At Initialized Capital, we will get on a plane if we hear of company that we think can return our entire fund. We really mean it. Our third fund has invested in ten companies outside the Bay Area.
When we first heard about IUNU from Mike Miller of Liquid 2 Ventures, we quickly booked a flight north to Seattle. The son of a botanist and an alumnus of Amazon, founder Adam Greenberg is creating a future for greenhouses and more efficient agricultural yields through sensors and artificial intelligence. Through an introduction from a mutual patent attorney, Greenberg teamed up with engineer Matt King, who had worked on Boeing’s manufacturing systems, to do computer vision for greenhouses.
When we arrived, we found Greenberg running a complex greenhouse system with every single plant under camera monitoring. From an iPad user interface, you could zoom in on individual plants and track every single leaf.
IUNU’s vision is to provide the operating system for greenhouses — a network of overhead cameras captures photos of every single plant, every ten minutes. This comprehensive set of data allows growers to track imperceptible differences in plant health before they can be spotted with the naked eye. The controlled environment of a greenhouse is the perfect place for an machine learning and data feedback loop where the impact of grower actions can be evaluated against precisely measured results. The goal is to bring to growers the same rapid iterative development cycle so prevalent today in the software industry.
North American greenhouse square footage is growing 20 percent annually with demand for organic produce outstripping supply by a four-to-one margin. Climate change will only make outdoor farming more challenging, thus driving more production indoors. This problem is especially acute in foreign markets that are not blessed with the great weather or soil conditions for farming vegetables that we enjoy in California. So it isn’t surprising that only one percent of the world’s 109 billion square feet of greenhouses is in the U.S. Many of IUNU’s most promising opportunities are outside of the country in Spain, the Netherlands, Mexico and Canada. Even Dutch indoor flower growers, who are facing wastage rates as high as 30 percent, have expressed interest.
IUNU has the chance to become an agriculture technology leader with deep moats for an enormous market. They are not another capital-intensive, low-margin tech-enabled indoor growing operation. They sell high-margin software that is difficult to get right and they have a data advantage for computer vision that grows with every customer and plant varietal they on-board.
There are network effects once resellers like Lowes, Home Depot and Whole Foods demand their growers have capabilities for predicting supply. This product is also extremely sticky as customers are not likely to switch after they have installed camera hardware throughout 30 or 40 greenhouses. This hardware, by the way, gets better and cheaper every year and the team has a laundry list of ways they will improve on their current installation design and process. Finally, the future of this company is in the data they will analyze across greenhouses, which will give them insight into new markets and products for predicting profit and financing receivables.
In sum, IUNU has an innovative, difficult-to-build product for a large and rapidly growing market that is underserved by software. The business has moats on moats and is led by the quintessential founding team.