US vertical farming startup Plenty is collaborating with Mawarid, a subsidiary of Alpha Dhabi Holding, in a $680M agreement to establish a network of indoor farms in the Middle East, the companies revealed to Reuters.
The joint venture intends to construct five farms in the region over the next five years. An initial combined investment of approximately $130M by the companies will finance the construction of an indoor farm in Abu Dhabi, which is expected to commence early next year and could be operational by 2026.
The farm aims to produce over 4.5 million pounds of premium strawberries for local consumption and export within Gulf Cooperation Council member countries.
Part of the financing also comes from debt provided by a local bank in the region, highlighting an unusual source of capital for the capital-intensive indoor farming industry that has raised billions from venture capital investors.
Vertical farms, which utilise stacked layers in controlled indoor environments, are promoted as a sustainable way to grow fruits and vegetables closer to the point of consumption while using less water.
The high costs associated with building new facilities have been a significant barrier to scaling production, and funding for indoor farming has declined to just a fifth of its peak in 2021, according to PitchBook.
“We are targeting returns north of 20 per cent, which is significantly higher than traditional agriculture. In that context, we think there’s a lot of capital for the space,” said Arama Kukutai, CEO of San Francisco-based Plenty.
Plenty said its UAE farm’s strawberry production has been pre-sold to Driscoll’s, which dominates the market for berries in the region.
The partnership comes as the indoor farming sector is seeking new financial avenues to sustain growth. In early 2022, Plenty raised $400M at a valuation of $1.43B, according to PitchBook. To date, Plenty has raised over $940M from investors including SoftBank and Walmart.
“We’ve been looking to bring food security into the UAE. We want to offer a solution that addresses the issue of scarce land and scarce water, and could pivot to different crops if necessary,” said Mawarid CEO Kashif Shamsi.