Red Sea Farms, the saltwater-based controlled environment farming system provider, will target up to $50 million in a Series A it plans to launch in the fourth quarter, chief executive Ryan Lefers tells Agri Investor.
Red Sea is a spin-out from the Saudi King Abdullah University of Science and Technology (KAUST) that develops systems that replace the freshwater typically used in greenhouses with saltwater and has focused largely on growing tomatoes.
In April, it closed an $18.5 million strategic round that included Saudi food and retail focused investment holding company The Savola Group, an investment unit connected with Inclusive Capital Partners founder Jeffrey Ubben and the venture capital arm of Saudi oil and natural gas company Saudi Aramco.
That round was preceded by $16 million pre-Series A round in August 2021 that also included Wa’ed, the Aramco venture unit, alongside the Saudi government-owned Future Investment Initiative and Equilibrium-backed controlled environment producer AppHarvest.
Red Sea chief executive and co-founder Ryan Lefers told Agri Investor the company plans to target $30 million to $50 million for a Series A it will launch in the fourth quarter. He said Red Sea planned to launch earlier in the year, but decided to postpone assigning a valuation to the company after extending its convertible-note financing with Wa’ed in April.
“We don’t need to raise, so we’re really trying to place ourselves in the best position so that when we start that Series A it’s because we’re ready and the market is ready,” he explains.
Lefers says the company’s status as an outgrowth of a key Saudi university has helped in expanding its investor base within the Kingdom to five entities.
“The investor market in Saudi Arabia is a small but growing group so they all know each other, and they all talk to each other,” he says.
In Aramco, Lefers said, Red Sea has established an important funding relationship with one of the world’s most profitable companies, which he hopes can continue. While Aramco is focused on diversity in the Saudi economy and strengthening domestic food security, Lefers said, the strategic nature of its investment does not make it any less returns focused.
“Aramco is strategic money, but we have financially driven investors as well,” he says. “They’re all strategic. Everybody wants us to make money and go as fast as we can.”
In Q4, Red Sea plans to expand its fresh produce business in countries of the Gulf Cooperation Council and begin global sales of its farming systems technology. International expansion is key to Red Sea’s growth strategy – Lefers says the company has ongoing trials in Arizona, California, Mexico, Spain, Portugal, the UAE, Egypt and elsewhere.
He declines to share any sales or growth targets but did highlight that gaining traction in markets will be an important part of fundraising for a Series A in which Red Sea hopes to expand the geographic focus of its investor base.
“We’re definitely going to have follow-on from the Middle East. We’d like to get at least a third from North America,” says Lefers. “As we look at global expansion and thinking around strategic and open doors, bringing in an additional world location – whether that’s Europe or Asia-Pacific – would be something that we are open to as well.”
US government entities continue to be among Red Sea’s potential equity investors, Lefers says, adding he had visited Washington, DC this summer.
“They’ve sort of been saying: ‘Well, just keep us in the loop. Tell us once you’ve got that data room ready’,” he says.