Vertical farms have drawn significant investment, and significant scrutiny, over the past several years. Pittsburgh-based Fifth Season closed operations in 2022 after raising $35 million from venture investors, and InFarm, once Europe’s largest vertical farming company, laid off half its staff the same year. Those early signs proved to be the start of a much larger trend: at least 21 agtech-related companies, concentrated in vertical farming, insect farming, and alternative protein, filed for bankruptcy or liquidation in 2025 alone, tied to more than $2.8 billion in disclosed venture capital. That list includes Plenty Unlimited, which had raised $940 million, and Bowery Farming, which had raised $700 million before shutting down in late 2024.
For a few years, it looked like investment in agricultural technology couldn’t be stopped: $51.7 billion was invested in agrifood technologies in 2021 alone, up 85% from the previous year. Total agrifoodtech funding has since fallen roughly 70% from that peak.
So, Why Are Vertical Farms Struggling?
Some of the initial pressure came from macro conditions: inflation, higher material costs, and supply chain slowdowns squeezed margins across the industry starting in 2022. But the deeper pattern across the failures since then has been structural. Many vertical farm operators built large, capital-intensive facilities before securing buyers or proving unit economics, then depended on continued fundraising to cover the gap. When venture capital pulled back sector-wide, companies that hadn’t reached profitability had no way to bridge the shortfall.
Booms and busts aren’t unusual for new industries. When technology advances quickly, the market often reaches a saturation point where only the most disciplined or best-capitalized businesses survive. Vertical farming remains both competitive and expensive to get right, and most startups in any capital-intensive sector don’t last more than a few years.
With all the volatility in this industry, when does vertical farming make sense, and when doesn’t it? Let’s look at the pros and cons of vertical farms, and when alternatives, such as greenhouses, might make a lot more “cents.”
What is a Vertical Farm?
Typically, vertical farms are indoor grow rooms, powered by artificial lighting, with rows of plants stacked vertically. Vertical farms are usually located in densely populated areas, where shorter transportation to consumers and higher demand can help offset some of the costs. Indoor vertical farms also offer the advantage of less water usage and higher yields per square foot. Some other advantages of this farming technology include:
- Fresher produce
- Less labor, assuming more automation
- More uniform product
- Less fertilizer
A vertical farm might make sense if you’re growing a high-value crop that can be grown hydroponically and you’re limited to a dense population area, but it can still be a risky business investment without access to cheap, renewable energy.
What are the Disadvantages of Vertical Farms?
The biggest disadvantage of vertical farms is cost: startup and investment costs, operating costs, and equipment costs, some of which is novel technology that carries a higher investment risk. Here’s a closer look at what drives those costs, along with some of the other downsides that can come with a vertical farm.
Higher Capex
Vertical farming can cost 2,200 to 2,600 euros per square meter of cultivation bed space, 6 to 10 times more than a high-tech greenhouse, according to Henry Gordon-Smith, CEO of agricultural advisory company Agritecture. This can be prohibitively expensive for many startups, especially given a potentially long period for return, with some estimates suggesting up to 10 years.
More equipment is also required in a vertical farm, including artificial grow lights. Lights aren’t cheap, and they need to be replaced when they eventually break down. They also produce extra heat, which may need to be offset with increased HVACD capacity, an added expense that comes with its own ongoing maintenance and eventual replacement.
Indoor vertical farms also require more high-tech systems in general, like the hydroponic system itself and often additional control systems. These are expensive to buy and install, and they carry the risk of breaking down and needing replacement. If a vertical farm depends on a particular grow system and that vendor raises prices or goes out of business, it can strain the operation to the point of shutting down.
Higher OpEx and More Energy
Lighting
The cost to run grow lights, even efficient LEDs, is significant. Electricity prices are also historically volatile: US consumer electricity prices jumped 14.3% in 2022, and EU household electricity prices rose 22% in the first quarter of that year alone, driven by that year’s energy crisis. Sharp increases like these can extend payback periods significantly and compress margins. In an indoor grow facility, lights might run 12 to 18 hours per day and account for well over half of the energy bill. The more vertical “stacking” a grow entails, the more lights are needed and the higher the bills.
HVACD
Vertical farms typically exchange little air with the outside, since they’re fully enclosed, which increases cooling and dehumidification needs. Increasing crop volume increases the volume of heat and humidity, and therefore the need for even more cooling and dehumidification, which drives up electricity costs further.
Funding risk
Many vertical farm technologies are still new, and few have existed for more than a decade. That funding risk was already a real concern when this was written in 2023, and it has since played out at scale: the vertical farming bankruptcies of 2024 and 2025 show what happens when novel, capital-intensive technology depends on continued venture funding rather than profitability. This has pushed many investors toward more established, lower-risk agricultural investments, including greenhouse-based growing.
When Might a Vertical Farm Make Sense?
An indoor vertical farm might make sense if the following conditions exist:
- Efficient lights are used (and smartly controlled)
- High-value crops are produced (ideally with lower lighting requirements)
- The grow location is in a dense urban area with an accessible, populous market
- Cheap renewable energy sources are available
- There’s a credible path to profitability that doesn’t depend on continued outside investment
Why Might a Greenhouse Be a Better Option?
While greenhouses may also use artificial lighting, cooling, and dehumidification, the need for these is greatly reduced by the ability to use natural sunlight and venting.
Compared to a vertical farm, greenhouses typically have a lower startup cost, carry less risk (less technology to break, and more ability to pivot and adapt), are cheaper to operate, can grow a wider variety of crops, and are generally more energy-efficient.
Sunlight is free, so a greenhouse’s primary light source carries no ongoing fuel cost. Artificial lighting doesn’t have that advantage: even efficient LED systems convert only a fraction of their electricity into usable light for plants, with the rest lost as heat
It’s true that a vertical farm offers a high degree of climate control, as well as increased water savings. However, investing in a greenhouse, especially one with a tight building envelope designed for efficiency and sun harvesting, like Ceres’ sealed SunChamber™, carries lower capital and operating risk in most scenarios.
Hybrid Vertical Greenhouse
Another option is to bring some of the advantages of a vertical farm into a greenhouse facility. Stacking vertically can work well inside a greenhouse for certain applications.
Growing smaller products, such as microgreens, vertically can be done inside a greenhouse, reducing electricity and water use in the process. Layering trays for seeds and starts is another way to save space in the greenhouse while getting crops ready for planting outside.
The reason you might not want to go “full vertical” inside a greenhouse is, again, the amount of lighting it would require. With greenhouses, you can typically spread further horizontally instead, taking advantage of free light from the sun.
Have more questions? Contact us to learn more about our energy-efficient greenhouse systems.
