07 Mar Feeding the future
David Farquhar, CEO, Intelligent Growth Solutions, shows, as the world comes to need more food, why Scottish technology might hold much possibility.
Intelligent Growth Solutions is one of Scotland’s best success stories, and the company has now established itself as a dynamic and prominent player in Scotland’s evolving agritech scene. Tell us how IGS came about, and as it continues to grow, what are your key priority areas?
IGS is now nine years old; we were founded by a real farmer who was farming in Aberdeenshire, producing baby veg and microgreens for Michelin star restaurants. He wanted to do this for 12 months out of the year. In the north of Scotland in the summer, we have very long sunny days, but in the winter, we have the exact opposite. He was growing under polytunnels and therefore required some artificial light in order to enable that to happen throughout the whole year. He got together with Professor John Allen from the University of St Andrews, and they proved you could indeed use LED lighting to get seeds to germinate, then propagate, but this was on a small scale, about the size of your dining table. Hence, the challenge was how to scale this up and then how to deal with the economic challenges, such as energy consumption and labor costs. Over the course of the subsequent five years until the end of 2017, the business basically behaved like a R&D project, going through several iterations of a prototype. They finally settled on the design that you see on our website today, which is now at the James Hutton Institute, the Scottish crop research institute at Invergowrie near Dundee.
I took the company over at the end of 2017 to turn it from an R&D project into a fully-fledged technology business. The most important strategic decision I made when I took it over was to stop growing crop for commercial sale. There are quite a lot of vertical farm companies around the world, especially in the United States, who are trying to design their own technology and be a grower at the same time. Trying to ride two bicycles at once is rarely successful, so the best thing to do is pick one or the other. I had looked at the amount of capital which would be required if we were going to build our own farms and then run them, and it is absolutely huge. Some people have had to raise over a billion dollars and still have revenues of below $5 million. It is a very capital-intensive business. Therefore, I decided we would be a technology provider to the industry and vowed never to grow crops for commercial sale. We are here to provide the best picks and shovels to the gold miners. As technology markets develop and mature, that is what always happens. The people who provide the technology split from the people who are using it and they supply to them and support them. That is exactly where we are now.
We raised our Series A capital in 2019 with three American investors: S2G Ventures from Chicago, backed by Lukas Walton of the Walmart family, Ospraie Ag Science from New York and AgFunder from Silicon Valley—three pretty iconic places—plus the Scottish Venture Fund. Within less than six months of raising those funds, coronavirus hit, and we had the lockdown. We were also facing Brexit, which Scotland did not vote for. So, not only were we facing the lockdowns, but we have also been battling Brexit, making it harder to export and to bring in materials and components that we need to build the farms.
The IGS vertical farm is an extremely sensory, very physical thing. When you see it from the outside, it is quite impressive. Inside you find millions of LED lights, trays moving, robots working and everything making wonderful technological noises. You can see this amazing crop, you can smell the crop, you can taste the crop, you can go hands on. All five of your senses are assaulted when you go into this thing. Having to sell this concept to people, to engage with them, to educate them, to raise their awareness is very hard when you cannot physically bring them into contact with it, so our team has done an absolutely incredible job. In the second half of 2020, we sold just under $26.1 million worth of farms. Last year, we were aiming to sell just over $65.3 million but actually booked $97.9 million. We are now just about to pass a $130.5 million worth of sales and buildings in 30 locations across four continents. We are now building farms for farmers everywhere, from the Pacific Northwest and Western Canada through Europe to the Middle East, Southeast Asia and down to Australia. In short, we are now the biggest vertical farm company in the world, but as a technology provider, not as an operator.
Can you share with us more about how you prioritize innovation in IGS and what some of these ground-breaking innovations are?
The total we have invested so far is around $15 million and our on-going R&D program is worth about $2.6 million a year. We have our Crop Research Centre, at Invergowrie which doubles as our demonstrator farm. We have our Engineering Innovation Centre at Inverkiething, Fife and our head office in Edinburgh: we also have offices in Chicago and Singapore. In terms of innovation, we have registered 17 patents to date across the six subsystems of the machine.
The most fundamental thing we have is a unique way of powering the LED lights, which is energy efficient, and allows us to manage the LED lights with no flicker. If you hold your mobile phone up at a conference to take a picture of the screen, you get lines across the image and it flickers. If you have LED lights at home, when you dim your lights, they will begin to flicker, because they are being switched on and off 50 times a second. Our eyes cannot see it, but the crop can, and it actually causes stress to the plants, preventing them from growing efficiently. It also does not allow you to make the light behave like real sunlight. Sunlight is not white. In fact, you have to be able to change the angle of the light, the spectrum, the brightness, the photoperiod, and all types of qualities if you are going to mimic sunlight in an optimized way to suit the biochemistry of the crops. Everything we do mimics nature. We do not use any chemicals or GM. We simply make the sun, the wind and the rain.
Our fundamental patent is on using a different form of electricity to power the LEDs. It is totally safe. You can actually touch it. There is a power and control system and an automated robotic handling system to manage the trays of crops so that we do not need to put any labor into the growing area. That is enormously important as labor is the single biggest cost. You do need a little labor in the service area you sow the seeds, harvest and package the crops but not in the growing area at all. That means that we will not bring in pests and disease, hence we do not need pesticides, which means we don’t need to wash the crop which doubles the shelf life and reduces waste. As you can see, there are many spinoff benefits. Apart from the power and control and the robotic system, we have an illumination system for the sun, two ventilation systems for the wind and an irrigation system to make the rain. Finally, we have our software and data layer, which manages everything in the cloud, creates recipes for weather and adjusts itself as the crop gets older. The system is extremely sophisticated, but actually quite easy to run for the farmer or the operator.
Why should agritech, and firms such as yours, be on the minds of investors for the future? What value added offering do you bring to a portfolio?
ESG is huge on the agenda. Our four series A investors followed into the Series B, which was led by COFRA holding, originally from Amsterdam, now based in Zug in Switzerland. They are the Brenninkmeijer family, a long-term ethical investor that does philanthropic and asset investment as well as private equity. Following them was Cleveland Avenue from Chicago, the family office of the former CEO of McDonald’s. Then there is DC Thomson, which is a media publishing family office, based in Dundee in Scotland. Family offices tend to have a long, ethical investment perspective.
Additionally, we are optimizing their economic viability, while reducing the carbon footprint and the impact on climate change in six major areas. The first is no pesticides. The second one is that we can put this on brownfield land. We do not need a building, nor do we need arable land. It can go on an industrial site anywhere and locate very close to the point of consumption. That also means that we can free up arable land which could be rewilded. One of our Growth Towers will produce 25 tons of a given crop, from a footprint of 42 square meters. If you do that in a field, you need 4 hectares: 1000 times as much space. Similarly with water, if you grew a kilo of lettuce in a field, you would need 250 liters, in a greenhouse 20 liters, but in our farm 1 liter. So there are massive water savings. We have zero emissions. Our ventilation system is 100% closed loop and our watering system 95% (every time you harvest some water leaves the farm in the body of the crop). Thus, we put nothing in the air; nothing in the watercourse and because everything that is not consumed can be composted, nothing into the land either—zero emissions. There is no need to use any hydrocarbons, not just in terms of renewable energy, but also lubricants. They have all been purposefully designed out. From an environmental point of view, we have an excellent foundation and track record.
How do you engage with international colleagues in the agritech space? How do you reach out to investors, and how do you sell and expose your projects and products globally?
We work with over 50 supply chain partners, best-of-breed from all around the world, whether that be sourcing components or manufacturing for us and logistics. They include Osram from Germany for the lights, OMRON from Japan for the robots and some of the electronics. We also work with local manufacturers here in Scotland to put farm kits together, to ship out for deployment. In fact, we just had 18 trucks leave our engineering center here last week to go to Paris to build out the next round of towers for Jungle. Additionally, we are starting to work with tree nurseries growing seedlings, a sector that is only one-third efficient. Two-thirds of all starter trees grown in one place are then shipped somewhere else; this burns a lot of hydrocarbons while they are thrown away before planting. It is absolutely insane. We are also starting to work with forestry businesses to help with carbon sequestration.
Increasingly investors have been reaching out to us. Our Series B round was 20 times oversubscribed from all around the world. We are very much a global company. Scotland has a fantastic reputation worldwide for making friends: we really like working with diverse people and operating internationally.
How do you view the role of agriculture players in helping the country achieve net zero?
Transport used to be the most polluting industry in the world, but because of the lockdown and so few flights going, agriculture and food moved from number two to number one. The irony is that what makes it difficult to grow our food is the way we grow our food. We have an exponentially growing world population that will hit 10 billion by 2050 according to the UN. At the same time, because of climate change, we are destroying habitats; we have increasing incidents of high wind blowing away topsoil, severe flooding and rising temperatures. The time when pollinators like bees are coming out is going out of sync with plants flowering. The really scary statistic is that we have to grow more food in the next 30 years than the previous 10,000.
We are members of the National Farmers Union in Scotland, so we want to work with the farming community, and, rather than replace what they do, we want to make them more efficient and help our farmers replace imports. Growing tree seedlings is one thing, but we can also grow starter plants for soft fruits, like strawberries or blueberries, and vine fruits, such as peppers and tomatoes. These are normally grown in one country and then trucked, shipped or flown overseas, then 40% percent are thrown away. It is totally unsustainable. We can bring that germination and propagation through to flowering and fruiting into the local market and do it right next to the point of production. Then we could genuinely say that a Scottish strawberry is a Scottish strawberry grown from seed here in Scotland. We want to work with the farming community in this hybrid way, either from the vertical farm to the field, or the vertical farm to greenhouses, and help diversify traditional businesses.
What would be your advice to the next generation of entrepreneurs trying to navigate external threats from climate change and unpredictable economies?
The single most important thing is to start with a problem instead of starting with a solution. IGS was founded by a farmer with the problem that he could not grow 12 months of the year. I see a lot of technologies created for their own sake and inventors trying to find an application for them: not commercial. You must start with a well-defined market problem, hopefully in a big industry, so that you have lots of potential demand. Hopefully, it is something that is also easy to translate so that it can be international. You must make bold decisions based on facts and data then seek enlightened investors who will back you. We have a terrific set of investors with whom we meet every month. They are super supportive, making customer introductions for us and helping us network.
Never assume that you are the smartest guy in the room. Hire people who are much brighter than you and who have a different perspective. You need diversity and bright people who will challenge you. We have a big push at the moment to bring more women into what are called STEM jobs: Science, Technology, Engineering and Math. That is something that we are driving very hard so that we can get these different perspectives, different ways of looking at problems. Those would be, for me, the absolute key things.
Do you have any final comments for the readers of Newsweek magazine?
Come and do business with us. We work with all kinds of different interesting partners, whether they are suppliers to us, channels to take our technology out to the world, or customers. We are open-minded and love hearing about new ideas and new technologies that could continuously enhance what we have to offer. We have a very international outlook, but Scotland is a terrific place to do business.