With more than 30 years in investment banking, Adam Bergman has worked across multiple industries at the intersection of innovation and climate change. Now, as Managing Director of Ecotech Capital, Bergman is focused squarely on food and agriculture, his insights shed light on both the opportunities and growing pains that define the sector today.
Fundraising Challenges in Agriculture and ClimateTech
One of the central themes in the discussion was navigating fundraising challenges in climate tech. Bergman notes that many ag tech and clean tech startups are operating in a tough environment, with capital drying up and investor confidence shaken by a lack of exits. “There’s been almost no exits, particularly in the last couple of years,” he says. Bergman emphasizes the importance of clearly defined business models and realistic roadmaps. “You never get a second chance to make a first impression.”
He now spends more time consulting than ever before, helping startups align their milestones and build investor-ready strategies. “If your pitch doesn’t start off with ‘I’m going to make you more money,’ you’ve already lost your audience—especially with farmers,” he adds.
Sustainable Agriculture Technology Adoption Hurdles
Bergman recounts his time at Wells Fargo, where even with deep ties to production agriculture, adoption of technology was painfully slow. The skepticism, he argues, is valid: “You’re asking someone to risk their entire operation. That’s not a small ask.”
Controlled environment agriculture (CEA) and regenerative agriculture also come under the microscope. Bergman remains bullish on the long-term future of indoor farming, particularly if it can evolve beyond leafy greens into high-value specialty crops. However, he cautions that profitability—not hype—will determine its survival.
When it comes to regenerative agriculture investment opportunities, Bergman is clear: the term is too loosely defined to be useful without context. Still, he sees promise in models that improve soil health and farmer ROI, especially when bolstered by data and technology. “Any way you get the farmer thinking, ‘I can make more money and limit my downside,’ you’ll get them to try it.”
Tomorrow’s Ag Leaders Face Turbulence Amid Global Concerns
Looking ahead, Bergman believes the next few years will be painful but pivotal. “If you can build profitable and valuable companies in the toughest markets, you’ll be ready when the real opportunities arrive,” he says. With food security, health and nutrition, and sustainable food systems emerging as dominant global concerns, the companies that survive today’s turbulence may be tomorrow’s leaders.
Transcript
This transcript has been edited from its original form to support readability.
Maureen Ballatori: I’m Maureen Ballatori and this is Spilled Salt, a podcast on the thrills and spills from the food, beverage and agriculture industries. Today’s guest is Adam Bergman. He’s the managing director of Ecotech Capital.
Ecotech Capital focuses on providing strategic insight and financial direction to senior executives and boards on growth strategies, tactical initiatives and strategic alternatives at the intersection of climate change and technological innovation.
Adam and his team work with companies at all stages of development from series A to global 1000. Eco-tech capital serves companies in a diverse group of industries, including agriculture and food, energy, industrials, mobility and transportation and utilities, which are dealing with these multiple challenges faced by climate change and innovative tech. I am not kidding when I say this is one of the best conversations I’ve had on the podcast.
Adam is just so knowledgeable about the broader landscape of investment banking and investing in startups across the board. He’s been in the industry for more than 30 years. And so our conversation today is focused on the state of ag tech investment and sustainability in the agriculture sector, but it’s also a treasure trove of knowledge and information for any company.
That’s fundraising. Enjoy the conversation.
Maureen: Hey Adam, how are you?
Adam Bergman: I’m doing well and thank you for inviting me to join the podcast today.
Maureen: My pleasure. Thanks for taking the time. I’m so excited to be able to share your knowledge and expertise with our listeners.
So I’d love to start with a bit of your background leading up to the work that you’re doing now. Can you start us off with a little bit of background on where your career started?
Adam: I am somewhat unusual in that I’ve only done one job my whole career. So for 30 years plus now I’ve been an investment banker. I’ve worked in a number of different areas, but from a specific area of finance, that’s what I’ve done. And really my progression is, from my perspective, somewhat interesting because I started off doing &A and restructuring, but I quickly pivoted to working in an industry.
And really from the past three years, sorry, the past three decades, I’ve worked with high growth companies. I started doing work in the late nineties during the healthcare internet period. I moved into working in more of the internet and technology in 2000. So I got the experience of going through the tech bubble roller coaster of watching it go all the way up and then watching it crash.
Maureen: Man, I bet from an investment banking perspective, that was a wild time.
Adam: It definitely was. One of the things I look at in my career is it’s been bubbles. And I’ve seen that healthcare internet, most people aren’t aware, was actually even before the regular internet. So that was the late 90s. It was a 99, 98. And then we went into the regular internet, which was 99, 2000, 01, 02.
And for me, really, my career changed a lot for what industry I follow in 2004. I was at a bank called Jefferies and a deal came across for a company that was very much unusual at the time in that they had four different, three different businesses. They had a flexible solar panel. They had hydrogen storage technology. And then additionally, they had a business that was focused on hybrid electric vehicle batteries.
And I went to raise some money for that company and my colleague and I, raised a lot of money. And then we raised a lot of money for their largest customer who took that flexible solar panel integrated into a white roofing membrane and rolled on a solar roof to places like large buildings, warehouses you would see near airports down in California. And at that point I said, okay, there’s something going on.
And really from that point on, my career has focused, as I like to say, I work at the intersection of technology, innovation and climate change. And over the past two decades, I’ve gone from renewable energy, solar, wind, biofuels, geothermal, into what I call utility technologies, everything from LED lights to smart grid and smart meters and energy efficiency and energy storage into mobility and transportation, starting in natural gas vehicles and then EVs and then shared mobility and autonomy.
And then really a lot of my change to where most of my focus is today in food and ag came when I joined Wells Fargo, who when I started there, they came to me and said, are you aware we’re the largest lender to production agriculture in North America and one of the top three lenders to food and ag? And I said, no, no idea. And they said,
Maureen: Wow. I didn’t know that either. I would have guessed Farm Credit or something.
Adam: Yes, Wells has a huge, huge focus around, particularly, the agriculture side. And so they wanted my help in trying to figure out how we could bring tech and innovation into food and ag.
Their thought was if we can bring tech to our customers, it’s going to make them more profitable, which will help our loans. And then conversely, if either the customer doesn’t choose the right technology or decides they don’t want to use any technology, the fear was it was going to have a negative impact on really how they’re performing and make the loans much more at risk.
So at that point, I had done a couple of capital raises for ag tech companies. And I started diving in. It was a really interesting time. And I think the past almost decade working, and what I often consider my focus is I say I work from farm to fork, but I don’t cover traditional food or traditional ag companies, I cover the technology companies that are disrupting it.
And to me, it follows my career trajectory, of course, of focusing on innovative tech companies, typically going into established industries, whether it’s energy or utilities or mobility transportation or industrials, and bringing in new innovative technologies to sectors that I often say haven’t seen changes for a century or an ag, you could argue a millennium.
And how did these new innovative companies come into these industries where almost all of them are set up with a group of oligopolies? Those companies have name recognition. They have marketing and distribution. They typically have stronger balance sheets and fight new incumbents or new players coming into it.
And really, a lot of my work over the years is helping these innovative tech companies go after these markets to try to take market share from players who already exist and don’t want to give up power.
Maureen: That is a huge challenge in the industry, absolutely. And we’ve talked about it on this show before too. We just recently had Greg Jaffe, former USDA on the show, who spoke about that as well.
So you mentioned that your time at Wells Fargo, the goal was for you to kind of help these ag producers and folks who are at that level of the supply chain be open to an understanding of what are the right types of ag tech and other technology to be able to implement on farm. How did you do that? What did that look like?
Adam: So let me tell you, I always joke that a bank is one of the slowest movers around technology. Agriculture is pretty much the slowest sector to move. So when you put a bank doing agriculture and technology together, you’re moving at a pace that a tortoise would say, wow, that’s really slow.
Maureen: Yes, very comfortable for a sloth, yes.
Adam: I would tell you it went sadly the way I thought it would, which would be it was challenging and we didn’t get as much done. I think for me though, it was a great learning experience of really digging deeper into the ag sector and learning more.
There’s some really positives to me in my knowledge and experience in ag that came out of that experience at Wells. One being I got very close to the Western Growers Association and started being a Technology Advisor to the Innovation Center. And I continue to have a very strong relationship with them today.
I had the opportunity to build Wells Fargo’s incubator for Ag Tech at the Danforth Plant Science Center in St. Louis. So while what I thought and hoped we could potentially do, maybe we didn’t achieve while I was at Wells Fargo on the, ag side, I learned a considerable amount and I was in no way an ag scholar going in.
There were some incredibly bright people at Wells Fargo whose knowledge I was able to gleam and really what I learned a lot. But it was challenging from the sense that a lot of the established players in the ag sector were skeptical of the technology. And by the way, they have a right to be.
In my case, my in-laws were dairy farmers. So I know how farmers think about technology and how they often think that people from the outside who don’t know agriculture come in and they think they have all the answers despite the fact they’ve never stepped on a farm before.
Maureen: Especially a shiny banker, right? Like in a shiny suit with their tie all the way up to the top and, you know, they’re far from muck boots, you know?
Adam: I have my wellies so I can show up with my wellies. All that I think is fair so was it we had a lot of dinners and one of the things I think was the most valuable I did at Wells over a three or four year period we probably had 25 dinners where we would bring two or three of what I call the tech executives together with 10 plus of Wells Fargo’s Food and Ag clients and really sit down and have conversations. And I thought that was valuable.
And it was valuable because anyone who’s around ag and you know this knows it’s going to take a long time. No, no one’s meeting anyone who does tech. No, no farmers, no processors, no one else in the sector meets someone who does tech and calls them up the next day and says, let’s roll this out. And not only let’s roll it out, let’s put it everywhere on our farm.
Maureen: To them that means let’s risk the entire operation.
Adam: It just isn’t how it operates.
Correct. Yes, it’s different. We say to people all the time, we’re so used to things around consumer electronics and social media adoption where we try something, doesn’t work. We either don’t use it or we know next week there’s going to be some sort of a software upgrade and everything will be fine.
If we as consumers thought about iPhone, particularly the early iPhone, like ag technology going on a farm, the iPhone wouldn’t have got to version three. People would have stopped buying it because it didn’t work as effectively as people would have wanted.
But consumers think differently than businesses. And I think that’s what I always default to that is, and I say this is more important even in today’s situation with challenges on raising capital and challenges and getting market traction is what are you doing when you show up to a farmer? What’s your pitch? If your pitch doesn’t start off with I’m going to make you more money.
I think you should not assume that that farmer is going to be sitting there going, okay, that’s a great idea. It’s just realistic to think of it, they are looking there. It’s not, it’s not something at their home just because the farm could be where they live.
This is a business. They have to be in position to make money. And that’s one of the things I always go back to.
And the more I’ve learned about the ag, the more the ag sector, the more really I’ve kind of sharpened my work and pitch that I have my clients think about in the sector of what are they offering and why does someone want to listen to them and why once they even use it do they think wow this is going to work great and we’re going to be able to use it everywhere.
I’ve had a lot of learning over the last almost decade and I think it’s really shaped my thought process of how people will go after looking to get adoption of technology on ag and food.
Maureen: So knowing how challenging it is to bridge that gap between adoption on farm and ag tech and climate tech in general, but anything that’s directly impacting, especially at that farm producer level, and we don’t have to stay there, can take a little bit more higher level, but you are now squarely focused on that, right?
So talk a little bit about Ecotech Capital and how that came to be and what your focus is there and why you chose it.
Adam: Sure. So it’s a good question. So after Wells, I actually had spent some time on my own as well. Unfortunately, one of things you learn over time is if you work in industries that go through bubbles, as I told you, my sectors always have, investment banks love to hire bankers to cover these sectors in the good times. And then when they turn bad, they usually shed them. So I’ve seen that a number of times in my career.
I had that just around the time COVID and then I joined Citi and spent three years there. And really again, building out what Ag Tech is and continuing my Wells Fargo work.
Unfortunately, between Ag Tech, Food Tech, Clean Tech, where I spend my time, those sectors have really struggled over the last couple of years. And they just restructured out the whole group.
For me, I came back to eco tech because I realized a few things. [I have] a small platform of a boutique bank. I can actually spend a lot of time with my clients and get really deep in the business.
And in a way, when I’m working at a bigger firm, it’s a lot more challenging and takes on a more specific and broader role than just helping to raise money. eco tech, of the things I often say, is we go into work with our clients almost like we’re outsourced corporate development.
So most of my clients right now are focused on the here and now that they are trying to raise money or they’re trying to increase revenue or trying to get to profitability. And they’re focused really on today.
And what I do is I work with management and boards to think about what’s broader. What does an exit look like if it’s three or five or seven years, how much capital you’re going to need to get to profitability. You could raise $ 10 million today, but if it’s going to take 25, you still have to raise another 15 at a later time.
And then the other thing that I think is even more important as we talk about where the sector goes is having strategic partners. And I frequently talk about the value. And a lot of my knowledge is predicated on years of learning and having watched something occur and what one would consider a different industry, but the same dynamic.
So I often say to my clients, as strange as it sounds, food and ag is no different than what I saw in energy or utilities or transportation. It’s as we talked before, the same dynamics of oligopoly, well-capitalized, that’s in all these industries.
And so I actually have playbooks as I’ve seen this before. These are kind of the steps you need to take. So for me, it’s all of that.
And then thinking about what I often consider the most important thing, which is what is it going to take to get an exit? If one looks out, probably if not the biggest, then one of the biggest challenges that Ag and FoodTech are facing right now, it’s a lack of exits. And so how do you actually put yourself on a path?
And more importantly, I tell my clients that if you can articulate in a real thorough way to an investor how you’re going to achieve an exit, you shouldn’t assume that investors are going to invest in you because they’re not giving you money to hold forever. They’re expected to get their money back.
So it’s one of those things that I look at is what’s the pathway to get an exit? And if you can achieve that, it’s so much easier to get investors to come in and put money.
Maureen: So do you consult with clients on the strategy of building that as well as providing capital investment to help them get there to raise that $10 million or whatever they need?
Adam: So I do a lot of my time these days is consulting because I often say to my clients, the capital raising process will come when the rest of the business is in line. If you try to go out and raise capital and as a business, you’re not ready. All you’re going to do is have a lot of conversations that typically don’t go anywhere.
Maureen: That perhaps you’re burning a bridge now that could have been fruitful later if you had waited to have the conversation at the right time.
Adam: Yes. 100%. One of the things that I think is very evident today is you never get a second chance to make a first impression. And that’s one of the challenges these companies have. You can go out there. And I say to my clients, one of the things that’s different than in the past is we often in good markets would rush out to go talk to investors.
If there is what we call the FOMO effect, everyone’s afraid that if they don’t invest today, they’re going to miss out on this deal. You get to market as quickly as possible because you have no idea how long that’s going to last. But you know, it’s not going to be long in a market like today, which one could argue is probably I don’t know what the opposite of FOMO is. Was it fear of not missing out?
And that’s where everything is today. There’s no need to rush to the market until you’re ready. So I actually tell my clients, I’m taking a lot more time. thinking through their business.
I’m thinking through what their investment highlights are. I’m thinking through how they’re going to address what are risk factors, because we know all these companies have meaningful risk because they’re earlier stage companies. And I think too often companies don’t spend enough time on the mitigating risk side.
And then what’s your process to go out there? And then what does an exit look like? You need to be able to articulate all these topics. And if you can’t articulate them, what I often say to my clients is you’re going to have a lot of people who are willing to take a first meeting because companies have really interesting technology.
Let’s be honest, these investors are out there having to invest. So they’re going to take a meeting. The question is, how do you get them to then take a second meeting, a third meeting, start doing due diligence to get in there? And you really have to have a well-scripted story.
I actually would say I spend more of my time doing consulting today than I have ever in the past just because that’s what my clients need and that’s what the sector needs to be able to have successful finances.
Maureen: Yes, it makes so much sense. I go back to what hit me the hardest based on what we were just talking about.
There is the idea you mentioned that there’s a lack of exits. And so I’m assuming by that, there’s not a lot of folks in food tech, ag tech, clean tech, climate tech that are exiting that is giving the industry confidence, right, in that investment. So is that part true?
So then my second part of that is, sorry to interrupt, is the idea of helping folks be clear about what that exit looks like. So if I’m a startup who is seeking capital, because there are not a lot of other brands to point to, it is that much more important to be buttoned up on exactly what the path is.
Adam: a hundred percent and it’s really important today. And it’s really important to be able to articulate what your milestones are going to be and what’s the roadmap. I tell my clients that I’ve almost usually when you talk to companies, when they go to raise capital, they have milestones and they’re probably two to three of them.
And one happens at six months and one happens at 12 months. So one happens at 18 months. I’m telling my clients, you almost need a monthly milestone because
Most of the investors are going to sit there and take a two, three, four month time horizon period. No, no one again is moving fast and they want to see what you’re doing. And if you said, here’s my milestone. It’s going to be, I’m going to do X in six months.
You should assume that investors are probably going to wait six months to invest because they’re going to want to see, can you achieve your milestone? So I’m trying to get my clients to think through, okay, what other milestones are there? Now, by the way, that investor might still wait six months, but the difference is he’s going to have seen you hopefully hit five other milestones before that. And that’s really important, it gives confidence.
The challenge out there a lot of the time now is there’s a lot of investors who are skittish, they’ve been burned. Let’s be very clear, Ag and FoodTech globally raised roughly $40 billion between 2018 and 2023 to the exit point, there’s been almost no exits, if any, particularly in the last couple of years.
And a lot of the investment committees are sitting there going, well, why do we want to put more money in now? Not only are, and the other challenges, a lot of the companies who previously raised meaningful amounts of capital at high valuations. And I often say to people that in itself isn’t bad. The problem is they took that capital.
Often to raise more money than they originally intended they put out unrealistic Business models or business plans and then with the money they’ve got nowhere near where they said they would be today.
So now they’ve raised too much money at too high of an evaluation and have not executed. It’s not a great time to raise money when that’s your backdrop in a bad market.
So there’s a lot of factors out there. I think a lot of companies need to do something really difficult, which is regain credibility in the marketplace and that’s tough because I often hear a lot of investors I talked to say, “look, the company has not been a good steward of capital”. That’s pretty much the worst thing you could say about a company is more or less. I gave you money and you didn’t use it 100 %.
Maureen: And you wasted it.
So the other factor of all of this, I jotted down your note about monthly milestones and I was having a conversation with somebody recently who is fundraising for a winery that she and her husband are building in the Finger Lakes region of New York state. And we were talking about the idea of building in public, which is this, you know, transparency in terms of what is behind the growth of the organization.
And I think it’s connected to your concept of monthly milestones and the idea of sharing along the way the growth that’s happening. I’m talking about sort of using it as a marketing method to help build rapport and relationships with your customers and your clients, but it’s also absolutely something that is applicable in your, fundraising partners, and I use the word partners intentionally, because what we’re talking about here too is a lot of the emotional stuff.
We’re talking about building trust. We’re talking about doing what you say you’re going to do and many of those things. And can you set up the goalpost and knock it down and do it again and again? And those are the things that build confidence. So I’ve heard that it’s a good time right now to be an investor and a challenging time to be a founder seeking funding.
And we’ve talked a little bit about the state of the investment industry across the board, but like sum that up for me a little bit. It’s because it sounds like you’re sort of saying that quality companies who frankly have their shit together can still thrive in this environment. And so they shouldn’t be scared of raising capital. And it’s about having the right strategy in place for that race.
Adam: So I think it’s good. Let’s start with the investor side, because I think we can use that to understand some what’s the challenges that entrepreneurs and companies are having.
So if you think about the investment side, we’ve had a tremendous decline in the number of active investors. And we’ve had that for a couple of reasons. One, there were a lot of generalists who looked at food and ag tech.
And by the way, they might not have been exactly the same, but they were similar to the people I saw 20 years ago who came into cleantech.
And I often talk about them as the people who when the going gets tough, the tough get going, they just walk away. It’s not where their focus is. They don’t know it that well. All the hype cycle got them excited. They came in, they didn’t really understand it. They put money to use.
Maureen: Yes, maybe they lost a big deal and, you know, or they had a loss and it just wasn’t worth pushing into.
Adam: Correct, correct. So you have that whole group who’s Secondarily, you have a whole group of what I’d call ag and food tech investors who pretty much have put all their capital to use.
And as we’ve discussed already, there haven’t been a lot of returns. So they’re going to struggle to go out and raise a new fund. So for many of them, this is the end.
And then you have other funds who raised capital, have some left, but have determined that that capital needs to go to their current portfolio companies because those portfolio companies are going to struggle to get capital from other sources because of course most of the other sources have gone away. And then you have another group who are people who raised funds recently and they’re sitting on the sideline often.
Maybe they’re making a little investment here or there, but they want to see what’s going on. Those people are the people who are going to get incredible returns. say to people, If you make an investment in 2025 and 2026 and caveat that by saying, know what you are doing. not the rest, but the people who understand it, you’re going to have your pick of companies.
You’re going to get in at probably the most reasonable valuation since 2018 and you should be able to make your return. So it is a great time to be an investor who has capital, particularly who doesn’t have tons of portfolio companies that are under water.
If you’re an entrepreneur, it is a tough time. The greatest entrepreneurs are going to struggle today. And a lot of it’s going to be down to what have you achieved? Because there are great companies out there who still haven’t achieved what they said they were going to, and it’s going to make it harder. The other thing is everyone has to be more judicious with capital.
One of the things I often find amusing, but it’s probably disturbing is the right word, is when I talk to an entrepreneur, and they say we’re going to raise capital. I said, great. And I said, how much are you going to raise? And they said, well, it’s our C. And we raised 15 in the B, so we’re going to go out to raise 30.
And I say, why? And they said, well, because we’re going to double the amount we raised from the last time. Why wouldn’t you do that? I said, that’s not how it works. You don’t get to show up and go, I’m raising a C, so it’ll be 30. You actually have to determine how much capital you need.
And one of the changes I’ve seen in the market that I think is really important is when we’ve raised capital in the past for companies, sometimes it was over almost up to 36 months of capital they would get, but definitely at least 24. Now I’ve seen deals happening where investors are saying, I’ll give you 12 months, go hit your milestones.
And if you hit your milestones, I’ll give you more money. If you don’t hit your milestones, why am I going to keep funding you? And that’s one of the keys out there, which is I think what we’d often call the leash that someone gets in good times.
It’s great. It’s long and it’s like, go do it. And we’ll come back and we’ll follow you and everything will be great. And bad times, it shrinks a lot and people are much more focused by the way, in many regards, not only is this not, is this what the sector needs? It is a good outcome.
I often say to my clients, if you could build profitable and valuable companies in the toughest markets and we’re in it right now. The only time I’ve seen a tougher market in my career was between 2013 and 2016 when you couldn’t use the word clean tech, or if you did, someone would hang up on you because they just didn’t want to hear it anymore.
But that’s where we are today. We are in a tough market and really, I think every company has to pivot to that mentality of, okay, capital is difficult. [They need to think] I’m not going to get it for many years [so] how do I actually build a business model and a viable business?
Because just to put out a business model that said, in 12 months we can be profitable, like investors are going to look at that. If you’re losing 10 million of EBITDA (earnings before interest, taxes, depreciation, and amortization) today and you say, well, next year we’re going to be profitable, I think they’re going to look at you and like, that’s probably not likely.
I think really thinking through, there’s a lot of work that needs to be done before capital raising to be able to put out a, and it’s not just a management presentation and a teaser, it’s a whole package that you are building a company for the future.
I often say the following, Maureen, because I really think it’s important. I tell my clients, you have to help a lot of these investors understand the inevitability of your sector. There’s a lot of industries out there that are going to be successful, but it’s not clear that it’s going to be today.
It could be three years, it could be five years, it’s going to happen. And I think people understand that. But you have to convince them it’s going to happen sometime. And then to me, you have to do even the most challenging component, which is to convince them that not only is it going to happen, but your company’s going to be a winner.
And that’s really hard when it’s an early stage of a company to say, look, there could be 20 people doing this, but here’s why we’re going to be the winner. And I think that’s what a lot of companies are facing right now is,
A lot of uncertainty about the sector, but even more uncertainty about who the winners are going to be because so few companies have got material revenue and almost none of EBITDA profitability.
Maureen: Yes. And so that uncertainty, I’d love your perspective on two sectors of ag tech that have, I think, sort of different connections to that concept of uncertainty.
And so one is CEA, so controlled environment agriculture, right? I’d love your thoughts on that, especially over the last five-ish years, maybe six or seven, right? Where it kind of exploded.
From what I understand, I’d love your perspective on that. And then also regenerative agriculture, I think is another one that is just uncertainty for different reasons in that regard. So what are your thoughts on those two sectors?
Adam: So by bringing up CEA, or I often refer to it as indoor farming, you’ve already allowed viewership of this podcast to double because I tell people as soon as I put a post out that touches on indoor farming, the number of people on my LinkedIn network who like look at it and comment doubles.
I can’t tell you why, but for that topic more than anything else I write on, there’s so much interest and it’s not clearly all good. There’s a lot of bad. It gets both of it.
But on indoor farming, I like to say the following. Everything that I see out there about growing crops outdoors, particularly specialty crops, tells me there’s at least a blinking yellow, if not a blinking red light.
We have fundamental challenges out there. And whether it is labor, whether it is water, whether it is regulation, whether it is costs, other costs involved, the specialty growers in the US, particularly in my home state of California, are looking at a lot of major challenges.
And by the way, people don’t realize that we’ve seen a tremendous amount of production already move offshore. And it’s continuing. There’s very little out there that tells me there’s going to be any change to more being grown in the US.
So I look at that and think, okay, there is a fundamental opportunity for someone to grow indoors. And that we’ve already seen and there’s industries where people don’t even talk about something like 60% of all tomatoes are grown indoors. Something like 50% of cucumbers. I don’t know if it’s 30% of peppers.
So why growing high-end lettuce wouldn’t go indoors? I don’t know why that wouldn’t move there. And I think you’ll see over time more and more products that can go indoors if you can make an economic argument.
To me, the reason for it comes down to two things. It’s going to come out to number one by and far in my mind is taste. Now, it has to be ‘taste at a reasonable cost’. You can’t be $50 strawberries and be like, they are the greatest strawberries ever.
Maureen: I totally agree, I totally agree. But when you say taste, are you saying that it has to, the indoor grown tomato has to taste better than the outdoor grown tomato or that it has to just flat out be delicious regardless?
Adam: I think it has to be delicious. And by the way, I think the other thing you gotta keep in mind, everything I see, and I’ve had a lot of indoor grown stuff, in almost all cases it tastes better. It naturally is going to taste better.
So here’s the dirty secret no one talks about. A lot of what’s grown outdoors is not grown for taste. Do you know what it’s grown for? It’s grown for yield and survival.
I always give the story, because someone told me years ago, why does iceberg lettuce exist? Because it’s a really fair question. Iceberg lettuce is pretty much water and a green leaf.
And the reason it exists is because 100 something years ago, people in Salinas realized if they took that lettuce, put it in a block of ice, they could send it to New York and it would survive. But no one made that lettuce because they said, no, what people want to have the tastiest stuff and it’s iceberg lettuce. I like icebergs.
I don’t want to say negative, but realistically, that’s what we’re talking about. So if you’re growing indoors, you’re hopefully already taken away from that whole thing about logistics and supply chain and when it gets to market and you’re going to be able to grow.
The other thing that’s really important and where I think CEA has not succeeded yet is a lot of times CEA is using the same seeds that are used outdoors to grow indoors. And that just makes no sense to me. And particularly if you’re going into the place everyone always, we always end up, which is vertical farming.
And to me, I get excited about verticals because of the ability to use LED lights, see genetics and other capabilities to optimize different traits. And we’re nowhere near there. And so to answer your question on indoor farming, I often say I am the harshest critic of indoor farming today because the companies again, like everywhere else in Ag Tech have made promises and almost none of, particularly in CEA, almost none of them have been anywhere near delivered.
So I think it’s, I think the, the challenge, think how people talk about CEA and the whole group who says it’s a scam or it doesn’t work or so, I think that’s just predicated on companies not delivering, but there are some who are delivering.
So I don’t think it’s fair to say everyone’s failing, but I go back and say, I’ve never been more bullish about CEA five, 10, 15 years in the future than I am today. And again, it goes to the challenges of growing outdoors, which is only going to get worse.
I hazard to find anyone who would say to me, you know what? The weather volatility we’ve seen over the last decade, it’s not a sign. It’s just everything’s going to be fine.
Because the joke I always say is, you don’t find a farmer who wakes up on January 1st and says, I need to grab my Farmer’s Almanac to see what the weather is going to be like this year. It’s just irrelevant at this point.
So it’s just a mentally a change. So the CEA, I think you have some hard times still going. And I say to them, all my clients very clearly, if you can’t show very quickly, you have positive gross profit and that you’re going to be getting close to EBITDA and not for a long time.
You probably don’t have a business and that’s, and that’s harsh, especially because a lot of these facilities could cost 50 plus billion dollars. But that’s the reality that you need to show it. The bigger question I look forward and I say to people is if you look at CEA 10, 15, 20 years into the future, my question is going to be, is CEA a group of successful companies who’ve made a lot of money or does it look like solar, which is a highly successful industry but you can name almost no one who has made money in it.
None of the solar panel manufacturers. So will the indoor farming companies be successful brands or are they just going to be growing leafy greens for Taylor Farms, Tanimura & Antle, and other players around the world?
So I think that’s the big question on CEA, not whether it’s going to be successful, but whether it’s going to be an industry that becomes profitable with a lot of profitable companies.
Maureen: Yes, I think that’s an interesting perspective and it’s one I haven’t heard before either, right? Because I think that many people, especially it being such a hot topic, are either very negative about it, all the money got set on fire, don’t touch it with a 10-foot pole, and others who are cautiously optimistic. But I think your point too about engineering seeds to be to grow well in that environment is also something that is beneficial for sure. So moving over, go ahead.
Adam: I’d add one other thing, is I think we also need to see a change of what’s grown. So it’s not just the seeds. I tell people vertical farms in my mind won’t grow leafy greens.
They might grow microgreens and microberries. I think they’re going to expand to specialty ingredients. I think there’s some interesting stuff in forestry and nurseries. I think there’s some pharmaceuticals that can be done. I’d be really intrigued to see, we grow coffee and cacao? Things that are going to be much more difficult.
To me, I think of a successful indoor farm, particularly a vertical farm. I think there’s still an opportunity for greenhouses to do leafy greens. I think they’ve done well.
But at vertical farms, they’ve got to go out of the main street. They’ve got to figure out where there are, let’s say, smaller niche markets where they can sell at a higher price. And I’m not saying that’s what they’re going to have to do 20 years from now, but they’re sure going to need to do it today.
Maureen: Right, to get that traction.
Adam: Correct, to get traction, optimize their business, get profitability, and get to a point where they can be viable. And I think that’s something you’re going to see happening more and more over time.
Maureen: Well said. So take us to regenerative agriculture. What are your thoughts? Is it investable?
Adam: Yes. So, I always joke with regenerative ag, which is the first thing I always say is I hate that term because if you ask 10 people, you’ll get 10 different definitions. What it means. How do I feel about it? So I think a lot depends on what a company is doing. And I will tell you, I’m working with a company in the region now. And when we started talking about the business, someone called me and said, you should talk to them. They’re, they’re looking for help. I said, I don’t really like regenerative agriculture. It did.
Because to me, regenerative agriculture almost always is carbon credits. And I’m again, I’m a clean tech guy. I’ve been, you’re not going to find a lot of people who’ve been doing it longer than me. Carbon credits mean voluntary carbon markets and those go away. And in bad times, or let’s say when elections go against the way people who are pro-carbon credits think, you’re in trouble. And so my view on regenerative is what are we meaning?
If we’re meeting, can we help farmers change farming practices again, make them more profitable and make the land better, then you don’t have a bigger advocate than me.
With the client I’m working with now, one of the things I love is every year they’re implementing their farm management software to get the farmer to really bespoke ways to grow and use chemicals and other things.
The soil gets healthier every year, and every year the soil gets healthier, the farmer’s ROI gets better. And to me, that’s the key. You’ve heard me say it. It’s one of the quotes I say continuously, which is, make the farmer more money.
So my perspective is, regenerative ag is going to work if you’re making the farmer more money. Now, you’re going to have a lot of farmers who are still skeptical, it’s regenerative.
But I always say this, if you get a farmer who makes more money, at some point, they’re going to talk to their neighbor who’s going to figure out they’re not making more money. And that’s when things change.
So what I’m seeing is I don’t think regenerative is going to be a process that we’re going to, it’s not, it’s not roundup ready corn. It’s not two years from now. Everyone in the industry is using it because it fundamentally changed economics.
I do think it’s a movement that’s going to gain more traction, because it’s going to help farmers make more money. And maybe over time, carbon will be added to it and that’s great.
But any business model in my mind that’s predicated on carbon credits to make a business for regenerative agriculture, I just get concerned. Even if you have the business today, I don’t know how you, with all the uncertainty out there today, I don’t even know how anyone would sit there and be like, oh, I’m comfortable that carbon credits are going to be a viable area 24, 36 months from now.
I just don’t think it is. Again, regenerative’s really interesting. I think farming practices can change.
Here’s the other thing that I think is really important today. I think we’re going to change how we farm because we’re going to have data. And this is going to be a, this isn’t going to be quick, but I often tell, and I give this example. I was doing some work again. started my work by years doing and restructuring and did some hardcore industrials.
And I remember going into some of these facilities and what do I remember? Well, they were labor intensive, not a lot of technology. And despite the fact that the person running it told me they were running at 98% efficiency, I was pretty confident they weren’t. But did know what he was running at? He was running at 98% of the best month they’ve ever had.
And now you look at a lot of these places and industries and it’s got automation or robotics. It’s got IOT (internet of things). It’s got machine learning AI, and he’s still running at 98%, but he’s running at 125% of the old 90%. And now he has the data to know it.
I often call it “the emperor has no clothing effect”, which is if you don’t know, you’re not doing something well, then you can’t really change it. And I think bringing data into agriculture, again don’t get me wrong, there’s very few people who are going to show up on farms tomorrow and say, here’s your data, so you fundamentally need to change your practices. But I do think there’s really interesting opportunities.
There’s companies out there who are having business models where they’re giving some sort of downside protection through some sort of a warranty, and then saying to the grower, use these new techniques and you’re going to get an extra 20 % yield, you’re going to make an extra 15, 20 % more, and we’re going to split it.
And I think any way you get the farmer thinking, okay, I can make more money and limit my downside, you’ll get them to try it. And let me be clear, if it doesn’t work, they’re not going to use it next year.
Maureen: Totally, right. And it goes back to the taste that we were talking about with indoor ag too. If it doesn’t taste good, you’re done.
Adam: So I do think there’s some really interesting ways that we’re going to see some changes in the ag sector predicated on data. And we’re getting closer to more and more of that being used. I find it exciting.
I think there is a definite future for regenerative, but it’s predicated on using data to help farmers farm more effectively and make more money. It’s not that we’re going to sequester carbon, because I just don’t see that being a catalyst in the near term.
Maureen: I think the other thing that we can say too about that, and perhaps this is a little harsh, but we’re not going to save the world with it until it can do exactly what you just talked about, is save the farmer money, right?
I can’t tell you how many conferences I go to where regenerative ag is discussed and they say, well, the consumer is just going to have to pay more for it. And they’ll want to because it’s good for the environment.
It’s a big gamble to make, you know, to get the farmer to change all of their practices in hopes that the consumer will pay more when all of this competition is on the shelf. I don’t know how realistic that is.
Adam: And by the way, you’re also now taking two other things into account. One, we’ve had tremendous food inflation over the last five years, and I think consumers have felt it. By the way, because I think it’s a change. I often say to people, you could argue we went from 2004 to 2020 and there was almost no food inflation. The food inflation we got is probably 20 years of food inflation in four years.
And that and that we had just incredibly cheap. I think that the stat I saw – something was like we went from 18 percent disposable income spent on food and like 1980 down to as low as 9 percent in 2000. It might have been nine or 10 in 2020. And now it’s back up to 12 or 13 percent. It just didn’t move.
But to your point about the consumer, the consumer is not doing that. And by the way, again, as a guy who’s been in clean tech a long time, I always remember the first conference I went to in 2004. One of the people there said, who’d like to use solar and everyone in the room went up. And then they said, who’d pay 15% more for solar and 97% of the heads went down.
And to your point on these products, if you raise the price and throw the word sustainability on the front, I don’t think you’re going to do it.
Now, if you raise the price and say taste, you might get someone to actually do it. But sustainability is not going to be the driver.
Maureen: I agree, unfortunately. All right, last question for you. Give us some predictions for clean tech, ag tech, this whole sector we’ve been talking about for say, whatever time period you want, five years, 10 years.
Adam: So I’ll start at the easy part which is for the next couple years the word that is going to be pain in difficulty it’s really because because we can’t solve in most instances the problems we have which is significant revenue growth EBITDA and path to profitability that doesn’t get solved in 12 or 24 months unfortunately which to my mind leads to a significant number of fire sales or bankruptcies.
I think if you look forward to let’s call it three or five years, the sector looks very different, mostly because there’s so many of the companies that I would call household names based on how much capital they raised, not because they performed or got. So when I look forward to five, 10, 15 years, I get excited. We really have to look at why this sector matters. Why does it matter?
Because there’s three mega trends out there that what I would say later stage investors are talking to me about. The early stage as well, but later stages are focused on it, which is going to be food security, health and nutrition, and sustainable food systems.
And none of those problems that exist today are going to improve in the next three years, five years, 10 years. The likelihood is they’re just going to get worse. The challenge we face is, the investors who have hundreds of billions of dollars able to come after these challenges do not invest into companies that aren’t profitable or don’t have EBITDA.
That’s where there is mismatch right now, which is we have a bunch of early stage companies with unproven technology and business models that haven’t worked. And we have later stage investors. And we’ve got to bridge that gap. And candidly, it’s not coming from the investors coming early.
Because we saw that. That’s what 2020 through 2022 was. Let me tell you, it did not work well for any of these investors.
So now it’s got to do the opposite, which is we’ve got to figure out and to their credit, a lot of the companies are sitting there doing it, how they have viable business models, because you can’t be, I was having this conversation with someone yesterday, you can’t be a company who’s been around for a decade, have 10 million of revenue and have a path that you’re not going to be able to positive for another five years.
You can’t be 15 years in, because you can be that, that’s fine, but you’re not a growth company. You’re not a company that’s going to be looking to go out to these investors who are talking about the future and scaling and things of that nature. You’re just a small business in a sense. And by the way, that’s fine, but you need to recognize who you are.
And so that’s where I think we’re going to have a reckoning over the next five years. So when I look out five, 10, 15, I think a lot of these trends that we talk about, we’d said about CEA or we say these mega trends or other things around protein I often talk about, particularly we’re seeing zoological diseases impacting avian flu, but could easily infect cows. We know that’s in our dairy. It could hit beef. We don’t know what the implications are.
There’s going to be a lot of challenges positivity to Ag Tech is not Ag Tech per se, but it’s the rest of the breakdown in the food system that’s going to offer opportunities. And that’s when Ag Tech better be ready to step in and say, I can do it. And if I can step in at that point and say, I can do it, I’m ready. The sector is going to do well. And if it’s not, the sector is going to be challenged.
Maureen: Yes. And I think based on the challenges that we’re going to face in the short term, the companies that five years from now are going to be poised for success are going to be the scrappy ones who have made it through the toughest of times.
And so hopefully they will be ready to jump on that opportunity to frankly, you know, I don’t want to say save the world, but I mean, we’re talking about our food system. These are very serious things. And so, there’s serious consequences when, especially when we’re talking about food security, when things don’t go well.
So I love your outlook. I love your positivity. I love your brass tacks too, of not being afraid to share what the actual state of things is while also bridging in that hopefulness. So thank you so much for sharing your time with us today.
Adam: My pleasure and I appreciated the invitation and enjoyed our conversation.