The image of the modern-day farm extends from a well-orchestrated landscape of lettuce heads, to a chic building in inner city Newark, New Jersey.

Welcome to AeroFarms, one of the largest indoor farming companies in the U.S. and one of the pioneers of the indoor farming sector in the US. The glass exteriors of the front façade — of what was once a steel mill — reveal rows of leafy greens and micro greens in vertically stacked trays.

AeroFarms is a success when it comes to both its products and fundraising.

According to data provider Crunchbase, since AeroFarms was founded in 2004, the company has raised some $138 million to date. Its high-profile investors include Swedish company IKEA Group, former U.S. Army General David Petraeus and American restauranteur David Chang the founder of the Momofuku Group.The company has 120 full time employees including a robust team of scientists, researchers and engineers mostly based at its Newark headquarters.

But AeroFarms is not an anomaly, it is part of one of the fastest growing segments of agriculture — indoor farming. According to the 2017 Agrilyst report, indoor farming makes up 30 percent of facility type, second to the green house. An estimated 49 percent is grown via hydroponics while 24 percent is soil based.

While the geography of the farms varies extensively, indoor farms share some commonalities.

The majority are in or near big cities where they occupy what were once warehouses. Most of the farms grow micro greens, herbs and baby lettuce or spinach.

These include BrightFarms based in Irvington, New York just north of Manhattan, Freight Farms, Detroit Dirt, Edenworks and SproutsIO.

Funding in the indoor farming space is on the uptick. Indoor farming startups around the world raised $285 million since 2017 with the U.S. leading the pack when it comes to amount of investment, according to AgFunder data.

This past June, for example, Crop One Holdings the parent company of Freshbox Farms signed a $40 million joint venturewith the catering arm of global airline Emirates to build a vertical farm.

The indoor farming boom is also catching on in the Midwest and West Coast too. In 2017 San Francisco-based indoor farming company Plenty Ag received an infusion of $200 million from Japan’s SoftBank Vision Fund.

“Following the $200m investment made by Softbank in Californian vertical farming startup Plenty, we’ve seen patchy growth in vertical farming investment,” said Michael Dean, chief investment officer at online venture capital investor AgFunder. “Outside cannabis, new entrants in the production space have generally found raising capital a challenge as investors tended to focus on niche technology developers and the established vertical farms who were able to sufficiently de-risk and prove supply chains were viable, and ready for expansion.”

An hour away by plane Oasis Biotech’s vertical farming facility is thriving in Las Vegas with over 217,000 square feet of 18 varieties of baby lettuce and 10 varieties of specialty herbs.

In the Midwest, 42 percent of farms who responded to the report’s survey are indoor vertical operations and 50 percent are in urban areas, according to Agrilyst.

John Hartnett founder and CEO of SVG Ventures and the THRIVE Accelerator. “We are increasingly on the lookout for startups with technologies that address the increasing constraints to in-field growing, and indoor farming is a category that is demonstrating real efficiencies in this sense.”

Climate change, labor shortage

The genesis of AeroFarms started as a solution to the supply chain, which is infamously lengthy in the agriculture sector.

“Originally, we thought we were about a supply chain disruption. How do we bypass a very complex supply chain and develop a fresher product,” said Marc Oshima a co-founder of AeroFarms and Chief Marketing Officer in an interview with THRIVE.

But the co-founders, David Rosenberg CEO and Ed Harwood, Chief Science Officer, fast learned that they had more in common with traditional growers than initially thought. The growth of indoor farming was also prompted by perennial ag challenges such as limited water supply and a severe labor shortage.

Oshima continued, “We had seen what the macro challenges were — population growth, urbanization, challenges to traditional farming, loss of arable land. We realized we needed some new paradigms, and some new systems. From day one our lens has been very much global in nature.” The company for example uses no soil and 95 percent less water than a traditional farm.

“Our way of growing and systemic growth is really about setting a new standard for farming overall,” said Oshima.

Agtech and indoor farming appear to be a natural match, considering the requirements of indoor farming. Within a contained space there are meticulously monitored conditions, and natural conditions replaced with LED lights and pools of water rather than soil.

AeroFarms keeps all of its innovation and research inhouse, and has its own team of over 30 mechanical and electrical engineers. Oshima stresses the technology, which has included designing their own LED lighting rays, is proprietary.

Other indoor farms such as BrightFarms (THRIVE Top 50 winner) look externally for innovation.

Innovation can include machine learning or AI to “help us understand the growth patterns of our crops as they are growing,” said Abby Prior, Bright Farms Vice President of Marketing.

“We do have some internal development, but we are just looking for the best technology. We are using the tools that are being developed by other startups, and by other agtech technologies to help improve our process,” said Prior.

Technology is “extremely important,” Prior said. “We look to benefit from technology that is available and quickly catching up with the controlled development world.”

At BrightFarms technologies have helped increase efficiency, crop yield and produce quality, she said.

BrightFarms has four operating farms including Bucks County Pennsylvania, Culpepper, Virginia, Rochelle, Illinois and the newest one in Ohio, where the company is expanding its Midwest footprint.

The company uses hydroponic green houses to farm. BrightFarms’ growers regularly work with breeder and seed companies to identity new kinds of greens; for example, a new product launched earlier this year was “Happy Beet” created from the green part of the beet. (top of beets)

Consumer demand

In the grand scheme of things, indoor farming addresses the needs of consumers living metropolises where it is a given that land and water supply are limited.

“The future is that why have lettuce come to New York from California when we can grow it in the metro areas?” said Herbert Kliegerman the publisher of iGrow News, a news website focused on indoor and urban farming. “Indoor farming is controlled environmental agriculture. I see this in every major city.”

Agricultural experts and researchers say that vertical and indoor farming is here to stay, and see it on a growth trajectory globally. Countries such as Japan,known for its limited space in cities such as Tokyo, already have an existing history with indoor farming.

Neil Matson, associate professor at Cornell University’s School of Integrative Plant Science, specializes in researching greenhouse crops and vertical farms.

Matson forecasts there will be more production facilities worldwide, higher valued horticultural crops, and more plants grown for medical purposes. Growth is also being sparked by what he calls the “foodie movement,” consumers who are increasingly keen on locally grown foods, connecting with local growers.

“People seem more interested in the providence of their food, and having a relationship or knowing how their food is produced,” said Matson, noting another drive could be food safety referring to the recent romaine lettuce scares.

This leaves opportunities for more innovation and technology in this space, particularly for robotics and lighting; two of the biggest costs of production on the urban farm remain labor and energy, Matson added.

Agtech entrepreneurs

Some agtech entrepreneurs have jumped on the bandwagon.

Tinia Pina, the founder and CEO of Re-Nuble and a member of the THRIVE IV seed accelerator, launched Re-Nuble in 2016 with the urban farm as the target. Re-Nuble is a supplier of chemical-free hydroponic fertilizer that is produced by organic produce waste. With her product Pina was intent on tackling a greater problem of food waste; Re-Nuble works with partners where they can trace food waste sourced from organic suppliers.

“We saw the demand for it,” said Pina, noting consumers are increasingly more interested in what they are purchasing and consuming.

While the timing for vertical farms seems ripe, Pina also pointed to potential challenges such as cost of real estate, notably in the country’s biggest and most cosmopolitan cities New York, Washington D.C., San Francisco and Los Angeles.

Despite the real estate sticker shock in big cities, vertical/indoor farming is also attracting younger people into the game.

Ricky Stephens, co-founder of AgTech X a co-working and educational space in New York City for agtech startups, said the majority of startups are in vertical or rooftop farming. Stephens said there are three drivers that are attracting young innovators: potential environmental impact, positive benefits to health and wellness and “the food — which has a sexiness and fits the Instagram-able world we live in. Finally, urban agriculture bleeds into other emerging niches within the larger sustainable food and smart city movements.”

The road ahead

AeroFarms’ Oshima said the company is interested in technologies that will help in forming what he calls the “fully connected farm.” Without divulging details, Oshima said it involves using various monitoring methods, data, sensors to better understand all aspects of the growing process from flavor, smell to yield with the goal of “continuous improvement,” he said.

To be sure, the vertical farm of the future could mean reducing the time of the harvesting cycles such as shaving a 30-day harvest by half or developing flowers with shorter stems (the company has grown edible flowers).

“We could be 390 times more productive on an annualized basis because of those crop cycles,” Oshima said. “We are also getting greater yield per square foot, and we can get greater output for that.”

AeroFarms currently grows over 400 different varieties of leafy greens.

The fully connected farm is global — extended to cities around the world — and it seeks solutions to global challenges, said Oshima pointing to the heat waves and droughts that have plagued the U.K. and the lettuce shortages in Spain and Italy.

“Technology in a science driven approach has been the backbone of our work,” said Oshima.