BrightFarms has cemented a partnership with the sustainability arm of automotive company Cox Enterprises, which puts it in a good position ahead of the consolidation it expects to see in the indoor farming market, said the startup’s founder Paul Lightfoot.
The company’s $100 million Series E round was led by Cox Enterprises, a $21 billion communications, media and automotive business headquartered in Atlanta and founded in 1898. Cox’s investment in BrightFarms was carried out by Cox Cleantech, a unit established in 2017 to invest in natural resource resiliency and efficiency.
“It does seem like the capital markets have recognized there is a shift from field production into indoor production, and that the companies that start to create scale and stability are going to be the ones that get seen,” Lightfoot told Agri Investor.
“We were lucky to get out early, we were lucky to do a good job and get the right capital partners and think we are going to keep being able to do that.”
Other investors in the round included growth equity firm Catalyst Investors, private equity firm WP Global Partners and NGEN Partners, a venture capital firm. All three firms are headquartered in New York.
Lightfoot explained that Cox also led a 2018 funding round for BrightFarms and the October investment establishes Cox Cleantech as majority owner. He said BrightFarms determined quickly after Cox’s initial investment that it’s scale and sustainability focus made it an ideal partner.
“When we brought Cox into the capital structure, we viewed them as perhaps the best long-term investor in, and potential owner of the company, [of any firm] anywhere in the market,” he said.
“Frankly, in the medium and long term, we think there is going to be some consolidation and BrightFarms, with Cox behind us and in a leadership position, is probably in a great place to lead some of that consolidation. That is the natural evolution of an industry that goes from niche to mainstream and matures. We are looking forward to that.”
The Series E Cox led is comprised of a mixture of debt and equity, brings total fundraising to $200 million and will be devoted to expansion of BrightFarms’ network of farms and retail programs.
The company currently supplies packaged salad greens to 2,000 grocery retail customers including Walmart and Kroeger from 16 acres of indoor production space distributed across facilities in Illinois, Ohio, Pennsylvania and Virginia. BrightFarms currently has farms under development in North Carolina, Massachusetts and Texas.
Fundraising surrounding indoor agriculture has undergone “remarkable change” since BrightFarms’ $4.3 million Series A in 2011, Lightfoot said. As investors have gradually come to see controlled environment ag as less speculative, interest and activity in the market have grown significantly, he said.
“We see that it as a good sign that we have competitors that are getting capitalized and scaling up. None of us are anywhere close to tapping out any of the major markets in the US yet, so it will not deter us from entering any markets.”
Lightfoot said the transition of US commercial tomato production from virtually all outdoors in 1990 to largely indoors today reflects how quickly other crops could see similar change. As that process continues, he said, the mix of investors active in controlled environment production will likely continue evolving.
“We see lots of infrastructure funds looking at the space, which I think makes sense. At the end of the day, this is going to be infrastructure for the economy,” Lightfoot said. “As we think about how covid has changed the world and the benefits of having a decentralized and more resilient supply chain, we think that will appeal to some of these infrastructure funds.”