A migrant worker walks past rows of tomato plants growing in a smart greenhouse at Pure Harvest Smart Farms in Nahil, United Arab Emirates, on May 20, 2020.
Christopher Pike | Bloomberg | Getty Images
An Abu Dhabi-based agricultural technology startup announced it had received $ 60 million to expand its Middle East operations, but said it had been a difficult task raising capital.
Pure Harvest Smart Farms grows fruits and vegetables in greenhouses in the desert of the United Arab Emirates and has partnerships to do the same in Saudi Arabia and Kuwait.
The harsh climate in the Middle East makes countries in the region heavily dependent on food imports, and the Covid-19 pandemic last year brought food security risks to the fore.
“Our pilot in the desert … showed very promising results – the potential for year-round local production with very high quality and a very good cost structure,” Sky Kurtz, CEO and co-founder of CNBC, told Capital Connection on Monday CNBC. The start-up will use the capital to build its bridgehead in Saudi Arabia, he added.
There are also plans to expand the product portfolio.
The company raised $ 50 million through Islamic bonds, also known as sukuk, which are debt instruments that comply with Shariah law. Kurtz said it was “fairly new” as the region doesn’t have a significant market for risk credit.
The issue was led by Shuaa Capital and takes into account Pure Harvest’s longer term need for an “aggressive investment program” and its rapidly growing nature, Kurtz said.
Separately, Sancta Capital ran a stock fundraising round in January that raised an additional $ 10 million with the participation of new and existing investors.
“Relatively underfunded”
Despite the success in raising capital, Kurtz said Pure Harvest received less funding compared to Pure Harvest Agricultural technology company in the US and Asia. That’s because the Middle East venture market is less developed, he said.
They “mature quickly” but it is “still a relatively emerging market,” he said.
Kurtz acknowledged that $ 200 million in Series A fundraising is “extremely large” both regionally and globally.
“However, in an industry like ours – which is extremely capital-intensive – we are still relatively underfunded,” he said.
He pointed to companies like the U.S. vertical farming company Plenty, which has raised more than $ 500 million, according to Crunchbase.
“Many of these companies have secured a lot more capital than we do, but admittedly our market needs are great,” said Kurtz. “Basically we import 80% to 90% of the fresh fruit and vegetables in this region.”
He added that Pure Harvest’s capital comes from around the world and “we had to fight for it” because venture capital is more difficult to attract to the Middle East.
“However, I think that is changing quickly and of course we are very grateful to the partners we have,” he said.
