How did the business model of urban-gro come to life and what was the journey that brought you where you are today in terms of industry coverage?
My ex-co-founder and I started an initial company focused on retrofitting old lighting infrastructures in hospitals, convention centers and office buildings. As this was a local Colorado-based business, it soon came to our attention how LEDs were extremely useful for the, then-evolving, cannabis industry. Wanting to bring some added value to this sector, we created urban-gro and in three years' time, we evolved from simple lighting services to cultivation design and equipment systems integration (benching systems, airflow environmental controls, etc.). After a while, we decided that it would be more beneficial to become plant agnostic so, in order to collect the capital for this transition, we listed on NASDAQ and raised $62 million. To attain the vision of building an EPC company specialized in controlled environment agriculture, we acquired architecture, engineering and construction firms, which we integrated with our existing team of horticulturists. This year, urban-gro is projected to increase by 60% to 80%, with each quarter being sequentially better, and we expect to get into profitability by Q2.
Where does the most demand come from in controlled environment agriculture and what impactful technologies are implemented at the moment across this sector?
urban-gro is one of the key players in vertical farming and we are offering engineering services that help control temperature or humidity across the entire facility. Currently, we are seeing the highest demand coming from urban vertical farming, especially for 2,000 square feet facilities built on top of retail centers and within driving distance from consumers. The resulting benefits tied to freshness, food security and shelf-life are unmatched in this sector, and with zero distribution costs built in, these solutions are price competitive and easily scalable.
The technology used in urban greenhouses is mainly concentrated around proximity and full automation, and it ranges from small robots that move the proprietary racking systems around the facility to pest management done exclusively through biological insects. The future of horticulture is technology, and it starts with data and sensors placed throughout the facilities to ensure that growing conditions are perfectly balanced.
At this stage, the parameters are analyzed by humans, but as time passes and more technology players develop smart solutions, in the future we will be able to employ AI to gather data and make decisions based on it.
How financially healthy are you finding your side of the industry and what is the major challenge that you are trying to overcome at the moment?
We entered the industry with an overall very strong balance sheet, but our clients, whether large vertical farm producers or cannabis cultivators, are facing challenges in accessing capital. To provide relief from the pain of supporting engineers and architects on their own staff, we are outsourcing our own professionals during limited periods of time and for very specific applications. Although the public markets in vertical farming have available funds, companies need to prove their efficiency before being able to tap into that money. About a third of our business is outside of CEA so we can keep our team intact and make sure they are efficient in terms of billable hours. Once clients start to obtain funds, we must be ready to move at the same speed as their aspirations.
Where do you see your growth plans both in terms of geography and industry verticals?
When we first entered the European market in June 2022, we signed a contract to build up to 20 urban vertical farms, but with the energy crises that derived from the war in Ukraine, we had to put those plans on hold, for the time being. Fortunately, the cannabis industry is really starting to pick up a lot of momentum in this region, and there is a heightened interest for our know-how in that sector. In the North American CEA market, we are focused on the produce side in small urban vertical setups and we are working with our clients to reduce logistics costs. These smaller facilities can optimize land usage to the extent that they can be placed in vacant parking lots or aside facilities that are putting off waste energy (hospitals, etc.). Helping our clients grow more efficiently by leveraging our backend model and technological capabilities is the goal that guides our steps on the road ahead. My mid-term goal is to become a 1 billion dollar company.
