Growcer snaps up assets of bankrupt US rival Freight Farms

Container-based vertical farming company Freight Farms declared bankruptcy in April after 13 years of operation. Three months later, Ottawa-based Growcer CEO Corey Ellis won a bidding battle in a Boston courthouse to acquire the assets of Freight, his company’s American competitor. 

The $2.6-million USD (about $3.6 million CAD) purchase suddenly adds a lot more than container-grown leafy greens to Growcer’s plate. The startup now has about 600 new customers (including municipalities, food banks, and other community food organizations) and farm containers across 30 different countries, as well as use of Freight’s proprietary software. 

Ellis and Growcer chief of staff Florent Schmal spoke with BetaKit on Monday morning after officially “getting the keys” to their purchase. The duo said they feel a sense of responsibility to keep “a pioneer of the industry” alive. 

“Seeing our main competitor in the industry file for bankruptcy, we [thought] we probably needed to step in order to continue legitimizing this industry and show that there’s a real fit for this type of farming in the overall food system,” Schmal said. “We’re a Canadian company coming to the rescue of the Americans. It’s an ‘elbows up’ story.”

Founded in 2016 by Ellis and CFO Alida Burke when they were students at the University of Ottawa, Growcer’s flagship offering is a modular vertical farm unit designed and built in Canada to withstand climates from -40 C to 40 C. The climate-controlled unit features racks of leafy produce from floor to ceiling, all growing on a controlled water system that allows farming year-round. 

Founded in 2012, Freight Farms also provided containerized vertical farms, though its units also grew produce on “walls” rather than just horizontally-stacked racks. This feature is a nice addition for Growcer, according to Ellis. The Boston-based company raised more than $43 million USD in external funding before it entered into an agreement to go public via a special-purpose acquisition company (SPAC) in September 2023, aiming for a $147-million USD market cap. The company was unable to close the transaction and, one year later, the deal was cancelled and the CEO replaced. 

Ellis believes the American counterpart’s failure stemmed from miscalculating the runway for its naturally capital-intensive hard tech business. The SPAC also served as a “major distraction” for the sake of making a big exit, the CEO added. He said he isn’t worried about making the same mistake. 

“The margins are not what software margins are, and you need to be really disciplined to make sure you grow the business at the pace that the market is growing,” Ellis said. “If our customers love our product, and we have super high referral rates and really high repeat business, that builds a successful business.” 

Being disciplined hardly means taking it slow for Growcer, as a lot has changed since it raised $3 million CAD in Series A funding last year. While it’s still working on offering more than just leafy greens for its farms, the company has found its way back to profitability.

Growcer now also provides more turn-key climate-controlled food storage options like freezers, fridges, and root cellars to help food banks and communities keep food longer.

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“Our communities are a lot more vulnerable from a food standpoint that they were 100 years ago, because we rely a lot on a very efficient supply chain,” Schmal said, “When that supply chain gets disrupted then [a lot of communities] are very much at risk of one truck not showing up and fresh food not being available in the store for an entire week.” 

Growcer has also raised a $30-million special purpose fund, half of which is from new and existing investors, and the other half made up of debt financing from the Royal Bank of Canada. The fund covers the $300,000 up-front cost for Growcer customers, unlocking an “as-a-service” component to its business where customers pay a monthly fee for their modular farm and food storage offerings. 

Without this structure, Growcer’s potential customers would likely need to take out loans to finance the purchase of the vertical-growing solutions—and that would only be practical through extreme measures like refinancing their homes or land, Ellis said, adding that the subscription model has the added benefit of providing the company with a source of recurring revenue. 

With Freight Farms under its control, Growcer will now introduce itself to 600-plus new customers who have gone months without support from the folded company. In the medium term, Elilis said there will be opportunities to compare what Freight Farms did better and what Growcer did better so the company can combine “the best of both worlds.” 

Feature image courtesy Growcer.