The Other Side of the Urban Indoor Farming Story
By Natnael Teklu - Undergraduate Research Assistant/Intern at C.U.R.I.I, University of the District of Columbia
If you've followed indoor agriculture startups over the past couple of years, you've probably noticed a pattern: the same headlines that once celebrated the businesses that adopted vertical farming technologies as the future of food are now chronicling its collapse. Multiple companies backed by nearly a billion dollars from investors. Bowery Farming, once valued above $2 billion, slowly dissolved a lot of its products. AeroFarms, one of the industry's earliest pioneers, went through bankruptcy once and is still working through the fallout of closing a large flagship facility. By some counts, at least a dozen well-funded controlled environment agriculture (CEA) companies failed in 2025 alone.
It would be easy to read those headlines as a verdict on the whole idea of growing food indoors in cities. I don't think that's the right takeaway, but I also think it's worth being honest about why so many of these companies struggled because the reasons matter for anyone like us actually doing this work.
It wasn’t always a technology problem
Here's the part that surprises people: the urban indoor farms that failed weren't failing because the science didn't work. Hydroponics, LED horticultural lighting, and climate-controlled growing all function somewhat as advertised. There are multiple factors at play in making sure they operate well. For the most part however, plants grow and the yields are real. The problem was mostly underneath the technology, namely in the economics and the business decisions built around it.
Growing indoors means replacing two things that outdoor farms get for free: sunlight and a stable climate. Indoors, both of those become an electric bill. Continuous LED lighting and climate control are expensive and that cost has to be covered either by charging a premium for the crop or by being super efficient about how much you're spending to grow it. One of the projects we are working on here at the UDC for example is aimed at tackling the lighting issue. Our project is focused on exploring Dynamic lighting methods to reduce the power consumption of indoor LED grow lights while trying to see if the yield and nutritional contents are the same as traditionally grown ones. Now, aside from expenses in growing, the other issue is also poor crop choices for the available space. A lot of the companies that collapsed were growing commodity crops like packaged lettuce, which compete directly on price with conventional field-grown produce. When your operating costs are structurally higher than a well known lettuce farm's produce and your product sits on the same shelf, the math rarely works.
On top of all that, another pattern that shows up in nearly every failed company's story is building massive flagship facilities and using expensive automation tools before assessing and securing the demand to fill them. Several of these companies adopt a ‘technology companies first and farming companies second’ approach and are more focused on proving what the engineering could do than on proving someone would reliably buy what it grew. Combine that with venture capital that expects software-style growth curves on a business with farm-style margins and multi-year payback periods, you get exactly what happened: a lot of impressive facilities that ran out of runway.
Even when the technology works, adoption is hard
There's another story here that gets less attention than the bankruptcies. The agtech tools that do work well often struggle to actually get used.
Ask farmers and operators why they haven't adopted a promising new system and the answers are not always "it doesn't work." They're things like: we don't have time to learn it, we don't have the training to run it properly, it doesn't talk to the other systems we already use, or we're not confident enough in it to bet this season's crop on it. Industry surveys find that most times, lack of training and technical skill gaps rank alongside cost as top barriers to adoption. That's also true for large well-resourced operations, not just small ones. A recent panel of agtech leaders summed it up as adoption not always fundamentally being a technology problem but a systems problem. One of interoperability and whether a new tool actually fits into how people already work.
That's a hard pill for any company building agtech to swallow. It's not enough to build something that works in a demo or a pilot facility. It has to be something a grower can actually run day after day without a PhD in horticultural engineering or a six-month training program standing between them and a harvest.
Why this matters for us, not against us
I’m sharing this not to be pessimistic about indoor farming. I don’t think the reports intend to show that either. I do think the companies and cities that get this right long-term will be the ones who took the failures seriously instead of ignoring them. From research, experience as a grower and a developer in the software space, there are few things I like to look at to make everything previously mentioned works as intended:
Match the crop to the economics - The operators that have held up best haven't tried to out-compete field agriculture on commodity crops. They've focused on things that benefit from being grown close to the customer, fast, or with more control. Things like herbs, microgreens, specialty greens — where freshness, consistency, and a shorter supply chain are the value proposition.
Grow into the demand and not ahead of it - Building relationships with the urban food suppliers, restaurants, grocers and neighbors who will actually use or buy what we grow matters more than building capacity for a future we're hoping shows up.
Keep the technology usable - The best tool is the one that gets used correctly every single day, not the most sophisticated one sitting half-configured in a corner. Simplicity and reliability are essential design goals that we should strive for.
Stay close to the work - A lot of what went wrong in this industry happened at a distance. Investors, engineers, and headquarters are far removed from the day-to-day reality of running a farm. Being embedded in the community we grow for is what closes that kind of knowledge gap.
Indoor and urban agriculture is still a useful answer to real problems: food deserts, long and fragile supply chains (see blog on Cyclospora outbreaks), a shrinking amount of farmable land near where people actually live. None of that should change because a handful of well-funded companies scaled too fast or built for a market that wasn't there yet. What should change is adopting systems that help make sure that the industry has a much clearer picture of what not to do. That's a lesson worth learning from rather than a reason to look away.
All things considered, I’m an advocate for building systems that slowly stay standing and offer fresh, safe and sustainably grown produce rather than chase a 10x exit for an investor. That's the change we are all hoping to make here in DC.