Our panelists:
There is no bigger industry on our planet than food and agriculture, an industry that touches every single person alive. Meanwhile, the dynamics of agriculture and food production are changing in ways we never thought possible just a decade ago. In 5G x Agriculture, we’ explore the far-reaching impact of this technology on the agriculture industry.
Transcript:
Noelle Tassey 0:00
Welcome to today's panel on 5G and the future of agriculture. I am so excited to be able to bring you guys this event in partnership with our pals at 5G Labs. For those of you who don't know me, my name is Noelle Tassey, and I am the CEO of Alley. Alley is a digital and physical community of entrepreneurs and tech startups. We work across all of our cities, to activate the local tech community and connect them with opportunities at our corporate partners. Joining me today is David Rosenberg, co-founder, and CEO of AeroFarms, so excited to learn more about everything that they're doing and just hear their story. So thank you, David. I know you probably want to say a few words, and introduce yourself. So feel free to kick it off and we'll take it from there but thanks for joining us.
David Rosenberg 0:57
Good. Great to be here. Love connecting with other entrepreneurs, I am— excuse me, I'm— got recruited to be a lifeguard on duty so making sure everyone's being safe over there. Happy to— happy to connect to bring the conversation wherever it's appropriate to go. And before arrow farms, I built a nanotech company, but this is my fourth change the world-type company I've been involved in, second one I've founded or co-founded and led. So, a lot of experience from tech to internet infrastructure to nanotech. And now...
Noelle Tassey 1:41
Awesome. I'm so— David we're so excited. And it's always great to have a serial entrepreneur on I think, to, you know, obviously, lay the broader experience. It just brings so much to the table. So we would love to know just in terms of AeroFarms, you said this is the fourth kind of change the world tech companies have been involved in, what really drew you to this opportunity and then maybe also if you could give us a little color around what you guys do because it's so cool— this is one of my favorite topics we talked about.
David Rosenberg 2:11
So AeroFarms, we're a vertical farming company. We define vertical farming as layer upon layer of farming. We grow plants without sun, without soil, without pesticides, herbicides, fungicides. Instead of sun, we use spectrum at different intensities and different frequencies from led as light-emitting diodes. Instead of soil we use different mediums— predominantly a cloth birth medium, and we're able to— in fully controlled environments grow without pesticides, herbicides, fungicides. Most people on that topic when they think organic, they don't realize most organic food has pesticides, just organic pesticides, organic herbicides. So we're able to grow with zero. So it's— the value proposition to the customer is locally-produced fresh, that's what people are— what the trend is towards, and then pesticide-free. So not putting that— those chemicals, sometimes harmful chemicals in our body. And then the idea is to scale so we could bring a lot of production and a very small footprint close to where the mouths are. So looking at the supply chain, and this has become more apparent in the COVID world, we have the centralized food production facilities, it's been on the news in large part for meat processing, where it's really hard to socially distance in processing facilities— that's off of packaging. But in lots of processing areas, and centralized production, people want access 365 days a year, they want food to be inexpensive. But— and we've gotten in those economies a scale and centralized production, but we've also obviously lost the freshness. So in fruits and vegetables, a lot of it in— leafy greens, for example, are grown in California, Salinas, Mexico. So if we're able to grow locally, 365 days a year by controlling the environment, whether it's on the equator, or the North Pole, or in our case, in New York/New Jersey. If you're in the New York market, we're able to give people fresh food and disintermediate that supply chain where there's also tremendous spoilage. So about 60% of the food that comes off the farm in leafy greens, for example, spoils just because it's about a 12-day shelf life and it gets to the store on Day Five. So if we were able to get it to the store on Day One instead of Day Five, it's just a fresher, better product. And our ambition is to grow lots of crops. So we've grown about 850 different types of crops always with the lens of how do we reduce capital costs, operating costs while improving quality? So how do we celebrate abundance, bring variety to the market, and equally important, fresh, great-tasting food?
Noelle Tassey 4:46
Amazing so it— you know, correct me if I'm wrong, it really sounds like you guys are tackling through disrupting agriculture everything from food waste to carbon footprint, decentralizing food supply chains, and getting better nutrition to underserved communities. Is that— and that seems like that's just scratching the surface of kind of the positive change you guys are setting out to create.
David Rosenberg 5:15
Yeah, it is. That's our value proposition. Part of— one gets those conversations, into the conversations of what is local? So how hyperlocal is local. There are economies of scale in our industry like other industries, so we try and toe the balance of once one puts in— we have automation, seeding harvesting, cleaning, packaging, now we're integrating automation between those automated components. And once one puts in automation you want it running 24 hours a day, not five minutes a day. So you need growing skills in a linear way, auto— some of the automation in a nonlinear way. So you want more utilization of the automation, you actually just put in more grow towers. So we find a balance of how to optimize the automation, the of— the exhilarate ancillary equipment outside of the grow towers. So it's what's— somewhat surprising for people working in the industry is the key to the economics is, for example, managing the economics of the packaging area, or other items beyond growing. So you have to be— it's a tough industry, on one hand, I'd say there are easier ways to make a buck, but we're happy we're in it. But it's how do you optimize growing to get good quality, get yield? Which in plants— I'd say this is the toughest business I've built because it's contributed to building, it's a living, breathing organism. So unlike making maybe a widget where you do the same thing and you stamp it out, you get the same outcome. Plants, just like kids, you have two kids that grew up in the same household and they're just wildly different. And you think, well wait a second, like nature versus nurture, I'm nurturing them the same way, but there are just like subtleties that make kids different and some of it is nature, some of it's nurture. Not too different is like plants, you do the same thing. And sometimes the plants grow well, sometimes they don't. So that also brings in an element of like data centricity and machine vision of like, how do we understand what's happening with a plant, grow great plants, but also in this bigger system to bring in automation in seeding, harvesting, cleaning, packaging, working with the customer, telling the story. So it's a lot of complexity where— when I started off thinking when I got into the industry, which was really brought about by the realization that macro trends are going in this favor for bad reasons, pop— not population growth, but urbanization, but the decrease in land scarcity, decrease in water scarcity, coupled with some of the technology innovations around LEDs, light-emitting diodes, and that's the biggest line item capital cost and operating costs. So as that moves in one direction, I realized this industry is going to be big, and then investing in it. What I didn't appreciate at the time was how hard living— dealing with living organisms are. I should have known that human relations are tough, plant relations can be tough and optimizing plant growth and changing for it is complex and building mechanical operating environmental, genetic solutions to optimize the business plan is just like— lead to complexity in us having to make a bunch of zigs and zags and be very vertically integrated to succeed.
Noelle Tassey 8:33
Yeah, for sure. And I mean, I can only imagine you— living organisms are so complex, you know, I have like five houseplants and I can barely keep them alive. We had Andrew Shearer, I don't know if you know him, but he's the CEO and co-founder of Farmshelf on here a few weeks ago. And he was saying that you know, the hardest thing for them to grow was strawberries. I'm just curious if you guys have like a single crop that has been a particular challenge for any reason?
David Rosenberg 9:02
What kind of— I'm not familiar with Farmshelf. Is that a greenhouse grower or what kind of grower...?
Noelle Tassey 9:08
Yeah, it's a hydroponic kind of greenhouse grower, goes into in-home or like, there's also— they have a commercial product as well. But I'm just curious, what's been hardest for you to grow?
David Rosenberg 9:29
Spinach has been tough, as an example. So each— and say, like, it's not about if we could grow a plant, we could grow a plant. But it's about what makes economic sense to a certain extent. So like, we wouldn't necessarily grow an oak tree in a vertical farm. So we asked specifically like, what problems should be solved and how we should solve them, and are we best suited to solve a problem? So if you think of a berry, so we grow berries, the— one— I mean the root physiology is completely different. So the "aero" in AeroFarms is— refers to aeroponics. That's— the roots want oxygen, the leaves want carbon dioxide. So if you grow hydroponically, then you have to oxygenate the water. If you aeroponically mist the nutrition of the root structure, there's— automatically a nice oxygenation of the root structure. The— we've grown using probably— almost close to 100 different ways of delivering nutrients to the root structure to use different systems, some hydroponics, some aeroponics. We've used different growth media to match like root physiology, height of plant, things of that nature. If you talk about strawberries, so here if you think of some of the problems one has to solve, so it's a different growth media. It's a different way of like, it's a very bushy route of getting nutrients to the root structure the— you have to deal with problems like pollination. How do you pollinate 40 feet up 80 feet down? And is it the same— so one thing I've learned is building a small farm is very different from building a big farm. And problems don't necessarily scale in intuitive ways. So I could prove a farm the size of a room we're in, which is very different from proving something the size of a building. And we've scaled problems and buildings or in rooms, and they are these sometimes unintuitive areas you have to solve. But here if you think of pollination, is if let's say one uses the honeybee. So you have mechanical pollination, automated pollination, manual pollination, and the honeybee. Let's say, for example, we're sold on the honeybee. We're just not going to replicate anything better than the honeybee. Is the honeybee going to find its way to pollinate 40 feet up, 80 feet down, or whatever the dimensions are tunnel? Maybe, maybe not. And sometimes you don't know till you do it. So then how do you— before you build up a hundred million dollar, whatever it is, strawberry farm, how do you systematically scale that problem or that example and see how it scales just to de-risk those elements? And strawberries— so here like I— we grow I think like whether it's the best strawberries you've ever had, it doesn't mean it's hitting the cost point of the market. So how do you systematically do that? And then think of like the harvesting— and I'm just giving these examples so you understand the complexity. So, the harvesting—if this is— if my fist is a strawberry plant— so if you think of leafy greens you have one harvest altogether, so the blade— if you want to automate an audi— and the labor component's really important. So a lot of berries are grown in Morocco because of cheap labor and the right environment. But berries typically grow well in western parts of cont— and this also illustrates the problem. Berries grow well— take— like strawberries grow well on a— on the western parts of continents and about a 10 degree latitude. So you get to like 15 degree latitude, and they don't grow well. And so you really have to get western parts of continents the way airflow humidity moves in a 10 degree latitude. That's their sweet spot. And that really illustrates why most people in the world don't eat fresh strawberries. The incipit— often labor's a component. So then if you get back to my fist, so let's say this berry is healthy and ready to be harvested, but this one is the week after and this one is the week after then you have these fundamental questions insomuch that you want to automate picking and that automation is different than a straight harvest. It's a kind of grab it's sort of soft-touch robotics. It's a grab, turn, pick, versus a harvest. But does the harvester go to the berry, or the berry go to the harvester? And does this take lots of journeys? So this one's harvested this week, this one the next week and this one the next week. And again, that's just another example of the problems one has to solve, aren't necessarily the same at massive farms versus big farms, if you're in a pot in someone's home, I don't think it's about growing a berry. It's growing an excellent quality berry when and also if you think of IPM, integrated pest management, your pest management systems are different, whether you have a short life crop or a longer life crop. One way to internalize that is, the longer a plant is out there, then the more things you're going to want to attack it and feed off of it, so the more protections you need. And we try, and so far have been successful in not using chemical protections: pesticides, herbicides, fungicides to protect that plant, but your level of protection, which is often built-in suspender processes is different for a longer life crop than a shorter life crop. Or you could sometimes, you know, harvest it faster than stuff, attack it so that in and of itself provides a level of protection. But the main reason I mentioned spinach is— like spinach in— like spinach is typically a cooler climate crop. So spinach in itself. is not hard, but if you want to grow spinach in the same environment that you grow kale, arugula, watercress, whatever it is, they each have a different environment, a different comfort zone. So, sometimes you could say, all right, you know, hot air rises, let's put the warmer climates up here and the cooler climate crops down there. Sometimes that works, but if the gradient were that— that comfort level's too wide apart, then it's like the cost-benefit analysis. Do you want to create a separate room, or a separate chamber to optimize environmental conditions? And then it's the whole cost-benefit analysis of there. Anyway, different problems to solve for different crops. I'm a kid from the BronxI've learned much more about plants than I ever thought just going to the Botanical Gardens.
Noelle Tassey 15:50
Yeah, you know, I'd actually love to know and you know, we had some questions from the audience I want to get to just around you know, a lot around the technology really, and how you—you know, you've touched on so many different aspects: the complexity of solving this problem and just kind of walking through that. But first, I'm just so curious, you know, like you said, you're a kid from the Bronx, how did you decide farming was the challenge you wanted to tackle?
David Rosenberg 16:14
So for me, my last company, which was nanotech, if people are familiar with Cradle to Cradle, which started off as a philosophy and then became a certified— a book and a certification, a lot of people consider it the Bible of the environmental movement. My last company was the first company to achieve Cradle to Cradle certification. And I sort of became passionate about the environment. So for me and figuring out what my next gig would be if you will, it was— it has to have a big environmental impact, a big social impact, and a big shareholder impact. I personally believe commerce is the best way to enact change, while public-private partnerships are important for me personally, I wanted a commercial solution that achieved both of those— all three of those items. Then I personally like industries where there's not a lot of innovation, and there are a lot of sloppiness or clumsiness or a lot of problems to solve. So the ag industry, like my last company was in the construction industry where there are a lot of inefficiencies, the agriculture industry has a lot of inefficiencies. If you just think of leafy greens, 60% spoilage in the market that like screams, "fix this." So there's a lot of problems to solve. And then— so I was kind of just at a point in life where I was writing a bunch of business plans, deciding what to go into. And it was the macro trends and then narrowing into agriculture. I was on the Global Agenda Council of water security for the World Economic Forum, and I realized how much water goes to ag. So about 60% of the freshwater in the world goes to agriculture. So again, realizing okay, big problem to solve. And then if we could grow using closed-loop systems, so you can grow as much as 95% less water, through example, filtration. So whatever the roots don't absorb, it goes right back through— gets filter out algae and bad stuff and put water right back into the nutrient system. There's big opportunities to save water. And then— so, population growth, urbanization, like I said, land scarcity or scarcity. A large percentage like fif— about 15% of all food contamination comes from leafy greens and leafy greens have a relatively high price point. So I'm a big believer in the Geoffrey Moore's Crossing the Chasm, which is also like another Bible for entrepreneurs. And crossing the chasm between early-stage adopters and mainstream he talks about like, where can your business model fit in, like, most elegantly and appreciating there's like— until there are like true economies of scale, more maturity of technology, there's often a technology premium and the cost structure. So how can we— where can we sell where it's not that far off of market? And leafy greens, because the relatively high price point, seemed to make sense, So that was our beachhead if you would, and pull that together, and then I saw that the cost of LEDs, light-emitting diodes, capex and operating costs were going down. So once I figure that out, and I brought people together and said, this is the space we're going to focus on in 2011. Let's find it. I like technology. So let's find some technology differentiators to build a business. And then, I can keep going, but that was the nexus of it. But keep going, is that what you said?
Noelle Tassey 19:30
You know you were talking about— no — well, yes, keep going. But I'm gonna give you a little bit on the audience as well. Because so the technology differentiators, is something a lot of people are writing in about you know. I'm really curious what those were when you first founded the company and what you see them becoming sort of in the next five years. We have a lot of people writing in to ask. You know, obviously, Alley is partners with Verizon 5G Labs. So how 5G and increased connectivity especially the Internet of Things aspect of this with regards to sensors and running your farms in a more automated way, how that will help? And then what other changes you see? So if you want to walk us through that I think your tech is incredibly cool.
David Rosenberg 20:15
Yeah, and I didn't— it wasn't a big part of us when we were starting. I wanted a technology differentiator, and it almost came out of necessity. So sometimes— back to my earlier comment about these, you know, organic products that just grow differently, the like— just sometimes the plants weren't growing well. So we started tracking to understand why does it sometimes work? Why is it not? And that really led to a whole bunch of problems to solve and opportunities in the industry. We're— so today we're 175 people. A large portion of that are focused on the tech side, we very much view ourselves as a technology company. Are these— early on, we invested— got very vertically integrated in lights. Lights is probably the single biggest capital expense and energy— the operating expense, we realized we had to be good there. So much so that our series A lead investor, GSR Ventures, who is one of the world's leading venture capitalists in LEDs. So they're out of China and out of San Francisco. And they have something like eight portfolio LED companies and they wanted to sell us the LEDs from some of these companies. That was part of their investor, philosophy, investment thesis. And I— and as we looked hard at that, we realized none of their eight portfolio companies matched our requirements for LEDs. We brought— early on we brought some real heavy-hitting lighting experts into the company. So we had to tell them sorry, it's not a fit. It's— the diodes are different, the casings, the different components aren't a fit. So then they helped us source the right components in China. So we essentially have our lights manufactured in China, bring them here, but we're very much involved in the design of the luminaire— the whole luminaire. So that started— the— we're biased, obviously, but we think we have the best horticulture luminaire on the market. And it went from there to things of different ways— like I mentioned, the nutrients delivery, there's a lot on the mechanical side. So whether it's ultimately— you have to figure out what a plant wants. And I think we're really— we have really good plant scientists and biologists, physiologists, pathologists, molecular biologists, microbiologists, so people that understand what a plant wants and then how to deliver what a plant wants, whether it's mechanically operation, environmentally, all these pieces. And now we're getting more involved in the genetics. That doesn't mean GMO. Though I'm not philosophically against GMO, I think there's— how it's been used has been a shame, but I think there's a lot of good solutions that can come from GMO. But that's— now when I say genetics, I mean, best of genetics. So like if you have two tall people, their child might be tall. Same thing— like what's the best breeding, the (inaudible) breeding? Where most plants are bred for optimizing against drought resistance, pest resistance, here, we can say, hey, I got drought resistance, pest resistance covered, let's optimize other qualities. So there's— we're making a big investment in genetics, but also it's the sensory system. So the sensors are big, integrating the sensors, where they can constantly be upgraded, cleaned, it's the— like, right now we're investing a lot in machine vision where we have machine vision, but not integrated in the towers. And we've looked at other commercial systems and they don't really work to the level we want it to. We're investing a lot in better machine vision systems in situ to the plants. I can go on and on but it's— basically, it's like— there's a ton of innovation in this industry that still is yet to come. I think there's a big opportunity to continue to reduce capex, reduce opex while improving quality. And beyond leafy greens and bringing lots of other types of crops like berries, or whatever it is to market.
Noelle Tassey 24:16
Very cool. And I'd love to talk a little bit more, you know, sort of as an add-on to that about the environmental impact. So you're talking about kind of how technology is going to drive, you know, improvements, the cost structure and hopefully broaden the number of crops you can grow and really turbocharge what you're trying to accomplish. And I'm curious on the environmental impact side, you know, where are you guys right now, in terms of your carbon footprint? And how are you planning to reduce that? I imagine, you know, as you scale you'll be seeing paths to reducing it, and it would just be so interested to hear more about that.
David Rosenberg 24:53
Yeah, this is really important to me personally. I'm actually— on a side note, co-chair of the Circular Economy Taskforce for the World Economic Forum. And for those who are environmentally leaders, environmental leaders in our companies, there's something— if you go to thecirculars org, we may not have it this year in Davos, but we typically have an award that we give out in Davos for circular economy champions. But to answer your question specifically, there's— we just got a third-party lifecycle analysis completed that came out pretty favorably with a partner company completed it. So we're working on the release of that information. And it's— and a part of what was done is it's— so there are areas that we're really good at areas, we need to improve upon. Part of what they measured against was like a comparable farm, let's say in a market there if you look at some units, Salinas is where most of our leafy greens come from. You have to pump water from the Colorado River to Salinas to irrigate the plants. You have these questions in the lifecycle analysis you do calculate the massive water usage and the transport of water from the Colorado River to Salinas to then irrigate? About 25% of California's energy bill is just moving water around. And then the energy involved in and the carbon footprint involved in making pesticides, herbicides, so they put all that together. It was a favorable piece. Now part— so that's part of the piece, and then the other important part of the answer— but I think the other important part is what can we do better? So we're constantly looking at how to optimize. We just had a successful— a whole new study on spectrum and optimizing plant growth with different spectrum at different intensities, different frequencies. Some spectrum is much more energy-efficient than other spectrum. And how do you get these— the right outcomes? So we just— I think we're going to reducing our energy footprint, another 10% in the coming year, just by having a different blend of spectrum-intensity frequency on the plants. So there's some meaningful— you don't have these opportunities in greenhouses as much you're outside. Just testing different spectrum-intensity frequencies to lower the footprint. But there's a lot of that— so it turns out, for example, the energy hog and spectrums, yellow spectrum, from a photosynthesis standpoint, yellow spectrum is a somewhat inefficient spectrum. So the optimal spectrum is more red and blue which ends up being a very efficient spectrum from an energy standpoint. So mixing that in, and same thing with like optimizing the— like the pumping systems, and the environmental systems. So there's constant ways to innovate and one of our mantras how do we do more with less? And this is ingrained into our cultures and what are ways we can not only reduce our footprint but how do we enhance plant growth when we're essentially doing more with less. Getting more yield for less inputs. I could go on and on with different pieces if you want, but— we could...
Noelle Tassey 28:10
I'm— that's terrific. And you know, I think— so one question we have, and you were certainly— you've talked a lot about just improving, constantly improving your process, right? Are you guys employing any new way of machine learning or AI to kind of optimize how you're analyzing the data that you guys are collecting around the crops are growing? Because it feels like agriculture can be so data-driven, and I know you guys, I mean, you obviously have so much that it's really down to a science.
David Rosenberg 28:46
We do, it's just an area where there's going to be, I think— like wherever we are now, it's going to be small compared to where we do— where we are in the future. And just to compare the— how full- controlled agriculture is different from in the field. So if you take fertilizer, most farmers grow, let's say, leafy greens. You put in a seed and you fertilize, then you add water periodically. Here, we're able to make adjustments to the nutrients instead of maybe once every 30 days, every 15 minutes. And understand what the plant's absorbing what they're not absorbing and how we want to change it in from the way our systems are designed one of eight different pockets. So we give, let's say, an average of 18 different nutrients and micronutrients. We could draw that from eight different pools to optimize nutrient delivery, and attach a sensor to really understand what's going on and put that into the machine-learning algorithm to optimize nutrient mix. That's that whole part and think about machine vision, so right now if we have machine vision outside of our towers, again, we don't really have it in an elegant way in situ. But— so we have to sort of take out representative groups and image it, groups of plants. But when we have that in the plant— in the towers themselves, there's going to be a wealth of other knowledge to really track plant growth during its cycle. So wherever we are now, we do it, but it's going to be minuscule to where we will be in the future.
Noelle Tassey 30:17
That's really, really cool. So, you know, I actually didn't realize this, I mean, I guess I should have guessed that sensors could measure, like nutrient density, for instance. Are you doing that post-harvest as well, and what kinds of sensors are you using to measure that?
David Rosenberg 30:35
Well, we do. Our— I mean, there are limitations to our lab. So often we send out to third parties to do it. We have relationships with different universities. So if, for example, we might send to Rutgers or some other third-party lab to test the nutrient density. And it's— so there's a cost to that, we don't do it on every plant, but when we have a different R&D activity, and we want to measure that, we send it out. And there, I mean, this could be another element of the future is when you think of functional food and you go to maybe that drink category and you have two drinks; one is vitamin C fortified or antioxidant-fortified, and you might reach out for the— for nutrient-fortified product in the same way. We can change an environmental stress just like when you're a kid, and your mom says go out in the sun, get more vitamin D, in a similar way we could stress a plant to increase nutrient density. And while we have some of those elements today, we might put it on the label and celebrate some of those benefits in the future. We expect to, we're trying to understand how meaningful it is to the customer right now.
Noelle Tassey 31:44
That's awesome. And food— I mean food loses a ton of nutrient value like in the first few days after it's harvested, right, agricultural products? So I mean that— I mean, for me, getting more bang for my buck when I eat a salad is pretty compelling. You were talking earlier a little bit about robotics. We have a question from a Fan Favorite audience member asking about autonomous vehicles and their part of vertical farming. And then I would actually add on to that, in general, just autonomous robotics and kind of how you see that portion of your product growing.
David Rosenberg 32:22
So there's not a lot of robotics today in vertical farming. We have a lot of automation. So— but differentiating between automation and robotics, there's not a lot of robotics. An example would be—and this is— there's some things that, with our capabilities and muscles, we want to build. Some things we want to outsource to others. So if you think of— sorry. The— if you think of strawberries, so like we— imagine something looks at a berry. They say all right, is it red? Is it ready to be harvested or not? And it makes a determination to move on or pick. So— and when it has to, again, touch it, grab it, turn it, pull it, and so forth, that is an example of what we'd want to partner with to develop that. I think that's beyond our— where we want to build muscles today at AeroFarms. And depending on the crop, there's going to be more robotics. There are elements for robotics, but right now, there's— most of what we do, transparently, it's more automation than robotics. And there's quite a lot of automation.
Noelle Tassey 33:35
Very cool. I know we've got about 20 minutes left in our conversation, I want to make sure we talk about a few social impact issues before we open it up for just I think a pure Q&A because we have had a ton of questions. Last 10 minutes we'll do Q&A, but I'd love to talk about social impact because I know that that's such a core part of your mission. I also know you guys just partnered with Jersey City to launch a vertical farming program that will bring— if I have this right— 19,000 pounds of fresh produce to Jersey City residents every year, which is completely incredible. You know, just speak more to what was behind that partnership and the social impact mission of what you're working on.
David Rosenberg 34:25
I'm happy you're talking about this. Our social impact comes up in a number of ways. That program in Jersey City, like one of the problems that we were trying to solve, is how do you get people to eat the right foods. So food stamps— the city had tried incentivizing people to eat the right foods by saying your dollar of food stamps might go to— like it's the equivalent of worth $1.50 if you buy a fruit and vegetable versus if you buy Coke or Pepsi or like sugared drinks, or Doritos or whatever that is, maybe it's just worth that face value of $1. So you get this extra incentive to eat the right foods. But net-net, the— the— sorry. The net-net, we— this is like driving the right behavior. So here, if people have access while it's an unconventional farms, if we put these in strategic parts and we couple it with— like we have a program with the World Economic Forum and there are a bunch of people involved, this is as much a— it's not just about farming, this is like a real, integrated approach of getting people involved in the farming, getting people to associate with the farming. It's more about is there some magic there that drives behavior in a different way? And then tracking the results of this to see if it works, if we're changing people's behavior, and we— we're hopeful it can. We have some small sample sets where we're getting, like people to eat vegetables instead of fries. So we have reason to be optimistic. We had some programs in Newark, Michelle Obama, when she was first lady, she had a big program on childhood nutrition. And she saw some of our results, came to like one of our farms in Newark and really was excited by what we're doing there. So we're trying to build off of some existing learnings, some existing success and take that from Newark to Jersey City and also obviously scaling it in Newark and other places. But it's about— ultimately it's about changing people's eating habits. There's— especially in low-income areas, there are a lot of diabetes and people just eat the wrong food. And often it's— you form these habits early on. So giving people access, giving them education, and seeing if we drive behavior. Beyond that, what we try and do in Newark is— Sorry— I'm on a conference call.
Noelle Tassey 34:43
Founder, CEO, and lifeguard. All good. We're all doing a whole lot of stuff right now.
David Rosenberg 36:24
I've learned how— like where I am on the pecking order at the Rosenberg household, I am the Butler, the maid, the cook— all of it together. Anyway with— I believe, like in Newark, Newark has a large number of people in the community that came from a tough environment. And here— like, there are a bunch of past offenders or people that have been incarcerated and have come up— we have a huge problem in the US in recidivism and they become another offender. Philosophically, I believe, you pay your debt to society, if you did something wrong, and then society should bring you back. So we've actively engaged in programs to hire past offenders and give them a second chance. This isn't something we market, but it's something that we are very proud of. And we've had some good success here. Just coincidentally next week on Tuesday, we're being honored in an event with different like— Governor (inaudible), Reverend Al Sharpton, where we are being honored for our work with this community of taking them in and giving them a good job. And that's something that we're proud of, I think the biggest impact we've had on a place like Newark is we've put our headquarters here, and just inspiring the venture community to go to cities. It's not just about San Francisco or New York City, but going to these other places like Newark, and like the fact that we've raised like over 200 million and we're building this tech community in Newark, other entrepreneurs are saying, Hey, I could go here too, and it's helping inspire the tech community to look at places like Newark or specifically Newark and build that ecosystem there. So very— I think our biggest impact is the inspiration to the community and the pride of having a leading tech company in their backyard.
Noelle Tassey 39:17
That's so cool. We love that. And it'll be really interesting to see how obviously, in our current shifts, and the example set by companies such as AeroFarms to kind of drive the shift to cities like you said, that aren't New York or San Francisco.
David Rosenberg 39:35
If I could build on that, just like one thing we also try is appreciating now with some of the racial tension, certainly with the police, is we very much engage our AeroFarms community and the community around us in these tough conversations. How do we continue to show leadership? In my mind, it's about building up the lives of the African American community. So how can we do more to give people a path to have a better life. And what other activities not only just within AeroFarms and what we can do with financial literacy or literacy or a mentorship program, different things. But also foods, like better eating habits, but also how we could work within the community on items that we think are important, work within the state and just sort of try concentric circles of how we could have a bigger and bigger impact on what's important. And we put together processes where it's more than just like me as CEO saying, this is what we're doing, but how do we involve people throughout the organization to have these conversations, to come up with what are areas that are important to us that we want to have an impact, and we'll— let's go ahead and execute. So very— I think it's really important to incorporate multiple stakeholders throughout the organization to put that plan together, and we're trying to see if we could— where we could have a bigger and bigger impact and what I could do is create that process, make it clear this is a priority, and then how do we go ahead and execute, make sure we do.
Noelle Tassey 41:07
Very cool. I think that that's something a lot of people are looking for right now is to your point, you know, not so much the statement that you make as an organization that's important, but what you're really doing internally to, you know, address issues of racial justice, especially if it is, you know, the core of your mission and values as a business. So I think that's terrific. It's always great to see that from entrepreneurs that we have on here. And really the commitment to action and follow-through, I think almost every leader in America right now, if they weren't already grappling with this and trying to find a truly thoughtful, impactful way to make a difference should have it on their radar. So that's terrific to hear. I do want to make sure we have time to do some Q&A because we have some awesome questions from the audience. I think a lot of people are really excited about AeroFarms and what it represents the future of agriculture, we have a lot of questions about cost structure and farming. So this one was from our pre-registration form, and it also echoes a few that we've gotten in the live chat. Why are the financials of farming agriculture so challenging today, and how can technology help solve for some of the financial burdens to help farm survive and thrive? How can the distribution model chang to help more farms reach more people?
David Rosenberg 42:26
Yeah, I'm not sure if that question specifically asked about vertical farming or farming in general. The— if you think of farming in general, the biggest part of the expense is land. So if you have to all of a sudden buy a lot of farmland that tough. If you— besides that, if it's a tractor and things like that, equipment, there's not much capital expense. Some of the operating expenses, seeding, and the labor component. The infrastructure around packaging could be pretty high. And that's why farms in general in the US are so like mega-farms. We have this— more so than probably any other country in the world. Not probably, more so than any other country, we have these mega-farms that are taking advantage of the capital— efficiencies of consolidation and it's often the processing side. In vertical farm, to answer— again, I don't know which the asker was focusing on, in vertical farms, the big capital expense on the equipment, it's a different— very different cost structure. At the end of the day, I think we could, in some markets sell product at the same price or— but in that— the trends are going down. So LEDs over time are just going down. That again, was what got me to invest in this industry. The— so that's going to continue moving. So much— part of your question's about the infrastructure and new business models. So we're seeing in a COVID world where you could sell direct-to-customers, there's some innovation there. And retailers, where retailers have 30 to 50% gross margins, then in the distribution center there's a lot of innovation in the distribution center. So there's some new opportunities whether it's prepared food industry or direct-to-consumer pieces. And we're— we sell— so here's my pitch, we sell a product called Dream Greens on— through Whole Foods, through ShopRite, also to Amazon Fresh and Fresh Direct. So those online retailers, who decided instead of investing directly to the customer, people could buy our product through Amazon Fresh, Fresh Direct, so we could focus on being the farmer and being good at farmers but I think those online delivery channels are going to continue being successful and growing.
Noelle Tassey 44:42
Very cool. We have a question also— and I love the questions that I just— I never would have thought of, but how far away are we from systems like AeroFarms growing staple crops like rice, corn, and potatoes, and is this limited by infrastructure or economics?
David Rosenberg 45:01
It's economics. So the technology's there today to grow the plant. Back to my earlier comment, it's not about growing a plant, it's about growing a plant with the right economics, and are we solving a problem. So I believe some parts of the world, it's better to grow in the field, some crops in some parts of the world, some crops, it's better to grow in a greenhouse, some parts of the world some crops, it's better to go in a vertical farm. You think of the staple crops, crops, rice, wheat, corn, those kind of products, it's about getting the cap— the capex. the opex dynamic right. And right now it's probably at least a decade if not more where those crops are grown so efficiently, so— such little cost out in the field. And then when we went through vertical farming, you have to ask— like one of the key questions— is fresh a benefit. So rice, wheat, often fresh isn't a benefit, but that's one of the key questions is fresh a benefit? Is pesticides of benefit? Is there a premium if there's a better quality product? But again, asking the questions like is there a problem where we are really suited to solve and having the discipline and saying no when it's not apparent, there's a problem that need to be solved by us. And I think that goes with any startup— or any maybe not a startup. but like a growth company.
Noelle Tassey 46:15
Yeah, definitely. I think that's one of the really kind of interesting and compelling things about even just when you were talking about picking your first crop and how you made that decision. So this is a fun question. Do you see 5G somehow enabling new disruptive use cases for vertical farming such as peer-to-peer micro-farming, potentially live in cities? And this I assume is kind of prompted— and then they've compared it to a real-world Farmville-like use case. Which I don't know what that would look like, that sounds fun. I know my mom played Farmville for a while. But I'd imagine that that's all kind of powered by obviously density of IoT devices on a 5G network.
David Rosenberg 47:02
So I— funny story. I talked— I was at the— did I talk to Matt Pincus, who's like the owner of the company that owns (inaudible) about an idea of like doing this— and this was, we were on a bike ride and had that conversation, and he thought it was a bad idea, but there still might be something there. That would be cool. But in either case, I think 5G does— I mean, our— we have wireless routers and a lot of interconnectivity to— I'm speaking in a conference. Sorry about that. This was a very important thing, for a little girl to get to her dance class. But the— yes, we've invested a lot, we'll continue to invest a lot in our fully-connected farm, at AeroFarms, we call it our Stack system. But it's— I mean, if you think on a high level, it's about digitally controlling the farm and digitally taking information from the farm. So how— on my keyboard, I mean, I could get into one of our farms and, you know, change a lot of the settings and a lot of the features. On our handheld, we can do that. And then how do we very seamlessly like— where we are today, while we could do a lot, it's going to be much— you look at us next year, it's going to be overall different, and the year after that it's going to be a world different. So that is important. And then in terms of the interconnectedness, is there a networking effect that makes these farms smarter by being part of the same network? And here the answer is yes, but it's not— it's not— this is a lighter conversation, it's not an easy, elegant yes. It's— there's a "yes, but"— but it is a yes.
Noelle Tassey 48:57
Very cool. I'm excited to see it. I dream of a future where I can have a farm on my rooftop. I think that, for me, is like one of the coolest ideas, really. And like, those are the exciting ideas that I think everybody who works in this field, you know, you kind of dream about, and you live to see those come to life. It's pretty awesome. We have— we have a ton of questions so I think we have a lot of people on the line who are really, really interested in innovations in IoT. Are there any big opportunity areas that you see for improved connected devices or like, new entrants in the market? Whether it's sensors or you know, some other kind of connected device that's not out there yet, but that would be really revolutionary for you?
David Rosenberg 49:50
Yeah, so here at AeroFarms, we say let's not reinvent the wheel. If something smart is out there, let's buy it and let's focus on— like, there's so much innovation to do, let's focus on where we really need to focus. And it's an area of continual innovation. I push our programming team a lot. Like, is there any system out there that we just want to incorporate and use their system? They continually tell me, like, no, we have to build it. Just integrating, like our operational know-how, our design know-how. With the software, it's just— what we're creating is better. I mean, it's hard to say, but the— I think there are a lot of— so there are a lot— there's a lot of opportunity to make farming, which is an incredibly, today often still an inefficient industry, how to make it more efficient. There's a lot of sensors that are adding more awareness to farming and what people are doing well and what people aren't. And there's some interesting business models like John Deere, integrating sensors on their—on their systems. And in other unique partnerships, you see more of the breeders and the seed sellers being more integrated in the operations than just selling seeds. So I think there is a shift in business models as well as how information is changing farming. And there's going to be a lot— a lot of cool things that come out of the industry. And more than ever, there's a dearth of investing in the industry and all of a sudden there's been an explosion. So there's more and more venture money investing in the industry. And this is great, this is going to come up with more and more solutions. It's going to make AeroFarms better because like I said, we're very vertically integrated. But often we feel like we're being vertically integrated because we have to, but it'd be much better to partner with people and acquire technology sometimes then build it ourselves. And too often I feel like we've— go and building it ourselves where I'd much rather partner and focus on other areas. So I'm looking forward to more technology in the space.
Noelle Tassey 52:13
That's awesome. And, David, you know, I know we only have three minutes left, I'd love to know if you know people left our talk today with just one take away from— you know what the future holds for vertical farming. What would you want that to be?
David Rosenberg 52:34
It's— an industry— it's not going to solve agriculture by any means. There's still going to be a need for field farming, for greenhouse farming, for vertical farming. I think our space is going to be bigger and bigger and more impactful as we reduce capital costs, operating costs and grow more crops. My biggest surprise— and this is not necessarily all vertical farming, but I'll share from my perspective at AeroFarms, my biggest surprises is that we compete on taste and texture, more than just fresh. So, intellectually, I thought, all right, we're about fresh food. But it turns out, we could stress a plan to make it more tender, more flavorful, more peppery, more sweet, more spicy, whatever it is, just to— like if you think of the human body, and when it's cold, we have goosebumps, if it's hot, we get sunburned, if we exercise we have less fat, if we eat junk food— So our biochemistry changes depending on the environmental interactions, similar to a plant, we could make a plant bigger, smaller, greener, redder, more vitamin A, B, C, more peppery, sweeter, more tender, all of these things just by stressing the plant differently. And so we have all these really smart people working on our perception. So our Steve Jobs moment, if you will, was not, let's wait and let the customer tell us what they want, but how do we grow a plant to what we think the pepper— the customers want. So if you try our arugula, it's grown in a way to optimize pepperiness. If you try our kale, you'll probably say, this is the least bitter kale, the most tender kale I've ever had in my life. My 13-year-old eats it like popcorn. And try our watercress, it's actually the— most like one of the most nutritionally-dense— per caloric intake, it's— I think it's like, the number one most nutritionally-dense product. But the point is, we're not only just growing plants, we're growing great-tasting plants because of the ability to change spectrum, temperature, humidity, airflow, CO2 at different points in the plant's maturation. It was not part of my calculus when deciding to build the company and it's been a great surprise, an unexpected, happy surprise.
Noelle Tassey 54:54
That's so cool. I love the idea of better-tasting kale through technology. David, thank you so much AeroFarms is such an incredible company. You're such an inspiring entrepreneur and I hope I can buy some of your kale sometime soon. Thank you so much.
David Rosenberg 55:11
So, it's sold under Dream Greens if you go to look for it. That's not under AeroFarms, but it— that's our brand.
Noelle Tassey 55:19
Fire up Fresh Direct, Check out—
David Rosenberg 55:21
Whole Foods, Fresh Direct, Amazon.
Noelle Tassey 55:26
Awesome. Well, David, thank you again, thank you to our audience for joining us this Wednesday afternoon. And, definitely come check out our panels next week. We're doing one on IT continuity in COVID, as well as 5G in the future of music with WXR Fund. So that'll be a lot of XR, VR, and music to talk about. David, thank you again. Today's talk will be recorded, available on our site for sharing with all of your communities and we have to see you soon. Take care, bye.
David Rosenberg 56:02
Take care. Bye-bye.
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