For a few years, vertical farming looked like one of agriculture’s biggest technology stories.
Investors poured money into automated indoor farms promising year-round production, higher yields, less land, reduced water use, shorter supply chains, and precise environmental control.
The technology was impressive.
The financial results were much less consistent.
PitchBook reported that indoor-farming startups attracted approximately $2.01 billion across 158 deals in 2022. By 2023, investment in AgFunder’s broader “Novel Farming Systems” category had fallen from $2.8 billion to $680 million as investors became far more cautious about businesses that could not demonstrate strong unit economics.
Several highly funded vertical-farming companies later shut down, entered bankruptcy, or restructured. Bowery Farming ceased operations in 2024 after raising more than $700 million. Plenty filed for Chapter 11 in 2025 after raising nearly $1 billion, although it later emerged from restructuring with a narrower focus on strawberries. AeroFarms entered bankruptcy in 2023 and subsequently rebuilt its business around microgreens.
By 2025, EcoTech Capital estimated that companies which had entered bankruptcy had collectively raised about $2.2 billion.
So what went wrong?
The answer is more useful than simply saying “vertical farming does not work.”
In many cases, the problem was not whether plants could grow indoors.
They could.
The harder question was whether the business could grow them at a cost customers were willing to pay.
The Technology and the Business Model Are Not the Same Thing
Vertical farms can control light, temperature, humidity, CO?, irrigation, nutrition, and other environmental variables with remarkable precision.
That control has real value.
However, a technically advanced farm can still be a poor business.
The USDA has highlighted this distinction, noting that fully indoor agriculture requires substantial capital and energy while also demanding expertise across horticulture, engineering, and business management.
A farm therefore needs two things to work at the same time.
The crop-production system must perform.
The economics must perform as well.
High yields cannot compensate indefinitely for excessive capital costs. Automation cannot rescue a product with weak margins. Likewise, a beautiful facility does not create customer demand.
Vertical farming profitability begins when those pieces work together.
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Electricity Is Not a Minor Operating Expense
Every photon in a fully indoor vertical farm has to come from somewhere.
Unlike a greenhouse, the crop cannot rely primarily on sunlight. LEDs provide the light, while HVAC equipment manages the heat and moisture that plant production creates.
Research consistently identifies this energy requirement as one of the industry’s central challenges.
A 2024 study found that lighting can account for approximately 65% to 85% of vertical-farm energy use, with HVAC accounting for another 10% to 20%. A 2025 review placed current lettuce-production energy use at roughly 10 to 18 kWh per kilogram across studies.
That changes the business calculation.
Electricity price, LED efficiency, crop light requirements, dehumidification, cooling, airflow, and facility utilization all influence the cost of every kilogram produced.
Better technology can reduce those costs. Still, energy efficiency alone does not guarantee profitability.
The crop must generate enough value to pay for the electricity used to grow it.
Crop Selection Can Decide the Business Before Construction Starts
One crop may work financially in a vertical farm while another fails using exactly the same technology.
That is why crop selection should never come after facility design.
Leafy greens became the industry’s default crop because they grow quickly, stay relatively compact, and perform well under controlled conditions.
The problem is that lettuce also competes with highly efficient greenhouse and field production.
That leaves little room for expensive production systems.
Recent industry pivots reflect this reality. After restructuring, AeroFarms concentrated on microgreens, which command higher margins and reach harvest quickly. Plenty moved away from leafy greens and focused its operations on vertically grown strawberries.
That does not mean berries or microgreens automatically make vertical farming profitable.
It means revenue per square metre, crop cycle, yield, quality, shelf life, market differentiation, and selling price must justify the production system.
The question should never be:
Can we grow this crop indoors?
It should be:
Should we?
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Automation Reduces Labour — But Adds Complexity
Vertical farming is often presented as highly automated agriculture.
That description is accurate.
It can also be misleading.
Robotics, automated irrigation, environmental controls, conveyors, sensors, machine vision, and crop-management software can reduce repetitive labour. At the same time, those systems introduce maintenance, calibration, troubleshooting, software, spare-parts, and technical-support requirements.
AeroFarms provides an interesting example.
After bankruptcy, its new management focused heavily on operational discipline rather than simply adding more technology. The company brought in employees with food-production experience, improved training, concentrated on yield, and paid closer attention to maintaining its automated equipment. Its system reportedly contains more than 2,000 spare parts.
The lesson is straightforward.
Automation changes labour requirements. It does not eliminate the need for skilled operators.
Capital Cost Can Become a Trap
Vertical farms combine agriculture with buildings, lighting, HVAC, irrigation, automation, electrical infrastructure, controls, food-safety systems, and material handling.
That makes them capital intensive before the first commercial crop leaves the building.
Problems arise when companies scale before proving that one farm can consistently produce positive unit economics.
During the investment boom, some companies raised hundreds of millions of dollars while simultaneously developing proprietary technology, constructing large facilities, entering new markets, and attempting to build consumer brands.
Those activities consume capital quickly.
Once interest rates increased and venture funding became harder to obtain, businesses that depended on continuous fundraising faced a much less forgiving environment. Funding for AgFunder’s Novel Farming Systems category dropped by more than 75% between 2022 and 2023.
Food infrastructure does not scale like software.
Before building farm number ten, farm number one needs to work.
Market Demand Has to Come Before Production Capacity
Producing lettuce every week is useful only if someone wants to buy it every week.
That sounds obvious.
Yet market risk can become secondary when a project focuses heavily on engineering and technology.
A realistic vertical farming business needs to understand who will buy the crop, what specifications they require, how much volume they need, what price they will pay, and what competing products already cost.
“Locally grown” may help with marketing.
It is not a business model by itself.
Retailers and food-service buyers still care about price, quality, consistency, shelf life, packaging, food safety, delivery, and availability.
For that reason, market validation should happen before major capital is committed.
The farm should be designed around a credible market opportunity rather than searching for customers after construction.
Unit Economics Matter More Than Yield Headlines
A vertical farm can produce an extraordinary amount of food per square metre and still lose money.
Yield tells only part of the story.
Operators also need to understand cost per kilogram, energy per kilogram, labour per kilogram, gross margin, crop losses, packaging cost, facility utilization, selling price, and capital required for each unit of annual production capacity.
A 2026 techno-economic study illustrates why this matters. Researchers found that advanced vertical-farming systems could potentially move lettuce production closer to Dutch greenhouse cost benchmarks if crop productivity and light-use efficiency improve substantially. Tomatoes presented a much harder challenge and required biological performance that researchers noted has not yet been achieved at full-cycle commercial scale.
In other words, there is no universal vertical-farming equation.
Crop biology and financial performance are connected.
Bigger Is Not Always Better
Scale can reduce certain costs.
It can also magnify mistakes.
If electricity assumptions are wrong, a larger farm creates a larger electricity problem.
When labour productivity falls below plan, expansion increases the labour gap. Poor crop performance becomes more expensive as growing area increases, while equipment failures affect more production.
A smaller commercial facility may therefore provide valuable information before a company commits to much larger infrastructure.
Developers can validate crop recipes, labour requirements, equipment reliability, energy demand, market pricing, packaging, logistics, and maintenance under real operating conditions.
Only then does scaling become an informed decision.
The Industry Is Already Learning
The vertical-farming story did not end with bankruptcy.
Some companies have changed direction instead.
AeroFarms reported profitability for two consecutive quarters in 2025 after narrowing its operation, focusing on microgreens, reducing organizational complexity, and emphasizing operational performance.
Plenty also emerged from Chapter 11 in May 2025. Rather than returning immediately to its previous strategy, the company concentrated on strawberries and continued developing its Virginia berry operation.
These examples do not prove that every vertical farm can become profitable.
They point toward a more disciplined version of the industry: fewer assumptions, better crop-market fit, closer attention to operating costs, and more emphasis on unit economics.
That is a healthier direction.
Vertical Farming Is Not Dead
The failures of the past few years should not lead to the conclusion that indoor vertical farming has no future.
Research continues to improve LED efficiency, climate control, crop genetics, automation, dynamic lighting, and energy management. Recent studies also show opportunities to reduce electricity costs by shifting lighting and climate loads according to energy prices.
However, better technology needs to solve a business problem.
Vertical farms may make the most sense where controlled production creates enough additional value to justify the cost: high-value crops, sensitive products, specific quality requirements, difficult climates, limited land or water, research and propagation, or markets that reward consistent year-round supply.
Each case needs its own feasibility analysis.
There is no reason to force every crop into the same production system.
What Should the Next Generation of Vertical Farms Do Differently?
The industry has already paid for some expensive lessons.
Future projects should use them.
Before committing major capital, developers need to connect crop performance, market demand, energy, labour, automation, facility design, capital cost, and selling price in one financial model.
The technology should then support that business case—not define it.
A vertical farm that cannot demonstrate a path to positive unit economics at realistic yields and selling prices should not become a larger vertical farm simply because additional funding is available.
Scale should follow validation.
Not the other way around.
Frequently Asked Questions About Vertical Farming Profitability
Failures rarely come from one factor alone. High capital costs, electricity consumption, labour, weak crop margins, rapid expansion, operational complexity, and insufficient market validation can combine to make a facility financially unsustainable.
Yes, but profitability depends heavily on the crop, energy price, production efficiency, selling price, labour model, capital structure, and market. AeroFarms, for example, reported profitability after restructuring around microgreens and improving operations.
Electricity is one of the largest operating expenses, particularly because fully indoor farms depend on artificial lighting and climate control. Studies commonly identify lighting as the dominant energy load.
They can be, but the economics are difficult because indoor growers compete with lower-cost greenhouse and field production. Crop cycle, yield, energy use, market price, automation, and facility efficiency all influence profitability
No. The recent failures demonstrate weaknesses in specific business models rather than proving that controlled indoor production cannot work. The more useful question is whether a particular crop, market, location, and production system can support profitable unit economics.
Before Building a Vertical Farm, Prove the Business
Vertical farming still offers remarkable control over crop production.
But control has a price.
Lights consume electricity. Automation requires maintenance. Buildings require capital. Employees need training. Crops need customers.
None of those problems makes vertical farming impossible.
They simply mean that technology cannot be separated from economics.
At NuLeaf Farms, greenhouse and indoor-farm feasibility begins by connecting crop strategy, market demand, facility design, automation, energy, labour, operating costs, and financial performance before major capital is committed.
The industry has already spent billions learning what happens when scale comes before unit economics.
The next generation of vertical farms should not have to pay for the same lesson twice.
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