# AppHarvest (2017 – 2023)

- URL: https://girisimcikafasi.com/en/startup-graveyard/appharvest/
- Sector: Food and drink
- Country: United States
- Total funding: unknown
- Cause of closure: Ran out of cash

## What did it do?

AppHarvest was a food production company practising hydroponic and vertical farming in giant greenhouses in Kentucky, in the Appalachian region. Founded by Jonathan Webb in 2017, it stood out for its promise of green jobs and sustainable production in a former coal region. It operated a total of four greenhouse facilities, in Morehead, Richmond, Somerset and Berea.

## Why did it shut down?

The greenhouses required huge investment while the company posted heavy losses; according to the local press, its loss in 2021 alone was $166 million. In November 2022 the company disclosed substantial doubt about its future. After the share price collapsed, shareholders filed five federal lawsuits alleging that executives had misrepresented the company's state of readiness to investors. An investigation by Grist revealed extreme heat and unsafe working conditions in the greenhouses. The company filed for Chapter 11 on 24 July 2023, and its greenhouses were sold to various buyers.

## The story

In eastern Kentucky, in the Appalachian region where coal mining had declined, an ambitious idea took root in 2017: growing soil-free crops in giant greenhouses and bringing new, green jobs to the area. Jonathan Webb, who founded AppHarvest, told the company's story through this narrative of transformation; its board included names such as Martha Stewart, Jeffrey Ubben and JD Vance.

The idea quickly caught the attention of the media and investors. In 2019 Fast Company wrote that the company would build one of the world's largest sustainable greenhouses in coal country. In 2020 AppHarvest went public by merging with a SPAC called Novus Capital. In 2021 CNN featured the Morehead facility as the largest greenhouse in the US and asked whether it could be the future of farming. Over time the company built up facilities of 60 acres each in Morehead and Richmond, 30 acres in Somerset and 15 acres in Berea.

The numbers, however, did not match the promise. According to the local newspaper, the Lexington Herald-Leader, the company lost $166 million in 2021; in November 2022 it disclosed substantial doubt about its future. After a sharp fall in the share price, shareholders filed five federal lawsuits. The suits alleged that executives had misrepresented the company's state of readiness to investors and regulators while collecting millions of dollars in pay.

The news from inside the greenhouses was not encouraging either. According to an investigation by Grist, workers at times faced temperatures reaching 155 degrees Fahrenheit (around 68 degrees Celsius); contract workers outnumbered local employees and had fewer rights. This picture contradicted the company's promise to contribute to the regional economy. On 24 July 2023 AppHarvest filed for Chapter 11. The Morehead and Richmond greenhouses were sold to long-standing investor Equilibrium Capital, the Somerset facility to Bosch Growers and the Berea facility to Mastronardi.

AppHarvest's story shows that a powerful narrative and celebrity backers cannot rescue the unit economics of a capital-intensive model. The transformation the company promised was scaled up before the greenhouses were proven to run efficiently and profitably; investors and workers alike paid the price.

## Lessons

- In a capital-intensive farming model such as greenhouses, do not move on to new facilities before proving the first one is profitable; every new site widens the gap.
- If you set out with a promise of local jobs, make working conditions a measurable part of that promise; lost trust drives away both workers and public support.
- Going public early through a SPAC puts a company whose production has not yet bedded in under a structure that is examined every quarter; work out the cost of that in advance.

## Sources

- [AppHarvest](https://en.wikipedia.org/wiki/AppHarvest)
- [AppHarvest files for Chapter 11](https://www.wsj.com/articles/appharvest-files-for-chapter-11-928e2ae3)
- [Could the biggest greenhouse in the US be the future of farming?](https://www.cnn.com/2021/10/06/world/appharvest-kentucky-greenhouse-robot-farming-spc-intl-hnk/index.html)
- [AppHarvest to go public via merger with blank-check firm](https://www.reuters.com/article/appharvest-novus-cap-idUSL4N2GQ33L)