The Bubble and the Hangover
Between 2017 and 2022, vertical farming was the hottest sector in agricultural technology. The premise was seductive: grow leafy greens, herbs, and eventually staple crops in stacked indoor facilities using LED lights, hydroponic or aeroponic systems, and precisely controlled environments. No soil. No pesticides. No weather risk. Ninety-five percent less water than conventional farming. Produce could be grown in cities, blocks from consumers, eliminating the carbon footprint of long-distance refrigerated transport. Investors poured over $5 billion into the sector, with startups like AeroFarms, Bowery, Plenty, and Infarm attracting valuations in the billions.
By 2025, the narrative has sobered considerably. Infarm, once valued at over $1 billion, filed for insolvency in 2023 and was sold for parts. AeroFarms filed for Chapter 11 bankruptcy protection, emerged, and continues to operate but at reduced scale. AppHarvest, a greenhouse-based competitor, went bankrupt in 2023. Fifth Season, a Pittsburgh-based vertical farm, shut down entirely. The sector’s problems were not fundamentally about the technology — the farms grew plants successfully. The problems were economic: the capital costs were enormous, the energy costs were crushing, and the unit economics never penciled out for any crop more demanding than premium salad greens.
The Energy Problem Nobody Solved
The fatal flaw in the vertical farming business model is energy. Photosynthesis is powered by sunlight, which is free. Indoor farming replaces sunlight with LED lights, which are not free — and while LED efficiency has improved dramatically (modern horticultural LEDs convert about 40-50% of electricity into usable light for plants), the energy bill for lighting a multi-level indoor farm is still the single largest operating cost, often accounting for 25-40% of total expenses.
The math is unforgiving. A typical vertical farm producing leafy greens consumes 30-40 kWh of electricity per kilogram of product. At an average US commercial electricity rate of about $0.12/kWh, that’s $3.60-$4.80 per kilogram just for electricity — before labor, rent, depreciation, packaging, or distribution. Conventional field-grown lettuce, by comparison, has a production cost of roughly $0.50-$1.00 per kilogram, plus transportation. The premium that consumers will pay for “local, pesticide-free” greens can close part of this gap, but not all of it, and certainly not for the full range of crops that vertical farms promised to grow.
The energy problem is compounded by the location problem. The original pitch — vertical farms in cities, blocks from consumers — put these energy-intensive facilities on urban real estate, where electricity rates and rents are higher than in rural areas. A farm on Manhattan real estate paying New York electricity rates was never going to compete with a farm in California’s Salinas Valley on cost. The surviving vertical farms have shifted toward lower-cost locations — former industrial sites, rural areas with cheap renewable energy, facilities co-located with solar farms or data centres — accepting longer distribution distances in exchange for viable economics.
What Survived and Why
The vertical farming industry’s shakeout has left a smaller, more focused sector. The survivors share several characteristics:
AeroFarms emerged from bankruptcy with a leaner operation and a focus on its most profitable products — microgreens and baby greens for high-end food service. The company’s aeroponic technology (growing plants in a mist rather than water) produces faster growth cycles than hydroponics, partially offsetting energy costs. AeroFarms’ partnership with Whole Foods continues, and its Newark, New Jersey facility remains operational, but the company’s expansion plans have been dramatically scaled back.
Bowery Farming, backed by investors including Google Ventures and General Catalyst, has pivoted toward differentiation rather than cost competition. The company now emphasizes proprietary seed genetics, software-defined growing recipes, and branded retail products (Bowery-branded salad kits in grocery stores) rather than attempting to compete with commodity greens on price. It’s a smart pivot — the commodity produce market is a race to the bottom that indoor farms can’t win — but it limits the addressable market to premium products.
Plenty has taken perhaps the most dramatic pivot, shifting from leafy greens to strawberries — a higher-value crop where controlled-environment production has clear advantages (consistent quality, year-round availability, elimination of pesticides). Plenty’s partnership with Driscoll’s, the berry giant, leverages Driscoll’s genetics and distribution while providing Plenty with a proven market. Strawberries are a better fit for vertical farming than lettuce: they command higher prices, face more pest pressure in the field, and have more variable quality in conventional production. Plenty’s Richmond, Virginia facility, one of the largest vertical farms in the world, began commercial strawberry production in 2024.
The small-scale survivors are also noteworthy. Dozens of smaller vertical farms serving hyper-local markets — a single city, a specific restaurant group, a farmers’ market — continue to operate profitably at modest scale. The technology works. It just doesn’t support the venture-scale ambitions that the bubble assumed.
The Honest Post-Mortem
Vertical farming was never a fraud — the technology is real, and the crops grown in vertical farms are genuinely higher quality than conventional alternatives in many cases. But the industry’s investors made a fundamental category error: they assumed that because vertical farming used technology, it would follow the economics of software (high upfront cost, near-zero marginal cost, unlimited scale). It follows the economics of farming — high capital costs, significant operating costs, commodity pricing for staple products, and premiums only for differentiated products. A farm is not a software company, and growing a plant takes as long indoors as it does outdoors.
The future of vertical farming is niche but real. Premium greens, berries, and specialty herbs will continue to be grown profitably in controlled environments. The technology will improve — more efficient LEDs, automated harvesting, better genetics — and the costs will continue to decline. But the vision of vertical farms replacing field agriculture for staple crops was always a story that the technology couldn’t support. The industry has been forced to grow up — to focus on the crops and markets where indoor farming has genuine advantages, not on the ones where a slick pitch deck convinced investors it could compete. That’s not a failure. It’s a maturation.
The Technology Trajectory That Matters
The vertical farming industry’s future depends on improving two variables: energy cost and labor cost. LED efficiency continues to improve at roughly 3-5% per year, with next-generation horticultural LEDs pushing toward 60% wall-plug efficiency. Automation — robotic harvesting, automated transplanting, AI-controlled climate management — is reducing the labor costs that make indoor farming uncompetitive with conventional alternatives. The integration of vertical farms with renewable energy — particularly solar, where daytime production aligns with lighting demand — could reduce energy costs substantially in locations with favorable renewable resources.
The most promising technological frontier is not better LEDs or faster robots. It’s plant genetics. Breeding programs specifically targeted at indoor environments — plants that thrive under LED spectra, that grow faster in hydroponic systems, that are optimized for flavor and nutrition rather than shelf life and transport durability — could dramatically improve the economics. Conventional agriculture has spent a century breeding for field performance and transport. Indoor farming can breed for fundamentally different traits, and that genetic work is only beginning.
