‘Huge patent portfolio’ draws Ceres Partners to agtech investment

iUNU uses cameras and sensors to monitor plants grown in an indoor setting and is the second greenhouse-related investment by Ceres’ second fund.

Ceres Partners co-led a $7 million Series A alongside S2G Ventures for a computer vision services provider in the indoor ag space, due to its potential scalability and the breadth of its patent portfolio.

iUNU uses a system of environmental sensors as well as mobile and fixed cameras to measure and record the real-time growth and health of individual plants. The product uses computer vision and is called LUNA.

“They have a huge patent portfolio which essentially protects them and in many ways gives us a lot of comfort,” Ceres Partners’ chief investment officer Brandon Zick told Agri Investor. “Just about any camera being used in a greenhouse to assess plant health growth, plant viability, etc would have to go through UNU.

“It’s something that we found a lot of benefit from and our head grower within the greenhouse was excited about it, as was the CEO of Pure Green Farms.”

Ceres drew capital from its Sustainable Food and Agriculture Opportunity Fund II, which launched in 2019 and has a $100 million target. Zick confirmed that the vehicle had an $18 million first close in H1, and invested in greenhouse grower Pure Green Farms during the period and was a follow-on investment from Fund I.

Fund II follows the same agribusiness-focused model as its $17 million predecessor of the same name, confirmed Ceres’ chief executive Perry Vieth, but it is weighted more heavily towards businesses with strong sustainability credentials.

He said the firm believes innovation in greenhouses will continue to improve sustainability and that the sector still has substantial growth potential.

We’re still in the early innings of the amount of production that can be done,” said Vieth. “You’ll see much more of it, especially in the eastern part of the United States, which is where the population is based.

“In addition to not having to use pesticides, you’re not transporting vegetables from the west coast to the east coast. There are other benefits such as less water being used. Most of your tomatoes and peppers already come from greenhouses and leafy green has a lot of expansion yet to do. Baby head lettuce, baby spinach, strawberries – those high revenue crops and vegetables will continue to expand.”

The firm chose to back greenhouse farming instead of vertical farming as the long-term winner in the controlled environment space, said Zick, due to several advantages the former has over the latter.

“We ultimately think this [controlled environment agriculture] will be a commoditized product where everyone’s going to have similar types of varieties and similar quality,” Zick said. “It will be much higher quality than what you typically see in the lettuce case, for example, today. But it’ll be higher quality – so the low cost producer is going to win.

“In a vertical farm, having to turn on lights to grow a crop is a distinct disadvantage as opposed to a greenhouse. When the sun is shining, you have free light. Additionally, we think that keeping human hands away from the product is going to be a differentiator. In our greenhouse it’s automated to the point that with mechanical planting and mechanical harvest, the first human hand to touch that lettuce will be the consumer at home pulling it out of the package.”

Zick added that the firm chose its greenhouse site in South Bend, Indiana due its proximity to an ethanol plant. Ceres’ long-term plan is to recycle the plant’s heat and carbon emissions “to provide cheap heat and free fertiliser in the form of CO2.”

“We think all those things will lead to us being a low cost producer, which is who will eventually win in the space. Having a lot of capital doesn’t mean you’re going to win, ultimately it comes down to what’s your cost per pound produced.”