According to insiders, the start-up is withdrawing completely from Europe.
(Photo: imago images/IP3press)
Berlin. Frankfurt The massive downsizing at the Berlin greenhouse start-up Infarm continues. The company has now laid off most of its employees in Europe, following the layoff of 500 employees announced in December, according to several people familiar with the matter. The company only employs around 80 people on the continent, it said.
Because of the persistently high energy prices, Infarm no longer sees its future in Europe, but in a region with lower energy costs. In autumn 2022, the company still had 950 employees worldwide. Infarm was initially unavailable for comment.
The company grows foods such as salads, herbs and mushrooms in vertical farms and sells them through trading partners such as Edeka. The plants are grown in large-scale systems and placed in the grow cabinets in the supermarkets shortly before harvest. The business model aims to shorten delivery routes, lower prices and reduce the carbon footprint of food production.
Insider: Cash injection for move
Due to production in halls where light, temperature and humidity are precisely regulated, energy costs are an important factor for Infarm. The company is exploring a focus on a region with low energy prices like the Middle East, some insiders said.
In order to be able to move at all, some existing investors had agreed to make a total of 50 million dollars available for this, it said. The money comes from the Qatar Investment Authority (QIA) and the London-based venture capitalists Atomico and Balderton, among others.
It was initially unclear whether long-standing supporters such as Cherry Ventures or Lightrock also participated. The above investors and existing investors Foodlabs declined to comment.
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It is also unclear which company valuation the cash injection is based on. However, lenders in this round received terms for their investments that put them in a better position than other lenders in the event of a later sale or IPO of the company, people familiar with the matter said.
Venture capitalists around the world are currently reluctant to invest in start-ups that are far from being profitable. According to the data provider Pitchbook, only 1.5 billion euros were invested in young companies in Germany from January to March. In 2022 it was a total of 14.5 billion euros.
The entrepreneurs from Israel founded Infarm in Berlin in 2013.
(Photo: Infarm)
Infarm was the first German so-called foodtech start-up in 2021 to achieve unicorn status and was valued at more than one billion dollars. According to US data provider Crunchbase, the company has raised more than $600 million from investors since it was founded in 2013.
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It has long been known that Infarm has problems. The rising cost of capital makes it difficult for supermarkets to pre-finance the expensive glass cases. Rising energy prices are driving up costs. In addition, the herbs and vegetables offered by Infarm are among the premium products. With inflation, more customers are paying attention to food prices, reducing demand.
Therefore, the company has stopped operating greenhouse centers in Germany and across Europe, it said. As can be seen from an updated blog post, Infarm has recently completely withdrawn from the British, Dutch and Japanese markets. Only one farm in Toronto, Canada, is still in operation, serving the entire North American market.
Infarm: Berlin start-up has never been profitable
For a long time, Infarm focused on strong growth and expanded into many countries, including the USA. However, the Berliners have never been profitable. According to Infarm, in 2020 it had a turnover of 5.2 million euros and made a loss of 48 million euros. According to Handelsblatt information, at the end of 2021 there was an operating result before interest, taxes, depreciation and amortization (Ebitda) of minus 67 million euros on the balance sheet.
Infarm was founded by brothers Erez and Guy Galonska and Osnat Michaeli. The entrepreneurs come from Israel, but lived in Berlin at the time. In addition to the Berlin venture capital investors Cherry Ventures, Foodlabs and the Aenu Fund, which specializes in sustainability, the current shareholders include several international financiers.
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