On May 20, 2020, a labor migrant walks past rows of tomato plants growing in a smart greenhouse at Pure Harvest Smart Farms in Nahil, United Arab Emirates.
Christopher Pike | Bloomberg | Getty images
An Abu Dhabi-based agricultural technology startup announced it has raised $ 60 million in funding to expand its operations in the Middle East, but said raising capital has been a daunting task.
Pure Harvest Smart Farms grows fruit and vegetables in greenhouses in the desert of the United Arab Emirates and has partnerships for this in Saudi Arabia and Kuwait.
The harsh climate in the Middle East makes countries in the region highly dependent on food imports, and the Covid-19 pandemic last year highlighted food safety risks.
“Our pilot in the desert … showed promising results – the potential for year-round local production of very high quality and at a very good cost structure,” CEO and co-founder Sky Kurtz told CNBC’s “Capital Connection” Monday. The start-up will use the capital to build its bridgehead in Saudi Arabia, he added.
It also has plans to expand its product portfolio.
The company raised $ 50 million through Islamic bonds, also known as sukuk, debt instruments that comply with Sharia law. Kurtz said it was “fairly new” as the region does not have a significant venture capital debt market.
The offering was led by Shuaa Capital and meets Pure Harvest’s need for an “aggressive capex program” and its fast-growing nature, Kurtz said.
Separately, Sancta Capital led a fundraising round in January raising an additional $ 10 million, with the participation of new and existing investors.
‘Relatively underfunded’
Despite its success in raising capital, Kurtz said Pure Harvest has brought in less funding compared to agricultural technology companies in the US and Asia. That’s because the Middle East risk market is less developed, he said.
They are “maturing quickly,” but it is “still a relatively nascent market,” he said.
Kurtz acknowledged that having $ 200 million in capital in the Series A stage is “extremely large” both regionally and globally.
“However, in an industry like ours, which is extremely capital intensive, we still have relatively little money,” he said.
He pointed to companies like Plenty vertical farm in the US, which has raised more than $ 500 million, according to Crunchbase.
“Many of these companies have raised much more capital than we have, but we have to admit that our market needs are great,” said Kurtz. “We essentially import 80% to 90% of the fresh fruit and vegetables in this region.”
He added that Pure Harvest’s capital comes from all over the world and “we had to fight for it” because it is more difficult to attract venture capital to the Middle East.
“I think that is changing rapidly, however, and we are obviously very grateful to the partners we have,” he said.