Indoor Agriculture Firm Opening Doors to the Public through SEC Filing
March 25, 2014 | Mitchell Hagney
Mitch Hagney is Chief Executive Officer of LocalSprout, a hydroponic farm based in San Antonio, Texas.
Houston-based Indoor Harvesting Corporation has begun the process of becoming a publicly traded company by filing a registration statement for the Securities and Exchange Commission. Their decision to go public may represent a larger shift for the industry from small controlled environment farms to larger urban agriculture conglomerates.
Known more for its oil refining and industrial car culture, Houston may seem a strange place to launch a green revolution. Yet it is here that Indoor Harvesting is engineering urban farming equipment to make controlled environment agriculture accessible to anyone. They specialize in aeroponics, which is a technique that delivers nutrient-rich water vapor to the roots of the plants. Their goal is to make systems that anyone can use without much technical knowledge by making all the components fully compatible.
CEO Chad Sykes says, “Most companies that build vertical farm equipment try to push prefabricated systems on farmers that end up being really large systems that are inflexible in their design. They sometimes even require licensing just to use their components.”
Would-be vertical farmers have to plan around their equipment provider, rather than the other way around. Indoor Harvesting’s solution is equipment built for broad compatibility, which Sykes calls “fixture-based.”
“Think like installing a bathroom, Sykes says. “All of the parts can be linked, but you can pick and choose what you want. Pipes fit together, electrical parts link up, and everything fits together no matter where you bought them. We want to create products that encourage standardized connections, to make building urban farms easier.”
Sykes believes that everyone, including Indoor Harvesting’s competitors, will be helped by sucg standardization.
“Fixture-based equipment means that we can sell to the smallest farms and the largest using the same systems,” he says.
The company is moving quickly. Besides registering for an initial price offering, they intend to begin limited sales of some components in about 3 months and are in the process of constructing a 5000-ft demonstration farm in Houston. Sykes believes that the indoor farming industry is about to explode, and he wants Indoor Harvesting to be at the front of the transition.
That’s why he is pushing to make his company one of the first openly traded indoor farming companies on the market. Registration with the SEC is a first step towards becoming openly traded by placing valuation on all parts of the company’s worth. But many companies are successful without selling stock. Why go public?
Public trading gives companies access to more capital, enabling them to take on more profitable projects at once and build the equipment they need to expand more quickly. It also enables companies to consider acquisitions and mergers, and that is somewhat of a new possibility within the industry.
Most indoor agriculture companies operate independently to create a specialized niche. While hobby scale hydroponics and aeroponics are dominated by just a few companies such as General Hydroponics and Sunlight Supply, commercial indoor agriculture is such a new industry that there are no clearly dominant suppliers of equipment. The potential revenue difference between indoor agriculture and home hydroponics is the same as farming and gardening. These companies are going to get big.
One of the first such conglomerations was last year’s announcement of a “strategic partnership” between Terra Tech Corp, which is a publicly traded sustainable agriculture products company, and Family Hydroponics, one of the largest hydroponic retail groups in the United States. The two will collaborate on product development and online sales.
Being publically traded means that many companies could experience explosive growth if investors like the looks of the indoor agriculture market. While the marijuana market is different because it is so new and it sells better per pound than any agricultural product, the recent bullish market may indicate the potential for indoor agriculture on the open market.
Marijuana company stock prices rose by more than 50 percent in 2013 and have already increased by 150 percent in the first 3 weeks of 2014. Growlife Inc. makes growing equipment specifically for cannabis and its stock price has more than quadrupled in the last year. Some believe that the market is growing so fast that it may be a “bubble” where the stock prices are overly inflated.
Even if the marijuana industry isn’t a good model for how indoor agriculture will expand, the fact that it requires the same equipment means that indoor farming companies stand to benefit from new customers, technology, and investors.
Sykes says, “We don’t want to market ourselves as the cannabis company, but that is the biggest market for our equipment and where the most advances in the technology come from. The companies that end up on top of the vertical farming market will be the ones that are willing to associate.”
Regardless, the fact that indoor agriculture companies are beginning to go public represents a shift to big business as the industry matures. As new innovations like LEDs and automation change the profitability of operations in short periods of time, we may see the industry become a tech market that is characterized by fast mergers and acquisitions of small companies with new products rather than the old model characterized entirely by huge companies and slow changes.
Going public will allow companies like Sykes’ Indoor Harvesting to have access to more capital, enabling them to take more risks. It will also make the entire industry more transparent while the methods of our indoor farming become clear as day for newcomers to agriculture.
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