Agrify currently sells computer-controlled vertical farming units for cannabis. But that's just the starting point for Agrify. The company is quickly going vertical itself, adding features and acquiring more companies as it builds out a total solution provider for the cannabis industry.
Cannabis is among the most valuable crops in the United States. According to Leafy's Cannabis Harvest Report 2021 (PDF), it's estimated to be worth $6.2 billion -- and that's just in the 11 states where it's legal for adult retail purchase.
Cannabis farmers, just like every other commercial farmer, employ countless systems to increase yields and maximize taste, size and durability. Often these farmers use several platforms from several vendors. As every CTO knows, that's normal in 2021. Agrify wants to change this approach.
Agrify aims to be the grower's only system and sells a platform that offers unparalleled control over the growing process. Thanks to two recent acquisitions, the company will also provide a similar system for the extraction process, allowing its customers to grow, harvest and process cannabis with only one system. And the company doesn't intend to stop here. CEO Raymond Chang tells me he sees Agrify becoming one of the fastest-growing and most vertically integrated solutions in the cannabis space.
Raymond Chang co-founded the company in 2016 and raised $4.5 million over two funding rounds. Instead of seeking additional venture capital, Chang took the startup public in January 2021. The company's stock hit the market at $12.74, and it climbed to an all-time high of $33.06 in August before sliding down to $15 in October. As of writing, the stock is surging, quickly nearing its all-time high.
Despite working within cannabis, the company is listed on the Nasdaq, as Agrify doesn't bundle cannabis with its equipment. It's considered a non-plant-touching, ancillary company to the cannabis industry. This is important. The company sidesteps all the regulatory hurdles facing plant-touching cannabis companies, including the restrictive banking and fundraising laws.
Chang doesn't regret taking Agrify public. There are pros and cons, he said, noting the company needs to be more disciplined and transparent, but the IPO resulted in a windfall of cash.
"We were able to acquire these two really awesome extraction companies [Precision Extraction Solutions and Cascade Sciences]," Chang said, "partially because we're public. We're able to do so in cash and with [company stock] shares. The internal goal is to fill two thirds of the growth organically, but a third will probably come from acquisitions. So we're going to continue to consolidate this industry. And having that public currency is a huge plus."
The Agrify growing platform starts with genetics. Growers pick from a list of pre-selected strains that work with the Agrify system. Since the system is working with a known quantity, the platform can maximize the yield by controlling several vital variables, including lighting, watering and humidity. There's no more guessing. Select the genetics, and let Agrify's system take it from seed to store.
The company's high-tech vertical farming units (VFUs) are key to the operation. These growing racks house and grow high-value plants like cannabis, hemp and other herbs. The units stack, allowing cultivators to grow two sets of plants with the footprint of one. Gangplanks link the units.
"I see consistent consistency issues around cultivation, and it's even worse around cannabis 2.0 products," Chang said.
Agrify sees its customers looking at two options: Either send their raw harvest to a processor or process it themselves. Naturally, Agrify wants growers to opt for the latter.
Recently, the company spent $50 million purchasing Precision Extraction Solutions and Cascade Sciences, two leading cannabis and hemp extraction and processing companies. According to Agrify, these two companies previously worked with 30 multi-state operators and over 1,000 cannabis and hemp customers. Because of this transaction, Agrify gains physical presence in seven states.
"We have a couple more companies we need to acquire," Chang said. "When you look at the customers, it's all about how we can help them increase their return on investments. It's all about better space utilization and pushing for higher yield, pushing for lower costs and just more automation."