The funding round -- which was completed in June 2022 and led by The Rise Fund, TPG's multi-sector global impact investing strategy and debt funding from Bank of America -- will immediately support Little Leaf Farm's expanding indoor farm footprint with existing operations in Massachusetts, a new 10-acre farm in McAdoo, Penn., and land in North Carolina that will soon be developed and transitioned into a fifth indoor farm for the company.
"Our network right now, which is Pennsylvania, Massachusetts, and North Carolina, can easily access half the country’s population. Our focus is on 55% of the US population, which is predominantly on the East Coast but then also moving into the Midwest as well," Sellew told FoodNavigator-USA.
With the opening of its Pennsylvania facility, Little Leaf Farms will double the company's current production capacity and increase retail distribution by at least 50% growing from 2,500 to 3,500 stores. By 2026, the company plans to own and operate at least 100 acres of indoor greenhouses.
Per Nielsen December 2021 retail sales data, Little Leaf Farms accounted for 42% of all CEA lettuce produced in the US. In the past year, the company has grown its retail sales by more than 50%.
"We’ve got a proven business model, we’ve got the capital to expand, and now it’s all about execution," said Sellew.
Strong unit economics
The CEA industry and companies within the space have attracted billions of dollars of capital in recent years, but according to Sellew, investors are becoming much more watchful of where they put their money and that scrutiny will only increase in today's current economic environment.
"Investors are never going to support a money losing company. There always has to be light at the end of the tunnel. 2022 is shaping to be a much tougher economic environment than in past years and that’s going to impact companies that can't support the business fundamentals and that’s positive unit economics," he said.
"I wish well for everyone in the sector, but the companies in this financing environment that are not making any money – it’s going to be tough. It’s a tougher financing environment in 2022 than in previous years."
For Little Leaf Farms, the company already has a profitable business model due in large part to its efficient indoor farming hydroponic production for lettuce that is grown under glass and uses captured rainwater, natural rainwater, and up to 90% less water than field-grown greens and solar panels to generate electricity.
"Little Leaf Farms is driving significant efficiency improvements in the growing process for leafy greens by meaningfully reducing water usage and greenhouse gas emissions at scale," commented Maya Chorengel, co-managing partner of The Rise Fund who has also joined Little Leaf Farms' Board of Directors.
But Sellew -- who has spent his career in agriculture and grew up on a farm -- also credits the company's strong operational track record to its best-in-class team, many of who are second-, third-, and fourth-generation farmers, who keep a watchful eye over every aspect of the business.
"We have a team of seasoned greenhouse professionals, and we made the correct technology decisions early on, because when we got started there weren’t a lot of proven business models out there. We designed something that is unique in the world from the standpoint of high yields and high quality. No matter how much technology you have, it ultimately is dependent on people, your culture, the day-to-day execution," he said.
"We built Little Leaf Farms to be a sustainable business enterprise because we want to be around for the long haul."
Indoor-grown leafy greens: 10% market share by 2025?
In its 'Beyond the Hype: Controlled Environment Agriculture' report, S2G Ventures forecasted that indoor agriculture could comprise 10+% of sourced fresh produce products by 2025, which Sellew believes is a conservative projection noting that CEA-grown leafy greens account for 2.7% of the market today.
"To say that 10% is achievable, absolutely, and it’s going to be much higher. We have a pathway at Little Leaf Farms because of the enormous productivity in our facilities we can be a low-cost producer as well without ever sacrificing quality," he said.
And the consumer is increasingly seeing the inherent advantage of indoor-grown produce which can last weeks longer than a head of lettuce that's traveled thousands of miles across the country to get to the store shelf. Right now prices for Little Leaf Farms products are comparable to organic and in certain cases lower. But as the company grows, price points will naturally come down, added Sellew.
"We have a better, fresher product than the West Coast field producers, people love it, and it’s in demand at our retail customers," he said.