This interview details Raiz Vertical Farms, an indoor farming company based in Portugal. The interview is with Emiliano Gutiérrez, Co-Founder & CEO of Raiz Vertical Farms.
What is the origin story of Raiz Vertical Farms?
I first encountered the concept of vertical farming in New York City while on a rooftop in the Bronx, specifically at Sky Vegetables. Interestingly, it wasn't truly vertical but rather utilized hydroponics. Nonetheless, this experience opened my eyes to the potential for making a real impact on communities, even in less developed areas. The community's need for fresh produce ignited my interest and passion for launching a project that could bring about meaningful change. My own background in Mexico exposed me to issues of hunger and limited food access, which further fueled my determination.
Fast forward to my meeting with Simon, who would later become my co-founder and CTO, in Berkeley. He was already deeply involved in an innovation program, exploring more efficient approaches to vertical farming operations. This initial encounter in 2018 was more about exchanging ideas than concrete collaboration. At the time, I was focused on developing my own energy company, specializing in distributed energy resources. Interestingly, we noticed that vertical farms were emerging as both a growing industry and a significant energy consumer among our early adopters. This realization shed light on several market gaps related to energy production and consumption within the Controlled Environment Agriculture (CEA) sector. This revelation occurred in late 2020.
During the challenging times of the COVID-19 pandemic, we not only witnessed food shortages but also saw an opportunity to drive change. It was in 2020 that we made the pivotal decision to dive headfirst into our venture. I reunited with Simon and explored potential collaborations with other co-founders. Together, we committed to developing a new paradigm for vertical farming with a strong focus on energy efficiency.
In summary, there were three critical junctures that shaped our journey: the initial spark of inspiration in the Bronx, the deepening of our technological understanding in Berkeley, and the pivotal decision to take action during the COVID-19 pandemic in 2020. These moments collectively laid the foundation for our innovative approach to vertical farming and energy efficiency.
It's evident that many companies are facing challenges. could you please share your current perspective on the state of the CEA industry and your opinions regarding it?
Certainly, it's undeniably a challenging situation. To a certain extent, we foresaw this, considering the various claims made and the substantial capital expenditure required, coupled with the high operational costs, especially in relation to energy consumption. Fortunately, we've managed to shield ourselves from the impact of rising energy prices thanks to our independent microgrid and our energy-efficient practices. However, this isn't the case for most other companies and industry players who rely on complete Controlled Environment Agriculture (CEA) and full LED lighting systems. This approach not only increases energy demands but doesn't necessarily align with a circular energy model that efficiently utilizes waste transformation and heat.
This, undoubtedly, adds significant pressure to the industry on the energy front. Furthermore, it's essential to consider the broader adoption of our produce. While we've observed a positive reception here at the farm, with visitors falling in love with the experience of witnessing our operations, widespread adoption remains a challenge. Only a small percentage of people actively consume produce grown in vertical or indoor farms. I'm confident that the industry will endure, evolve, and prosper, although it might not be an immediate turning point. While these are undoubtedly trying times for all of us, I believe that the lessons we learn, the optimizations we make, and our renewed focus on unit economics will ultimately enable us to bounce back stronger than before.
What are some of the biggest challenges facing your team in the future?
To start, we currently operate a farm in Lisbon. Looking back, the previous year marked a challenging period as we launched this endeavor. Getting a handle on the entire operational process, including logistics, distribution, and sales, was no small feat. Those initial months or seasons were quite turbulent. However, this year has seen significant progress, and we are now efficiently selling our entire harvest. We have successfully secured a stable demand for our produce. Consequently, our Lisbon farm is running smoothly and remains unaffected by energy issues. It has become an approved and profitable concept farm. In terms of our operational objectives, we are satisfied with our progress.
Looking ahead, our aim is to launch three more farms of this nature by the next year. Achieving this goal will require substantial capital investment, ongoing research and development efforts, and team expansion. Currently, we are actively working to secure the necessary funding to support this growth. Our existing model has been validated, and we are determined to replicate its success.
On another front, we have noticed a growing demand and interest in modular, smaller farming systems, which has led us to develop a 3D-printed product line. We have already received commercial interest from corporate offices and co-working spaces. This endeavor serves not only to increase our brand awareness but also to connect mid-scale container farms with these smaller, modular units. Of course, this comes with its set of challenges, including securing funding for this R&D project and assembling the right team and partnerships to ensure a successful launch by early next year.
Launching this new product line, known as the "Ortus Farmwall," poses the additional challenge of maintaining focus and coordinating our team effectively. While the current industry climate has made funding less accessible, it is by no means an insurmountable obstacle. We are confident that we will achieve our objectives, as we are driven by the knowledge that there is a significant demand for what we offer.
Regarding fundraising, Who are the prospective investors? Have you identified which factors resonate most with them in terms of the information they seek to sustain a dialogue and what piques their immediate interest?
Growing a validated model serves as a pivotal strategy in reducing risk and solidifying our credibility. When we can demonstrate that we have successfully validated our approach and have encountered increased demand – exemplified, for instance, by the need to expand with three additional farms – it becomes an enticing proposition for potential stakeholders.
Furthermore, what truly distinguishes us from the competition is vital to sustain meaningful dialogues. As previously mentioned, our hybrid energy model significantly slashes costs. This, coupled with the ongoing development of algorithms for optimized and dynamically controlled lighting and environmental conditions, sets us apart. Additionally, we've dedicated the past year to the early stage developments with NEAR Protocol & Celo of Web 3 elements, which, in the future, promise to unlock funding and foster network effects. These innovations serve as strong attractors for investors, enabling us to continue conversations and secure necessary investments.
Beyond these technological advancements, providing a comprehensive overview of the industry's landscape, specifically addressing the surging demand for locally grown produce, is imperative. While the operational and profitability challenges are evident, the demand remains substantial. By demonstrating that our venture is not only profitable but also efficiently managed in terms of operations, with a secure supply chain and scalability, we shift the conversation in a favorable direction. Moreover, the ability to showcase our learning from industry mistakes bolsters our credibility further.
What is unique about Raiz Vertical Farms compared to competitors?
What sets us apart from other companies is our energy, our ability to dynamically control lighting, and our incorporation of web 3 elements. I'd like to emphasize the importance of community involvement. First and foremost, we're focused on community-driven decentralized farming. Our goal is not to create massive farms located far away from urban areas. Instead, we aim to establish farms in every neighborhood, making it accessible for people to visit and engage. Additionally, we prioritize education and immersive experiences, as we've observed that these aspects strongly resonate with individuals. We firmly believe that fostering a sense of community, combined with education and memorable experiences, plays a crucial role in advancing the acceptance and adoption of vertical farms and the produce cultivated within them.
How do you measure the impact of your company so far? (Revenue, Employees, Customer Quantity, Production Volume) etc?
In regards to our team, it's been a bit of a fluctuation. We've been fortunate to attract interest from interns, as well as more experienced individuals and volunteers who've generously assisted us with our software development. Earlier, when I checked our Slack channel, we counted 39 members. However, this figure encompasses everyone who has contributed to various aspects of our company, which has been incredibly beneficial. As for our core team, we currently stand at 8 members, while the extended team, including those who contribute on a part-time or per-project basis, totals around 12 individuals. So, the active contributor count within our team falls between 8 to 12 people.
Now, turning to the farm itself, it comprises two containers, each spanning 18 square meters. The lower level houses our logistics area, which includes the germination station and reservoir. On the upper level, we've created a controlled environment for cultivation, featuring hydroponic systems. Over time, we've successfully grown a diverse range of crops, including amaranth, dill, and basil. Approximately 80% of our current production is dedicated to crops for which we've secured demand from various restaurants. Notably, we grow not only traditional Genovese basil but also a highly popular variety called Pluto basil, known for its small, flavorful leaves that chefs and restaurants adore. More recently, we've conducted trials with cucumbers and tomatoes, exploring the potential for nutrient-dense crops as we plan to expand into other regions.
Our journey began with the launch in late 2021, commencing with a single test chamber and a solitary hydroponic system. Presently, our farm boasts six operational hydroponic systems, indicating a sixfold growth. On the B2C side of our business, we've garnered over 100 paying customers. Additionally, we've formed partnerships with five restaurants, offering them our fresh produce. Visits to our farm have also become a revenue stream, with over 500 visitors participating in farm experiences, workshops, and related activities. These engagement metrics have played a pivotal role in sustaining our operations.
Do visitors to the farm need to pay for their visit, or is it simply an opportunity to see how it looks without any cost?
They are paying to visit, and we charge 15 euros per visit. Typically, our visitors are from universities or corporate events, and we often receive reposts on social media. We host at least five corporate events where people come to enjoy various activities and also include a visit to the farm. Occasionally, we offer workshops where visitors can plant their own seeds and take home some plants. This experiential aspect adds significant value for our customers and for us. It's an engaging experience that also helps us validate the interests of our community.
What is the weekly purchasing comparison between an individual consumer and a restaurant?
We've realigned our efforts primarily towards production, with a strong emphasis on supplying restaurants exclusively. In this arrangement, we allocate approximately one out of every six barrels to our hydroponic system for potential B2C engagements, such as activities, workshops, and producing items like pesto, enabling us to offer farm-to-table experiences. This means that roughly 80% of our output is committed to restaurant distribution, leaving approximately one barrel per customer per week.
Approximately, how much supply is typically produced for one of those restaurants in terms of weight, either in kilograms or another unit of weight?
I'd be happy to provide more information, but it varies. It's not a consistent amount; it depends on the specific restaurant. Some order more than others. For instance, some receive a weekly delivery of three kilograms, while others receive just one kilogram. So, it's quite a range, and I would estimate it falls anywhere between one to three and a half kilograms.
What have you learned that you wish you knew when you started the company?
Well, it's a classic, but our primary focus is on the client and the people. Initially, during the first month after our launch, this wasn't the case, but now it is, and it will continue to be for every farm we launch in the future. So, securing interest and demand before launching the farms is crucial.
Moving on to differentiation, we decided to emphasize it right from the start. However, it's important to keep concentrating on what we can do differently and excel at. This applies not only to the energy aspect but also to our community involvement and our commitment to the evolving Web 3 landscape. It's vital for everyone in the industry to identify their unique strengths and leverage points since we all bring something different to the table, and it's complementary.
Lastly, we're highly open to partnerships. This is something we'd like to see more of in the industry. Currently, we're not developing all of our software in-house because we haven't found a solution that allows us to seamlessly integrate with APIs and make the necessary code adjustments. Therefore, we welcome more collaborations with different providers. Our approach of giving first has worked well for us, and we believe that fostering a culture of mutual learning and creating synergies will benefit everyone involved in the industry.
How can people connect with you or learn more about Raiz Vertical Farms?
People can check out our LinkedIn and website for more information. Don't forget to follow us on Instagram too. We're excited about future launches and products. Our goal is to empower individuals to create and manage their own farms within their communities. We can even assist with funding and offer a seamless operational solution. So, if you're interested in any of this, please don't hesitate to reach out and start a conversation with us. We're a laid-back bunch and enjoy connecting with others.
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