In the United States, today’s funding landscape for new greenhouse projects is heavily weighted toward established controlled-environment agriculture (CEA) operators. Ryan Douglas, horticulture business expert and founder of Ryan Douglas Cultivation, shares that the advantages of scale, intensifying competition, and a shifting distribution network have made it increasingly difficult for small growers to gain traction.
To better understand current financing challenges and where small operators may still find opportunities, he spoke with Dave Chen, CEO of Equilibrium Capital. “The firm has raised approximately $1.4 billion for CEA investments, including funding for Little Leaf, Revol Greens, and Perfection Fresh,” he notes.
In their conversation, Dave offered a candid assessment of why today’s capital environment is so difficult and what realistic options remain for smaller growers.
Why funding favors big growers
When discussing the financing of new greenhouse projects, Dave was direct. “You’re going to have to raise $50–$60 million, and you better know what you’re doing because the amateurs and the tourists are gone.”
According to him, securing this level of capital has become increasingly difficult. “Almost everybody who’s been hit to finance a startup facility with a startup company has either been tapped, has had a disaster, or has heard his friend has had a disaster. There’s not a whole lot of people out there with an appetite right now, and there are also a lot of facilities for sale.”
This tightening of investment has strengthened the position of established operators, particularly in mature categories. Dave explains that in crops such as tomatoes and cucumbers, it’s a very mature market segment. Billion-dollar revenue players dominate it. “They’re also shopping distressed deals, so they’re adding to their facilities base.”
The leafy greens sector has become similarly challenging. Dave notes that it has been an extraordinarily hard field to break through with only five or six players at scale. “These operators already have functioning facilities, established customer bases, and steady distribution.” Competing with them requires what Dave refers to as “the holy trilogy”: an operator who understands greenhouse economics and retail strategy, a grower who can deliver consistent quality, and a salesperson capable of moving product. He added that smaller facilities struggle to justify hiring all three roles because “each one is going to cost you $200,000.”
Why small growers struggle to compete
Dave repeatedly emphasized size as the defining constraint for new CEA entrants. “This is not a place for small growers. There’s no such thing as a one-acre CEA grower.”
He explained that a single acre doesn’t produce enough volume to meet the needs of most buyers. Even small grocery chains, he said, “are going to need more than one acre. And you wake up one day, and now it’s five, now it’s ten.” With construction costs estimated at $1–2 million per acre, scaling quickly becomes financially prohibitive.
For operators unable to scale, he suggests that the only viable path may be highly specialized production. “You’d better find yourself one hell of a niche,” he advised, citing crops such as Madagascar vanilla, wasabi, and saffron as examples with potential, though he cautioned that it remains too early to know whether these products can support sustainable business models for small CEA farms.
He also pointed to shifting distribution requirements as a major obstacle. Dave recalls that in 2016, numerous small family-run greenhouse operations could sell directly to large retailers. That environment, he notes, has changed significantly. “Today, Walmart doesn’t want to deal with you,” he said. “They want to deal with someone who can offer them the peppers, the cucumbers, the tomatoes, 365 days a year.”
Collaboration as a path forward for small growers
With capital limited and scale increasingly critical, he highlighted collaboration as one of the few viable options for smaller growers seeking access to larger markets. “The only way, if you’re a small grower, that you can succeed is a business model, which not a lot of growers are successful at, called the co-op,” he explains. In this model, processing, packing, and brand development are centralized among grower-members.
Dave noted that many well-known agricultural organizations operate as cooperatives, including Sunkist, Blue Diamond, and Tillamook Creamery. However, he emphasized that cooperative success depends on more than shared infrastructure. “The only way a network works is if you can solve the marketing and sales problem,” he said, adding that brand identity, pricing, promotion, and retail strategy all play essential roles.
He also emphasized that effective collaboration necessitates growers adopting a collective identity. “You subsume your ego and say the collective is bigger and better,” he said, an approach that can be difficult in an industry long associated with independence.
A shifting path for small CEA growers
For small CEA operators, prospects may depend less on individual access to funding and more on partnerships, shared services, and specialization. As the funding environment increasingly rewards scale, collaborative models and niche production may offer the clearest path for smaller growers seeking to remain competitive.
For more information:
Ryan Douglas
[email protected]
Equilibrium
eq-cap.com/contact
