,
Soil (hybrid)

Aeroponics
6%
6%

24% 49%
Soil-Based

Hydroponics

15%
Aquaponics

Facility Type
Low-Tech Plastic
Hoop House Container Farm

Indoor DWC 12% 7%

4% Indoor Vertical
Farm

30%

Glass or Poly 47%

Greenhouse

The indoor farming industry in the United States has been predominantly
dominated by greenhouse crop production in the past. Tomato production
is a staple greenhouse crop because growers can produce the crop more
efficiently indoors. Now, due to decreases in technology costs (LEDs in
particular) and an increase in local demand for food, we’re seeing an increase
in alternate growing systems, particularly fully enclosed vertical systems.

7
Timeline of Farm Openings by Type

Indoor DWC 1 1 1 1

Glass or Poly Greenhouse 17 1 1 1 1 3 1 1 2 4 6 4 3 4

Indoor Vertical Farm 1 1 3 4 7 7 9

Container Farm 1 1 3 1

Low-Tech Plastic House 4 1 1 1 2 3

Before 2001 2003 2005 2007 2009 2011 2013 2015 2017

This year, we asked respondents to describe their location as either urban,

suburban, or rural. About half of the respondents indicated rural locations.
The other half comprised of urban and suburban locations.

Farm Location
Suburban

Rural
10%

47%

43%

Urban

8
Indoor agriculture isn’t equivalent to urban farming. This is a big
misconception. As evidenced by the data, indoor farms typically locate close
to the point of sale or where efficiency can be maximized. For a tomato
grower, this may mean locating a greenhouse in a rural area where energy is
cheaper and closer to a distribution center. For a container farm, this may
mean placing a container at a grocery store in an urban area. This is one of the
major benefits of indoor farming. Because the farmer has more control over
climate, they can choose to locate a farm wherever it makes the most sense.

When we look at the physical location of farms in the United States, there is
a large concentration of greenhouses in rural areas of the Northeast, South,
and Southwest. In the Midwest, 42% of responding farms are indoor vertical
operations and 50% of respondents are located in urban areas. The highest
concentration of container farms was located in the Southwest and the largest
percentage of urban farms was in the West.

Last year, farms were placed into one of two size categories: large farms
(>1,500 square feet), and small farms (<=1,500 square feet) to show the
differences between small non-commercial operations and larger commercial
facilities. This year, we divided farms up into the same two categories: large
and small farms, however we changed the threshold to 10,000 square feet.
We found that 1,500 square feet did not account for the small, commercial
category of farms. The 10,000 square feet threshold allowed us to separate
farms that operated on a smaller square footage commercially. From an
analysis perspective, we found that growers at or above 10,000 square feet
had consistent per-square-foot rates for various measuring points (revenue,
cost, budgets, etc.), as did farms smaller than 10,000 square feet. This should
help growers using this data to create projections to categorize themselves
correctly based on size. This year, 61% of respondents were small farms and
39% were large farms.

9
Facilities by Region
Respondents located in the
continental United States

Glass or Poly Greenhouse 59%

Indoor Vertical Farm 16%

Glass or Poly Greenhouse 25%
Low-Tech Plastic House 16%
Indoor Vertical Farm 42%
Container Farm 3%
Low-Tech Plastic House 25%
Indoor DWC 6%
Container Farm 8%

Northeast
Midwest 40%
West 15%
16%
Rural Suburban Urban

Rural Urban
Rural Urban

South
15%
Southwest
15%
Rural Suburban Urban

Rural Urban

Glass or Poly Greenhouse 46%

Indoor Vertical Farm 31%

Low-Tech Plastic House 8%

Glass or Poly Greenhouse 71%

Container Farm 15%
Indoor Vertical Farm 29%

Glass or Poly Greenhouse 38%

Indoor Vertical Farm 21%

Low-Tech Plastic House 17%

Container Farm 17%

Indoor DWC 8%

10
 Survey Respondents
by Size

Small Farms

39%

61%

Large Farms

What are indoor farmers growing?

Thanks to climate control systems, indoor farms can grow a wide variety of
crops.

The list of products farmers reported growing or raising includes (but is

not limited to): leafy greens, tomatoes, cannabis, flowers, microgreens,
strawberries, herbs, cucumbers, peppers, mushrooms, onions, leeks, hops,
figs, sweet corn, eggplant, fish, insects, carrots, and shrimp.

The five main crops grown were: leafy greens, microgreens, herbs, flowers,
and tomatoes, with more than half of respondents growing leafy greens.
Throughout the report, we focus predominantly on these five crops.

It’s important to note why these make good crops to grow indoors. It is costly
to operate an indoor facility (we’ll dig into these costs in a later section). In
order to operate profitably therefore, farmers have to grow crops that are high
revenue generating. To do this, you can grow crops that are specialty items,
like flowers, or you can target crops that have quick growth cycles, like leafy
greens. If you think about a vertical growing system, you want to grow crops

11
that are physically short (so you can get many layers), that have short growth
cycles (so you can turn your facility over many times), and are highly perishable
(more valuable when grown locally).

Main Crop Type Flowers Herbs

10% 11% Microgreens

Tomatoes
6%
16%

57%
Leafy Greens

Single crop operations only account for about 20% of cases. The remaining
80% of respondents grow at least two crops. This is another benefit of growing
indoors. Growers have the ability to create microclimates within the growing
area and optimize for more than one type of crop.

12
2 Production & Operations
A snapshot of how indoor farms operate.
Yield
One of the main advantages of indoor agriculture is its higher yield compared
with conventional farming. Enclosing facilities creates ideal growing
environments so farmers can grow a crop from seed to harvest in less time,
realize higher yields in each cycle, and repeat the harvest more times in a
given year.

The average yield of conventionally grown tomatoes in 2016 was 805 cwt per
acre, or 1.85 pounds per square foot, according to USDA data1. Greenhouse
hydroponic tomato growers on the other hand, reported an average yield of
10.59 pounds per square foot.

Similarly, the average yield of conventionally grown head, leaf, and romaine
lettuce is 0.69 pounds per square foot2, compared with 8.71 pounds per
square foot for leafy greens grown hydroponically in a greenhouse.

1 — Vegetables 2016 Summary, page 97

2 — Vegetables 2016 Summary, page 62,63,64

Yield
lbs/sqft

3.75
6.42

Container Farm
Hydroponic

8.71
5.45
10.59

Vertical Hydroponic
Greenhouse
Hydroponic

Leafy Greens Tomatoes Herbs

14
Indoor vertical growers reported yield of 5.45 pounds per square foot for
leafy greens and container farms reported the lowest yields at 3.75 pounds
per square foot for leafy greens. Indoor vertical farms can increase their
overall yield by stacking additional layers and increasing their growing area as a
percentage of available square footage.

Revenue
Looking at both profitable and unprofitable operations, we see a pretty
large range of revenue data. Hydroponic operations, for example, reported
a minimum of $6.67 per square foot to $42.86 per square foot, averaging at
around $21.15 per square foot. Aquaponic operations, on the other hand,
reported more than double the revenue per square foot. Similarly, for facility
types, indoor vertical farming operations reported double that of greenhouse
revenue. Because of the wide ranges in revenue, it’s more important to analyze
profitability than revenue alone.

Revenue — All Operations

(Profitable & Not Profitable)
Revenue per sqft
$21.15 avg
Hydroponics $6.67 $42.86

$53.89 avg
Aquaponics $5.20 $100

$41.16 avg
Indoor Vertical Farm $2.13 $100

$20.06 avg
Glass or Poly Greenhouse $1.00 $50.91

15
Profitability
One of the big criticisms of indoor farming is the high cost of operating
facilities. This is a huge challenge for growers. In fact, only 51% of respondents
reported operating profitably. The average age of profitable farms was 7 years
and farms that are not yet profitable were on average 5 years old. With less
conventional financial sources available to indoor farmers for both capital and
operational expenses, as well as higher operational costs, it takes growers
a long time to realize profits. According to Henry Gordon-Smith, Founder
of Agritecture Consulting, “the three mistakes I see new growers make are:
miscalculating and underestimating operational costs (labor, HVAC, and waste
specifically), lack of clear understanding of the market and customer, and not
understanding your production needs and whether a greenhouse or vertical
operation would be best.”

% of Respondents Average Age

Profitable Farms 51% 7 years

Unprofitable Farms 49% 5 years

16
Farm Profitability
Profitable Not Profitable

Profitability by Farm Type

73% 75% 75%

67%

50% 50%

33%
27% 25% 25%

Container Farm Indoor Vertical Glass or Poly Indoor Deep Low-Tech Plastic
Farm Greenhouse Water Culture House (Hoop House)

Profitability by Crop Type

100%

83%

67%
60%
55%
45%
40%
33%

17%

0%
Herbs Microgreens Leafy Greens Tomatoes Flowers

Profitability by System Type

75%

58% 60%
50% 50% 50% 50%
42% 40%

25%

Hydroponics Aquaponics Soil-Based Aeroponics Aquaponics, hydroponics,

soil (combination)

17
Of the facility types we surveyed, the most profitable appeared to be indoor
deep water culture, followed by greenhouse operations. Of the five most
commonly grown crops, 100% of flower operations reported profitability,
along with 67% of tomato growers, and 60% of microgreens growers. The most
profitable system types were hydroponics and aquaponics.

The facility types with least profitability reported were indoor vertical farms
and low-tech plastic houses. Similarly, herbs and leafy greens were the least
profitable crops. The combination operations (using multiple system types)
were overwhelmingly unprofitable.

Tomatoes, microgreens, and flowers are most likely profitable because

microgreens have extremely high revenue per pound, and flower and tomato
producers have lower operating costs. Vertical farms reporting limited
profitability is most likely because it is a new industry that is just beginning to
mature.

Looking at only profitable operations (for data stability), the most profitable
operation is leafy greens grown hydroponically in a greenhouse at a 46% profit
margin. When we analyzed revenue alone, and among both profitable and
unprofitable operations, we saw that hydroponics and greenhouse operations
both had average revenues of about $20 per square foot. Below we see
that when farms get to profitability, the revenue per square foot increases
significantly, to nearly $40 per square foot. And despite not having the highest
revenue per square foot of all operations, growing leafy greens hydroponically
in a greenhouse has one of the lowest operational costs per square foot, at
$20 per square foot. This nets a grower $17 per square foot in profit. For an
acre facility, that amounts to about $750,000 in profit.

On average, leafy greens and microgreens had the highest profit margin at
40% across various facility and system types, flowers came in at 30%, and
tomatoes came in at 10%.

18
Financials — Profitable Operations
In dollars/sqft

Indoor Vertical & Indoor DWC Glass/Poly Greenhouse

$51.98

$37.10

$21.15
$14.88 $13.86
$7.29

Avg Revenue Avg OpEx Avg Profit Avg Revenue Avg OpEx Avg Profit

Glass/Poly Greenhouse, Leafy Greens Across Different

Hydroponic, Leafy Greens Growing Systems

$37 $37.74

$23.91
$20
$17
$13.83

Avg Revenue Avg OpEx Avg Profit Avg Revenue Avg OpEx Avg Profit

Profit Margin Among Profitable Businesses

40% 40%

30%

10%

Leafy Greens Microgreens Flowers Tomatoes

19
Costs
Last year, we focused exclusively on the revenue side of operations. This year,
we wanted to share a complete picture of how facilities are operating. One
of the biggest criticisms of indoor farming is the high operational costs. In
fact, when we asked growers what their biggest challenge was, the number
one challenge reported was capital related. This was an open-ended question
and responses included: insufficient access to working capital, high operating
costs, profitability, lack of financing for startup costs, and more.

Biggest Challenge

Other
Capital

19%
25%
1. Capital
Time Most growers indicated challenges with access to working
capital, expansion capital, or capital formation for the capex.
11%
2. Building-related
15% Building-related challenges include things such as pests and
managing the environment.
13%
Labor
17%

Financial
Sustainability Pests/Environment

In this section, we focus on breaking down the operating costs for the most
common types of operations, starting with hydroponic operations.

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Operations Snapshot — Hydroponics
% of Total OpEx

Other
(rent, packaging, energy, etc.)
38% % of Inputs

Total Shipping
2%
33% 34%
Seeds Nutrients
10%

33%
Grow Media
Total Input
49%

Total Labor

Small Farms (<10k sqft) Large Farms (>10k sqft)

Total Input (% of total opex) 6% 13%
Total Labor (% of total opex) 57% 41%
Total Shipping (% of total opex) 0.4% 5%

For hydroponic operations, the largest single contributor to cost is labor,

averaging 49% across both small and large farms. We categorized inputs as:
seeds, nutrients, and grow media. Across all operations, inputs account for
10% of hydroponic operating costs. Shipping costs accounted for 2% of the
cost, and the remaining 38% of costs includes: rent, packaging, energy, and
miscellaneous costs.

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Operations Snapshot — Aquaponics
% of Total OpEx

Total Shipping

Other
4% (rent, packaging, energy, etc.) % of Inputs

11%
34.5% 35.5%
Seeds Nutrients
6%
79% 30.0%
Total Input
Grow Media

Total Labor

Small Farms (<10k sqft) Large Farms (>10k sqft)

Total Input (% of total opex) 6% 5%
Total Labor (% of total opex) 71% 87%
Total Shipping (% of total opex) 5% 3%

For aquaponic operations, the cost of labor increases pretty significantly to

79%. The cost of inputs reduces slightly to about 6%, shipping stays low at 4%,
and the other costs decrease proportionally.

22
Operations Snapshot — Indoor Vertical
% of Total OpEx

Other
Total Shipping (rent, packaging, energy, etc.)

% of Inputs
6% 27%

25% 21%
Seeds Nutrients

11%
54%
Grow Media
Total Input
56%

Total Labor

We also analyzed indoor vertical operations. Vertical farms mirror hydroponic

operations from a percentage perspective. The major difference is the
increased share spent on growing media, which makes sense as these facilities
have stacked operations requiring more units (and producing more units) than
a horizontal hydroponic operation.

The major difference between vertical farms and greenhouses from a cost
perspective is, of course, the total spend (as opposed to the breakdown).
The “Financials - Profitable Operations” graph shows the operating cost of a
profitable greenhouse facility (all crops, all systems) to be $13.86 per square
foot. In comparison, profitable vertical farms (all crops, all systems) spent
$37.10 per square foot. So at 50%, labor would cost a one-acre greenhouse
grower roughly $300,000 and a vertical farmer $800,000.

23
Energy
Avg Spend per Square Foot
100% of vertical indoor farms
use supplemental lighting.
$3.45
Avg Runtime (hrs/day) (12% of total opex budget)
16 16 16 16 Indoor Vertical
Farm
$8.02
(25% of total opex budget)

Summer Fall Winter Spring

$2.34
(11% of total opex budget)
43% of greenhouses
use supplemental lighting. Greenhouse
$0.68
Avg Runtime (hrs/day)
(8% of total opex budget)
0 2 9 3

Small Farms

Large Farms
Summer Fall Winter Spring

Another difference between indoor vertical operations and greenhouse

operations is energy use. Supplemental, or artificial, lighting is a key
component to vertical farming operations. Growers reported running their
lights 16 hours per day every day all year round in vertical farming operations.
On the other hand, only 43% of greenhouse growers reported using
supplemental lighting at all, and of those growers the most light applied to
plants was 9 hours per day in the winter.

Energy accounts for a large percentage of operating costs for both vertical
farms and greenhouses. For large vertical farms, energy made up about 25% of
total operating expenses at around $8 per square foot. For small farms, energy
cost $3.45 per square foot, or about 12% of the operating expenses. This is
primarily lighting costs. For greenhouses, energy makes up about 8% of total
operating expenses for large farms and 11% of small farms. This is primarily
heating and cooling costs.

24
This year, we also looked at water usage. This is one of the metrics often used
in media regarding indoor agriculture. Conventional farming methods produce
one pound of lettuce using 15.5 gallons of water1. Our respondents reported
only 4 gallons per square foot per year for hydroponics and as much as 10
gallons per square foot per year for aquaponics. For hydroponic lettuce, that
equates to less than 0.5 gallons per pound, or around 3% of the needs of
conventional lettuce.

Water Usage
gallons/sqft/year

10
8

4 4

Hydroponics Aquaponics Soil-Based Aeroponics

Labor is the largest component of indoor farming budgets. Data held pretty
steady from last year’s report. Large farms employed an average of 37 full time
employees and 14 part time employees per year, totaling 86,712 labor hours
annually. The number of employees total is interesting, but we also have to
look at the rates per square footage for different facility types. Comparing
greenhouses with indoor vertical farms shows a more complete picture as
operations scale, with indoor vertical farms needing many more employees
than greenhouses. This makes automation technologies incredibly important
as the industry matures.

1 — http://waterfootprint.org/media/downloads/Hoekstra-2008-WaterfootprintFood.pdf

25
Interestingly, we found that large farms pay employees double what small
farms pay per hour. Large and small farms also reported spending between
1.37% and 6.85%, respectively, collecting and analyzing data.

Labor Snapshot

Large Farms Small Farms

(>10k sqft) (<10k sqft)

# Full Time 37 3

# Part Time 14 2

Total Cost $1,316,537 $68,673

Annual Labor Hours 86,712 4,273

Average SF 879,194 3,336

Cost/sf $1.50 $20.59

% Hours spent
Collecting/Analyzing Data 1.37% 6.85%

$/pp $25,923.14 $13,348.60

$/hr $12.46 $6.42

Labor by Facility Type

Total Employees People per People per
(full + part time) Sqft Acre

Indoor Vertical Farm 8 0.00144 63

Glass or Poly Greenhouse 38 0.00007 3

26
3 Technology
The systems that are moving indoor farming forward.
Budget for technology and goals
To produce more with less, indoor farms rely on technology: from increasing
plant yields, to managing operations, to improving crop quality.

On average, small farms have an annual budget of $7.68 per square foot to
invest in technology. Large farms on the other hand, spend about $9.34 per
square foot.

What technologies are farmers excited about?

Average annual technology budget
per square foot

$7.68 avg

Small Farms $0.25 $50

$9.34 avg

Large Farms $0.005 $83.33

Automation tops the list of technologies growers are most excited about.
Second to automation is HVAC (heating, venting, and air conditioning)
equipment. Third was a tie between data analytics, LEDs, and sensors. Note
this was an open-ended question and for sensors, most growers indicated an
interest in sensors specifically for nutrient applications. Automation is not a
surprising number one. With the high cost of labor, most growers are thinking
strategically about investing in technology that can bring costs down.

28
Technology that growers are
most excited about

2. HVAC

1. Automation 3. Data Analytics,

LED, Sensors

What technologies do farmers think are overhyped?

While LEDs are one of the things growers are most excited about, it also came
in second on the list of things growers think are over-hyped. The overwhelming
number one on the list of doubtful technologies was container farms.

Technology growers think

is overhyped

Container
Farms

LED

29
Would growers buy technology from a startup?
We asked growers if they would buy technology from a startup and 78%
indicated they would. Growers are interested in innovation. However, they’re
hesitant to take risks and indicated they wouldn’t buy unproven or untested
technologies. Most growers specified they don’t want to be “beta testers.”
Startups need to work with farmers from the onset to be successful.

Would you buy technology

from a startup?

78% 22%
No
Yes

What technologies are growers buying?

When asked to indicate one or more new technologies or improvements
they’re planning to make in the next 12 months, most farmers selected data
analytics technology, while climate control systems ranked second.

This largely has to do with the impact growers believe data and analytics can
have on their operation. Over 70% of growers believe they can increase crop
yields by up to 30%, with a minimum expected growth of 14%.

30
 What new technologies or improvements
are you looking to make in the next year?

Post-harvest automation
equipment 49%
Data and analytics

21% 16%
Respondents who want to
purchase two or more
new technologies
18%
16% Climate control system
Adding LEDs

14% 16%
Farm management
system
Organic nutrients

Growers are interested in investing in technology that can improve operations.

The number one thing growers are looking to do with new technology is to
manage their operations more efficiently. Last year, this ranked third on the
list of top priorities. This year, managing operations more efficiently was
followed by lowering the cost of production and increasing yield. Last year,
these ranked fourth and second respectively.

Percentage of growers who believe they can Percentage increase they

increase crop yields with data analytics believe they can achieve

30% max
71% 29%
14% avg
No
Yes

31
Most pressing goal for
implementing new technology Achieving better
quality crops

10% Interacting with

Managing operations customers better
more efficiently 7%
36%

25%
Lowering cost of
production
22%

Increasing yield

Growers believe technology can not only gain additional yield and revenue,
but also lower the cost of production - the second most important goal of
implementing new technology. In fact, 19% of growers believe technology can
save them more than $20,000 per year.

Can hardware or software

save me money?

Hardware (lights, chiller, etc.)

$1 — $5k 9% 16% 25%
Software (farm management
software, sales tracking software,
climate control apps, etc.)
$5k — $10k 12% 8% 20%

$10k — $15k 5% 5% 10%

$15k — $20k 3% 6% 9%

$20k+ 11% 8% 19%

32
Climate control system and farm management
A climate control system is perhaps the single most important technology in
an indoor farming facility, as it allows farmers to create the ideal environment
for year-round production. This is why it ranked highly on growers’ list of
technologies they’re looking to purchase this year.

Of the farmers who reported using a climate control system already, 53%
indicated owning a Priva, Link4, or Wadsworth system, while the others use
either less-known providers or homemade systems.

Selected manufacturers of
climate control systems
Share among survey respondents
Other

19% 22%

22%
25%

13% DIY

DIY includes any answer that wasn’t a

commercial off-the-shelf product.

33
Production Management Tools
While farmers are aware of the importance of data analytics and climate
control systems, the use of production and inventory management software
is still limited. When asked their tools of choice, most farmers - in both small
and large facilities - reported using either Excel or pen and paper.

Tools used for production

and inventory management

45%
41%
37%

16% 16% 16%

7%

Excel Pen & Paper ERP Agrilyst

Small Farms

Large Farms

34
4 Market & Future
A look at the benefits from and challenges with rapid market
expansion over the next five years.
Despite its explosive growth, the indoor farming industry is not without its
challenges. When asked what their number one challenge is, 25% of growers
responded with an answer related to capital - from access to working and
expansion capital to cost of production. The second challenge was building-
related, including things like pests or challenges managing the environment.

Biggest Challenge

Other
Capital

19%
25%
1. Capital
Time Most growers indicated challenges with access to working
capital, expansion capital, or capital formation for the capex.
11%
2. Building-related
15% Building-related challenges include things such as pests and
managing the environment.
13%
Labor
17%

Financial
Sustainability Pests/Environment

Primary goal for 2018

Increase
Revenue Profitability

22% 24%
1. Profitability
2. Increase Revenue
7%
18%
Expansion
Improve
Product 3. Expansion
22% Quality
7%

Other
Decrease
Costs

36
When asked about their number one goal for 2018, 46% of farmers indicated
either increasing profitability or revenue. For an additional 7%, the primary
goal is decreasing costs, which takes financial-related goals to 53%.

2017 Expansion
If the industry can figure out these challenges and help growers become
profitable faster, the industry will continue to see additional growth. Of the
survey respondents, 30% expanded in the past year, adding over 450,000
square feet in new production area. On top of that, 16% of respondents were
new farms created in 2017. Small farms added 50% more area in 2017 and large
farms added 20%.

Past 12 Months

Respondents who expanded Percent of Area Increase

30% in the last year in the Last Year

50% s
Farm
Small
~450k Square footage added
Large Farms
20%
Increase from existing square
21% footage in the last year

Respondents that were

16% newly-created farms in 2017

37
The Future
The vast majority of growers, 84% of survey respondents, are planning to
expand their facilities in the next five years and they’re planning on growing
significantly, with plans to add 22.3 million square feet of growing area. This
expansion primarily comes from leafy greens growers, with expectations of
adding 15 million square feet in new growing area.

Expansion by Crop Type

84% of respondents indicated plans

to expand in the next 5 years.

Leafy Greens Tomatoes Peppers Microgreens

~15m sqft ~2.5m sqft ~2m sqft ~1.3m sqft

Total expansion area expected: 22.3m sqft (512 acres)

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Expansion by Crop Type

2017 Expansion by Crop Type,

in % of total added sqft

65%

41%
25% 26%

7% 10% 9% 6% 9%
2%

Leafy Greens Herbs Microgreens Tomatoes Peppers Flowers

Small Farms Large Farms

Future expansion plans by crop,

in % of total sqft by crop
66%

11% 10%
4% 6%
2%

Leafy Greens Herbs Microgreens Other Tomatoes Peppers

39
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