S7E90: Alexander Kappes / Greener Crop - From Groupon to Green Thumbs: Planting the Seeds of Vertical Farming in Dubai

[0:00:00] Alexander Kappes: It?

[0:00:02] Harry Duran: I probably should ask you that. Last name is Caps or Kappes?

[0:00:06] Alexander Kappes: Kappes.

[0:00:07] Harry Duran: Okay. Alexander Kappes, CEO of Greener Crop. Thank you so much for joining me on the Vertical farming podcast.

[0:00:15] Alexander Kappes: Hey, Harry, it's great to be here.

[0:00:18] Harry Duran: So, for the benefit of listener, where are you calling in from?

[0:00:22] Alexander Kappes: So, I'm currently in Dubai, did the company up here two and a half years ago. And so I spend most of my time between the US.

[0:00:30] Harry Duran: And Dubai and giving the listener a little theater of the mind. You've got some photographs behind you of what looks to be someone on a horse. So are those your photos?

[0:00:45] Alexander Kappes: Yeah, so those are pictures of my other passion in agriculture, which is beef cattle, livestock production. That's a bit of a family history, but fully focused on horticulture and vertical farming and greenhouse agriculture.

[0:01:03] Harry Duran: Now we connected briefly in Dubai, and I was out there with the cultivated team. Henry Gordon from Agriculture was out there and a lot of folks there was some past guests, which was nice to see. So this was the aggrav conference. Given that you're now stationed in Dubai, is that something that you've been to.

[0:01:24] Alexander Kappes: On a regular basis actually, last year? Well, I mean, when we met, that was in November of 2022. So that was the second time we attended. It was the first time we actually exhibited there. I think it's definitely one of the better conferences in the Middle East, particularly in Dubai. There's a couple of other ones that have popped up, but those tend to be a little bit too focused. This was, I think, fairly well diversified session that was attended both by startups as well as the more established manufacturers, technology providers and so on. So I think that's actually one of the better conferences for people that are interested in exploring those conferences and attending those in the Middle East.

[0:02:08] Harry Duran: So just to rewind the clock a little bit and give the listeners some context into how you actually ended up there, can you talk a little bit about the prec life you had and how that took you and your travels out there? Because I think that's an interesting story.

[0:02:25] Alexander Kappes: Yeah, for sure. So after university I joined Management Consulting and did that for a year and hated every second of it, and then was fortunate to be approached by Rocket Internet, which at the time was a really big deal in the Internet space.

[0:02:43] Harry Duran: What year is this? What year would this be?

[0:02:46] Alexander Kappes: This is 2011.

[0:02:48] Harry Duran: Yeah.

[0:02:50] Alexander Kappes: And so I joined one of their portfolio companies at the time, which was Groupon, and was very lucky to have a very quick career rise at Groupon and went from joining as a trainee to being put in charge of emerging markets as a VP within a year. And part of the countries that were under my management as that VP of emerging markets was the UAE. And so I started spending more time in the UAE and we kind of saw the huge potential in the market and in the Middle East. And I eventually asked to be transferred full time to become the CEO of Groupon Middle East. And I did that for five years while I was a group on a total for five years and then moved on, launched the premium food delivery segment in the Middle East. So it was the Rocket and company called feudora that we launched and scaled. Well, we launched it in Dubai within just five weeks time. It was pretty funny. When I went to my kind of onboarding meeting, they told me that Delivery, which is the biggest competitor in Europe and the Middle East or in Asia, was going to launch in six weeks. And so we had to beat them. And I was like, cool. So what do we have? What resources do we have in Dubai? And they're like, what do you mean? I'm like, do we have a trade license that we can operate under?

[0:04:16] Alexander Kappes: They're like, no. Do we have a bank account that we can use now? Do we have a launch team going around? They're like, you're the launch team. Sweet.

[0:04:24] Harry Duran: Wow.

[0:04:25] Alexander Kappes: So we actually managed to go live in five weeks time, and we had something like 60 restaurants on board in that time. So that was a really wild ride. And then afterwards, I worked directly for the first seven years I worked for a Rocket Internet entity, and then I worked directly for Rocket for two more years before I joined one of the sovereign wealth funds out here that belongs to the ruler of Dubai. And that's where I actually got my introduction into vertical farming. Okay, so we were looking at a couple of different investments. One of the companies we were looking at was Aero Farms, and then that's where we kind of really started doing a due diligence of the market, proper market research to understanding how big the opportunity for vertical farming, for hydroponic farming in the region was. That prompted the switch eventually into launching Greener Crop.

[0:05:18] Harry Duran: Interesting tie in to Groupon is I started my podcasting journey in 2014 with a show called Podcast Junkies, which I still do. That's a podcast where I interview other podcast, but it's given me a nice world, an introduction into networking and meeting other podcasters and also people who are doing interesting things in the podcasting space. So a couple of years ago, someone from Andrew Mason's new venture, Descript, reached out to me because he had started this company, which is now Big. It's a great resource for podcast. It's essentially you can edit audio by editing text, which is fascinating because you delete the word and it deletes the snippet of audio. And they've grown ever since. Though I was able to have two conversations. He's come on twice for this show. So we have had a couple of conversations with Andrew. He's an interesting guy. And I'm wondering if you have any interesting stories from your time at Groupon, what that experience is like, because for folks that remember, Groupon was everywhere and across the globe, and almost everyone you spoke to knew what it was and was using the feature all the time. So it was really pervasive. And I imagine it must have been a roller coaster ride for you.

[0:06:34] Alexander Kappes: Yeah, it was insane. When I joined, I think we were in something like twelve countries, and in less than a year later, we were in 46 countries. And so the model scaled extremely quickly, and it was the usual play that especially Rocket Internet at the time had perfected, which was we have a strong HQ that has all of the central functions like tech development, digital marketing, finance, HR, and so on. And so whenever you expand into your country, that is literally a sales and operations team that goes and hits the ground running. And the premise was phenomenal. And if we think back, what existed or what didn't exist much more at the time, groupon always called itself the Merchant Commerce Operating System, and the idea was that this was a great way for you to do customer acquisition in a way that wasn't possible before most merchants. Most businesses at the time weren't familiar enough with social media marketing at the time. And so Groupon was a really easy way for you to start going into the digital space with marketing. It's a shame that they didn't surf that weight any further and take advantage of the reach that they had. In my opinion, they should have been the first ones to launch food delivery, for example, both as a marketplace concept and as the delivery concept. And so there's so many opportunities where other companies have surpassed them significantly and have grown much, much bigger, that we're all at Groupon's feet. Andrew Mason was obviously the founder. The guy who came up with the idea and what he contributed to the culture was really great. This wasn't his second or third startup, and he wasn't a seasoned entrepreneur. He was a young guy, smart guy, and there's this guy, but he kind of understood that.

[0:08:33] Alexander Kappes: And something I learned from him, I feel, is in the startup scene, people don't join you for the money. They hope that the equity might be worth something someday, but they're not joining you for any short term monetary gain. They're not joining you for the relaxed working hours. They're not joining you for the perks and the benefits. People think that like Google and massage rooms and sushi buffets and so on. I've not worked for a single startup that's had any of those features. But for example, what Andrew did, andrew had a hard time finding good people for customer service, and he knew that Chicago had a great stand up comedy scene and that most of those stand up comedians had nothing to do during the day. So he went out there and he started recruiting those guys and he brought them on board to be partner management and customer service. And so here we are talking to someone who's a professional comedian or aspiring professional comedian. So whatever challenges you kind of face, that was a great way to take the edge off, relieve some of the tension in those conversations and so on. There was a lot of really cool features. There was a scandal at the time of him, a video surface of him doing yoga in his underwear. I remember. That's pretty funny. The funny thing is, I feel like if you think about all the crazy stuff that's happened since then, I don't think that would raise any iPad.

[0:09:51] Harry Duran: It wouldn't even register. That's interesting.

[0:09:56] Alexander Kappes: Andrew is a great guy.

[0:09:58] Harry Duran: So talk to me a little bit about your mindset, because obviously you had the opportunity to go out there. Some people would treat that as just something temporary, because I've moved locations in my corporate life previously and it was temporary. And then I'd end up back home. I was living in New York at the time. So what was it about Dubai, UAE, that over the years slowly started to attract you, where you would start to feel comfortable calling it home?

[0:10:28] Alexander Kappes: I think Dubai is a great place to call home. There's a high degree of safety. It's phenomenal infrastructure. There's a lot of business opportunities. The weather is it's always sunny and blue skies now. It gets way too hot during the summer. But generally I prefer this over rain and snowstorms, blizzards and so on. So the other thing is that Dubai has this incredible mentality and this incredible attitude. You've got a population that's incredibly young. I'd say definitely over 50% of the population under 18. And it's a country that's grown incredibly quickly. So people are very willing to adopt new technology and they're very willing to try out new things. And so if we look at adoption rates for all types of tech services, the Middle East is usually incredibly high. And there's a reason why Amazon, of the countries that they're in, which isn't that many, I think it's about 30 countries, but they're in two or three Middle Eastern countries because they see what adoption rates are. And this has turned into a battleground for ride hailing, for micromobility, for food delivery, for ecommerce and so on for a good reason.

[0:11:41] Alexander Kappes: And now it's the new frontier for vertical farming and hydroponic farming. And I think one of the big reasons is that people embrace change. People know that for a country like Dubai to develop and turn into what it is now, nobody in the world doesn't know about Dubai. Everyone recognizes Borslarov. Everyone will recognize Borsch Khalifa. The palm is literally visible from space. What they've achieved is incredible. And people know that this was only attainable because of the risk appetite that people have and because people are willing to embrace change. And so that's definitely what attracted me to Dubai. Plus, you just saw the massive opportunity where there was no tech. Most businesses didn't have websites ten years ago, and they were just so far behind, and I think they've surpassed a lot of European countries and a lot of countries in Asia within the last ten years. And so that was what attracted me at first, and definitely one of the main reasons why I'm still here. And like I said, hydroponic farming is the new frontier here. This is a country that and in the neighboring countries, the same goes for the neighboring countries. They depend on over 90% of the fruits and vegetables to be imported.

[0:12:57] Alexander Kappes: That's an $8 billion bill that these countries have to stem. And so that's the size of the opportunity here. Land is affordable, sunshine is abundant, labor is cheap, and Dubai is within I think the statistic is that Dubai is within an eight hour flight of half the world's population. So it really lends itself to being a huge export market once we get to that scale. So, yeah, opportunities, I think, is the summary. They answered your question and how often.

[0:13:29] Harry Duran: Do you make it back to States?

[0:13:31] Alexander Kappes: I try and come every two months. We started the business here and we then start looking at, okay, with our experience, with our knowledge, with our network in the US. Where does it apply? And obviously I think the US Is a leading market when it comes to hydroponic farming, vertical farming. Most of the big companies started there and we actually decided to join an accelerator program called Generator that's based in Champaign, Illinois. That's a focus on active. And we spent twelve weeks working with those guys and trying to understand where would our market fit be in the US. And what we came up with was that we believe there's a significant opportunity within conventional farming to look at how a hydroponic farm can be integrated in conventional agriculture and how farmers and conventional producers can benefit from that and where that fits in. And so with that, in the back of our mind, we started looking at how can we expand into the US. We're currently in talks over setting up farms in Oklahoma, Illinois, Idaho, New York and Texas. And so yeah, I think I'm going to have to start spending a lot.

[0:14:47] Harry Duran: More time back where in New York?

[0:14:51] Alexander Kappes: Outside of New York, in a town called Jensen.

[0:14:57] Harry Duran: Okay. Yeah, I grew up in New York. I grew up in Yonkers, New York. Just as Western county people forget how big New York actually is, they just.

[0:15:07] Alexander Kappes: Think New York City. Exactly.

[0:15:09] Harry Duran: Yeah. So interesting. Thanks for giving us that context. So I'm curious about your mindset. You're working with Aero Farms. You've obviously had experience in the region, you've led a couple of companies, and so you've done the homework and you understand logistically what it takes to be successful. What was it about in CEA that pulled you into actually starting your own company?

[0:15:43] Alexander Kappes: So there were two things. There was a personal reason, which was I spent ten years in tech building other people's startups, and I felt I was quite good at that. But at the same time, when you're involved and you're in the trenches, you will see a lot of the mistakes that happen, a lot of the reasons why companies fail. And so I feel like that was something that I had in the back of my mind that held me back a little bit. And I didn't have a venture in mind that I was passionate enough about to kind of overcome those concerns and then COVID hit and suddenly opportunities were very limited. I was at the Sovereign Wealth Fund. I wasn't happy there. I was in charge of tech investments. There was no investments to be made during that time. There was investment free. And so then there was my lifelong passion for agriculture. My family has been involved in agriculture for several generations. This was always something that I knew I wanted to eventually retire into and hopefully sooner than later. And so I kind of wanted to find a way to combine my knowledge and tech, my experience in tech and launching businesses and scaling businesses with my passion for agriculture. And so that was always in the back of my mind.

[0:17:02] Alexander Kappes: And then after the research we did into Aero Farms, that's when I kind of realized that there was this gap that existed that is rare to find. Right. That opportunity, which was we have eight to $9 billion worth of food or fruit and vegetable imports in the GCC. We have technology that is capable of overcoming that deficiency. Right. This is technology that's proven. This is technology that's made the Netherlands the second largest food exporter behind the US. A country that is don't even know how much bigger. So much bigger. Right. And it's not being deployed. It's not being deployed at a meaningful enough scale. And so that's when we started looking into, okay, what are the reasons why it's not being deployed on a meaningful scale? And so if we look specifically at the Middle East and the Gulf, the Arabian Gulf, which consists of Saudi, Oman, the UAE, Bahrain and Qatar, and I think Kuwait counts as well, you've got a population that does not have a strong background in farming. Right.

[0:18:11] Alexander Kappes: This is not arable land. It's always been massive water scarcity. So you don't have farmers who are going to innovate and pioneer this new technology. You have very little representation of those companies here. You have significant barriers to entry in terms of there's a knowledge gap. People don't know. People don't have suppliers here. People don't know where to source the growing supplies. Our industry is still very fragmented. Our industry is still very intransparent. People don't know. First of all, the first question anyone will ask is what's the difference between indoor vertical farm or greenhouse? Do I want deep water culture? Do I want Nfts? Do I want vertical stacks?

[0:18:53] Alexander Kappes: Do I need lights? All those questions are questions that they're not going to get a definitive answer for if they search right. And so if you have all of those obstacles and all those questions they need to answer, you don't find answers for and all those challenges they need to overcome. You're going to look at the opportunity cost and you're going to see, I'm going to invest in something else. Gold, crypto, stocks, whatever it is. And we said, okay, that's what we want to overcome. And the way to overcome that is by offering a hydroponic farm management service that is comprehensive and allows basically us to support our clients from conception stage. Understanding what farming technology would be best suited for your ambitions, your budget, your goals. Whether it's a vertical integration into a business or whether it's a standalone investment. We connect them to the manufacturers we work with, we assist with the setup process and then we support them with the day to day operation. And so that's what we started with.

[0:19:50] Harry Duran: Yeah. When you lay it out like that, it's almost this idea of first mover status. And it's almost like the people there don't know what questions to ask because we take it for granted here in the States of having just a rich history in agriculture and in a lot of places in the world. And to your point, that's not something that was considered as a way of life and not something that people there's nothing generational when you look back and people saying, like, oh, my grandfather had a farm similar to your story, and I think you have that perspective and you can see the opportunity there. So is that really where you're seeing the most advantage because of your experience and because of where we are in the agtech cycle, that this is really a unique opportunity to not only educate folks in the space, but also be there and obviously be on the ground to show them what's possible. It's almost like creating a new industry there.

[0:20:52] Alexander Kappes: Yeah, absolutely. I'm not sure how much credit I can take for it because I'm not the first one to come up with it. COVID played a big part in amplifying the need for food security.

[0:21:03] Harry Duran: Sure, right.

[0:21:03] Alexander Kappes: I mean, it was only a week here where we suddenly had a couple of empty shelves. But the shelves that were empty were lettuces. They were vegetables. They were a lot of the crops that were being imported from Italy, from the Netherlands and so on. And those were the first shelves that were empty. And that was a shock because that had never happened before. But of course, the UAE leadership responded really well. We never had empty shelves again, but I think everyone realized how vulnerable these countries are. And so there was an immediate shift in government prioritization in public policy and subsidies that were being granted. There was a very quick shift in the regulations where they, for the first time, allowed foreigners to own farming businesses. Previously, that wasn't possible. They couldn't be the majority owner of a farming business. They very quickly shifted that and changed that to make sure that foreigners who make up 80% of the UAE's population would be able to set up their own farms. And so I think we were definitely there at the right time. And yeah, you mentioned having a population that has experience in growing and that has history in growing.

[0:22:18] Alexander Kappes: If you don't have that, you don't even have university courses here. Right. It's very rare that universities teach agriculture or horticulture. So you're not even having any homegrown talent being developed that may look into, okay, how do we grow further, how do we innovate? And so on. So, yeah, without outside input, nothing would be happening here. So we're definitely here in the right place at the right time.

[0:22:48] Harry Duran: Talk a little bit about the model for folks that are not familiar with Greener Corp. What are the offerings and who's the typical client that you're serving?

[0:23:01] Alexander Kappes: Yeah, so, Greenercorp, the idea was that we wanted to enable the deployment of hydroponic farms and that it didn't matter what experience you have. Right. And so for us, who do you speak to first? And that was a matter of who can you reach, who can you reach easily and who is invested, or who thinks long term enough and who's willing to invest in something that's going to take several years to recover its investment, who sees the value of contributing towards food security. And so we initially said, okay, this would be difficult as a pitch to individuals. So we started targeting corporations, and we started going to food manufacturers, we started going to real estate developers who were losing their tenants in commercial buildings rapidly. We went to hotels who had always been struggling to provide the quality of produce that they wanted to year round. It can't be grown locally. There's no such thing as seasonal produce here. Everything has to be imported. So it doesn't matter what season it is in South America or the Netherlands or Australia. Right, sure. But they were interested in the farm to table concept. And so, obviously, those guys are all on LinkedIn. Very easy for my sales team to approach them, for me to approach them.

[0:24:25] Alexander Kappes: So that was our first target group. And so the first farm we actually set up was for a client who had already invested in agriculture. Okay, they're in the pharma business, but they were investing in agriculture. That was our first client. The second client was a real estate development company in Qatar. The third client were ESG investors. The fourth client was a food manufacturer. And so initially our clients were all corporations. And now we're getting to the point where we do have individual investors who are investing and setting up their own farms. And in the States, the people we are talking to are conventional farmers, so row crop farmers who are now looking at how can they benefit from this. And so the service model is that we offer farm management and we can be as involved as our client wants us to be. And so we have clients that are completely hands off and we handle absolutely everything. So between helping them select the best manufacturer for the farm they have in mind and that we recommend to supervising the setup and doing the handover and then developing the crop strategy for them. Where do we see demand? What prices are there in the market?

[0:25:43] Alexander Kappes: How are we forecasting certain price changes to say that over the next nine months, we believe this is what's going to bring you closest to recovering the cost of investment, right? And we look at these farms as an investment. And so one of the key metrics we analyze for all of our clients is our projected capex recovery period. And so that's something we work towards. And I'd love to tell you a bit more about how we develop our crop strategies, but the next step is then, okay, once the crop strategy is developed, we start sourcing all the growing supplies. We deploy our team to operate the farm. And so it's our farm manager and our farm hands operating that farm day in, day out. Once the crops are harvested, we handle the post harvest procedures and we take the crops to the market and we sell them to the market. So that's the full comprehensive farm management solution. And we can scale that back as per the client's wishes and as per the client's expertise. So if the client says, listen, I have my own farm hands, I'd like to choose my farm hands, absolutely, we can do that. If the client says, I'd like you to hand over to a farm manager that you train for me, we can do that too. If the client wants remote farm management and they say, listen, I'd like you guys to be available to me two or three days a week, but on calls, through sensors, through the remote tracking that we do. But I'd like you guys to handle the growing supplies and the procurement and the negotiation of those things and crop strategy, then we can do that too. So we're pretty flexible with how we structure that.

[0:27:10] Alexander Kappes: We are trying to move towards a less boots on the ground and more remote farm management through upskilling, through training that we provide for our clients that will just make us a little bit more scalable.

[0:27:22] Harry Duran: Sounds like almost like an ala carte feature where you can sort of mix and match and pick the approach that's suitable for them, depending, like you said, to the experience they've had. What percentage of the stuff are you building in house. Are you outsourcing for the specific technologies? Because you did mention, like, remote sensing. So obviously there's considerations like building your own software and maintaining your own software and all the other equipment that's needed to keep a farm up to date. And it's a lot of moving parts. And obviously, from the conversations I've had, people have taken a wide range of approaches building everything in house to working with a bunch of partners and trusted partners, because a lot of that technology obviously needs upgrades over time.

[0:28:06] Alexander Kappes: Yeah, absolutely. And I think what's been really important to me is that we don't try and reinvent the wheel. There are certain things that people in the industry, if you look at guys like Prevail Hogandorn who have been doing this for decades, they know what they're doing. Their teams are just their developing team is significantly larger than my entire company. So I'm not going to try and reinvent the wheel there. I'm going to try and plug into their technology and take advantage of everything they have already built. And so we deploy very little, actually. Sorry. We deploy absolutely zero proprietary hardware. What we are doing is we're building, and we're about to finalize our own platform that allows us to plug in sensors, that allows us to connect to the control unit to support our clients remotely. And so the idea really is that we are able to train our clients, and they start the operation of the farm, but we are fully aware of every task that's being carried out. We help them develop a workflow and a work plan. We help them allocate tasks to staff to make sure that that staff management works seamlessly, especially in the US. Where labor shortages are a big issue for anyone, for any producer. And at the same time, because we understand what's going on on the farm, we're able to understand how is that affecting inventory.

[0:29:30] Alexander Kappes: And so everything's logged. We control, obviously, all the well, we start we have full visibility over all the growing parameters.

[0:29:40] Harry Duran: Okay?

[0:29:40] Alexander Kappes: So whether it's CO2 level, whether it's light intensity, whether it's temperature, humidity, and so on. Right. But we're also able to see, based on the activities that are being logged, what happened. So what was the germination rate when we transplanted? Were there any crops that we had to remove? How often have we been spraying? How often have we had to spray? And then, of course, what are the implants yielding? What are the individual sections of the greenhouses yielding, and how does that compare to the growing parameters? And so through that, we're able to optimize. We're able to constantly monitor and update the inventory to make sure that our farmers and our growers and our partners have all the tools that they need to be successful, that there's no delays there. And at the same time, we're making sure that we leverage that data to give them better supplies. I think. That's one of the beauties of the model is that the more farms we operate, the more we see small levers that make a big difference in production. And we will go from season to season, and we'll switch tomato seed varieties, and we'll see suddenly a 15% increase in yield.

[0:30:44] Alexander Kappes: And the fact that something like that is still possible, despite all the innovations made, despite all the promises by our seed manufacturers that this is absolutely the best seed, next year's one is 15% better. Of course, that depends on the climate. It depends on what we're growing, depends on how we're growing, and so on. But it's that type of knowledge that we're able to pass down to our clients and make sure that they have. I think my goal is that I want them to not have to replicate certain resources and for them to be able to access huge economies of scale by being part of our network.

[0:31:17] Harry Duran: I do want to circle back to and give you the opportunity to talk a little bit about your crop strategy.

[0:31:24] Alexander Kappes: Yeah, thanks. I think one of the things that we've been extremely focused on is making sure, like I said, that these farms are able to recover their cost of investment as quickly as possible, but that as we develop a crop strategy, we match the risk appetite of our clients. And the majority of our clients are first time farmers, they're first time producers. And so their risk appetite, they're already taking a huge step by investing with technology and going into an industry that they don't know. And so my focus has been on growing crops that are as resilient as possible, both from a growing condition point of view, but also from a market dynamic point of view. And so we grow almost exclusively in all of our greenhouses tomatoes, bell peppers, chilies. And we found that that strategy works really well. A, those are among the most consumed crops. And the way we build our business plans, the way we build our visibility studies, the way we build our forecasts, is by projecting that we're going to achieve average yields with these, and we're going to sell them into wholesale. And if I'm able to have a farm break even and be profitable and recover its cost of investment, growing tomatoes, cucumbers, bell peppers, chilies, and selling them to wholesale, then I have a resilient farm. Right. What we've been very eager or sorry, what we've been very cautious to avoid is falling into the trap where people will be like, listen, we heard you can grow saffron, why don't you grow saffron? Because if three other farms jump on that opportunity, the market is going to disappear. And what we've seen in the UAE, for example, is that within the last two years, lettuce prices have gone down from $3 a pound to something like a dollar 20 a pound. Right.

[0:33:20] Alexander Kappes: And that's within two years. And that's for varieties like bib Lettuce and your Lola Rossos and Boston Lettuces and so on. And so all of those farms that had in their budgets that they need to hit $2 a pound to break even are very far away from that. And so we just wanted to make sure that if I can operate a farm, I can sell into wholesale. I'm not planning on selling to five star hotels or three Michelin star restaurants only and take that premium and so on. If I can build my strategy based on commodity crops into wholesale and we can be profitable with that, then we've got a farm that's going to be resilient.

[0:33:59] Harry Duran: Yeah, it's smart, because to your point, if this is their first experience with a vertical farm, there's a lot of unanswered questions. And I think if you're sticking with what works and you can prove what works and have them show success, I think that gives them the confidence to then experience and try other crops later. That might be a bit more risky to sell. But I think there's a lot of and then, as with each success I imagine that you have, there's more data points. Right. So you can prove the viability of these crops. And what I love is the fact that you're providing this guidance to them, not only from the startup and the maintenance and the ongoing production within the farm, but also the question that everyone has, obviously at the end is, once I have these crops, what can I do with them? Where am I going to sell them? Because that's usually a big concern. So it sounds like you've really created a whole end to end support system for these farmers.

[0:34:57] Alexander Kappes: Yeah, that's been the goal. And obviously there's been a lot of challenges on the way and it's been great to see the industry here develop. Meaning to keep in mind that in a country where everything's being imported, there was no real procurement teams for these big grocery stores that were looking at the local market. A farming was very small and B is very seasonal. Right. And the project wasn't great. Obviously, you've not got fertile soils, so the crops are not picking up great minerals, they don't taste good, they're very watery. It's something that over the last two years, fortunately, the industry has grown alongside us. Fortunately, there are a couple of great players, like Pure Harvest and the likes, who have put CEO agriculture on the map. We're seeing the infrastructure and the ecosystem grow around us and we've been fortunate that we've been able to influence a lot of that. But, yeah, the goal really is that we want to make sure that our clients can leave this farm, can look at this as almost a task investment, really.

[0:36:07] Harry Duran: Yeah, it makes sense. What are the challenges for you as you think about the ways you're supporting your farms and how you build out your team? And what are the skill sets that are needed. And obviously, given that it's a younger industry out there and less mature, what are you thinking about? What keeps you up at night in terms of thinking about how to grow?

[0:36:34] Alexander Kappes: Obviously, there's a very large educational piece that still needs to happen. There's external challenges, I think internal challenges. Obviously, securing offtake the market here is how do I describe it in a nice way, it's very spontaneous. We don't really get any long term offtake agreements at the moment. I think we're working with something like 20 different crop buyers who are having daily deliveries and who want to renegotiate quantities and prices every other week. And so that's draining a lot of manpower and I think there is a good technical solution there, or there must be, so we need to get there. But the wholesale buying industry is not particularly tech savvy and so how we implement that, that's one of the major concerns I have, because at the moment, it's draining a lot of our resources. We're spending a lot of time on securing the uptake for the farms that we operate in the UAE, in Qatar and Omana. And then I think from an external point of view, you've got the education that needs to happen for people to be interested enough in pursuing the opportunity of setting up their own farm. And unfortunately, there's a lot of actors in the industry that are being counterproductive, in my opinion. I think we spoke earlier about the fact that it's still a bit intransparent and I think there's some reputational damage that's being done by salespeople who are promoting innovations with unreliable or false data. I think there's a big issue, especially out here, where you have every American, every European company wants to sell to the rich Middle Eastern Easterners, but how many of them have operations set up here? So when the farm is built, where is the after sale service? If something breaks, where are the guys? And so we have places like that where Spanish manufacturers have built farms here and then they kind of left.

[0:38:43] Alexander Kappes: And so now if there's an issue yeah, well, I mean, we'll get the guy to try and help you on Skype. It's not going to work like that, guys. You need to be here. People are investing tens of millions of dollars in setting up farms. They expect you to be here when there's a problem, especially in the first couple of years where everything should be under, I'm kind of warning. Right? And so at the moment, I think we're dealing with some, like I said, reputational damage. There's been several headlines about farms going bankrupt, about farms shutting down, and that's affecting a little bit how people view the industry now that there's more awareness about it. Those headlines, unfortunately, are also being read by more people. So that's something that we need to work around and we need to make sure that we educate on why certain things happen and how we plan to counteract those issues and challenges.

[0:39:36] Harry Duran: Yeah, something that I remember from when I was in Dubai was as I was speaking to folks in the booths, is a lot of the questions from people that were curious about the opportunities there. One of the first ones was, where are you based? Are you here in Dubai? What's your support system look like? And will I get support when the farm is up and running? And to your point, it feels like it's a very important and probably one of the first questions people are asking nowadays.

[0:40:04] Alexander Kappes: Yeah, absolutely. I mean, these farms are complex, right? And one of the things when we talk about crop strategies, we'll have clients tell us, okay, want to grow strawberries? Want to grow blueberries? We want to do saffron. When do this one do this? I kind of tell them that the safe approach to this is to look at a farm like a classic car. Right. Should sure, we're using state of the art technology, and sure, it's being built and designed by experts who have been doing this for a long time and very well educated people, but it's going to take you a while to get a feel for the farm. It's going to take you a while to understand, okay, like, how quickly does it cool down? How quickly does the humidity disperse, how is our CO2 build up? What are microclimates that we are finding within the farms? And it's going to take some time, and you want to do that testing, and you want to do that tron error with crops that are going to be a lot less expensive to replacing strawberries. Right? But, yeah, unfortunately, I think I wouldn't call it unscrupulous.

[0:41:04] Alexander Kappes: That's maybe a bit harsh, but there is a bit of a hit and run mentality here where it's like, okay, we'll sell the tech to them. And this is not a market you can do that with because it's A, it's a small market, b, they're very inexperienced growers, and already you've got the last generation of tunnel greenhouses that were set up here ten years ago, abandoned all over the country. And you can't really afford another wave of that if you have another wave of that with people spending a lot of money on building these greenhouses that are supposed to be a lot more high tech. Not supposedly we know they are, but that's the pitch. We can't afford for this to go wrong a second time because otherwise people are just going to lose interest and lose patience with that. And then we're not moving towards food security and we're not implementing everything we so strongly believe in.

[0:41:54] Harry Duran: That's a good point. I think what happens is that people see the dollar signs from the region and they figure, like, everyone's just got limitless pocketbooks and purse strings, and there's no shortage of money being poured into it. And to some extent, that's probably what happened with that first wave. But I think what you're speaking to is it's the reputation almost of the industry that's at stake here. Because if people that are looking to come out from outside CEA are exploring the opportunities, seeing abandoned greenhouses is probably not the best thing for them to have any confidence that this is going to be something that's going to succeed for them.

[0:42:32] Alexander Kappes: Yeah, absolutely. And I mean it's crazy right? Because there's also such a big disconnect and there's the growers, there's the operators of the farms and there's the people who sell farms. Right. And those are very much not the same people. And of course a grower probably wouldn't be the best salesperson because we know everything that goes wrong and can go wrong. But yeah, I think there needs to be some middle ground there and I think we just need to as an industry get to a point where we are a bit more conservative with our projections, where we're a bit more transparent about the things that we don't know. My feeling is that with the VC money that had come into the industry over the last two years, people started behaving like tech entrepreneurs and was like this is a problem we'll solve as we grow and this is something that once we get more scalability, we'll reach those, we'll hit those unit economics. What's scalability in a farm? You're going to build ten more farms and they're going to be unit economic positive like about scalability replicating the same investment over and over again hoping for a better outcome. Right. And those VC guys were not asking hard enough questions.

[0:43:41] Harry Duran: Sure.

[0:43:42] Alexander Kappes: And so I think people feel like they got away with not having those hard questions and people are inexperienced like they are here, they're not going to get those hard questions. So you're going to get away with selling certain ad stuff that is a bit unnecessary and you're not going to be there for the consequences. I think with that kind of VC money drying up, I'm hoping that that's as painful as it's going to be for a lot of operators and as painful as for some innovators that have great ideas and need money. I think it's good for our industry to go through that right now.

[0:44:19] Harry Duran: And it's interesting that you actually had that experience with coupon to see the heyday of a tech company and some of the decisions that are made. I'm curious with that experience, with the experience with Greener Corp, how have you grown as a CEO over the years?

[0:44:36] Alexander Kappes: Oh wow, that's a loaded question. I think it's so humbling to be surrounded by people who are smarter than you. Right. And so I'm the only employee in this company, in my company, Greener Crop, that is not an agricultural engineer. I studied business and I worked in tech for the first 1012 years of my career. So everyone else is an agricultural expert. And it's been incredible to learn everything from them. And obviously I've not learned everything from them, but everything I have learned is obviously from them and from all the reading I've done in the last two years and conversations with people like you and other people in the industry like Henry and Chris Higgins from ord America. There's so many amazing people and who are so generous in the knowledge that they share. And so I think the thing that I definitely learned during this journey a lot more than in my past roles, was how helpful people are if you ask and if you're humble to admit your shortcomings and you're not trying to overcompensate for everything you don't know by being arrogant or pretending that you know. I really love that about the industry. I really love about all these people who and especially in my own team, these are all agricultural engineers that had some experience with hydroponics, but they saw themselves eventually managing a farm for someone. They never saw themselves being part of a company that helps enable other people to set up farms, that takes farm management of one farm and says, okay, listen, there are synergies that we can create, there's data that we can leverage. There's so much more we can do with access to more data with more farms. And so the enthusiasm that they've responded to this challenge with has been so inspiring.

[0:46:28] Alexander Kappes: And there's so much I've learned on this journey, especially with Greener crop. I hope this is the last thing I do until I retire.

[0:46:39] Harry Duran: What's a tough question you've had to ask yourself recently.

[0:46:48] Alexander Kappes: There's a lot of tough questions. One of the biggest challenges for us has been funding and determining and understanding, do we want to take on external funding? How much faster can we grow with external funding? Because what's external funding going to do? For me, a groupon at anywhere else? It'd be okay. Great. If we raise that money, we're going to throw that into customer acquisition. And, you know, you have a product that people want, whether it's food delivery in 30 minutes or whether it's 90% discount on spa deal, whatever it is, you know that there's a demand for it. People just need to know about it. And so the more people you can reach, that's what you spend the money on. In our case, that's not necessarily the case, right? There is more I can do with more spending, but me setting up a billboard on the side of the highway saying, set up your own hydroponic farm is not going to do much. And so we've had investors propose ideas like, there are ways for you to get a farm funded, and you can get 80, 90% of that farm financed. How about you put down the remaining ten to 20%?

[0:48:01] Alexander Kappes: That way you are tied to the hip with the farm owner. The farm owner has to put in no capital of their own. So you're going to not have that friction point and it's an additional source for money because you basically now also make profits off that farm. So it's an easier conversion process, it's easier for the client to get financing. It's a clear value proposition and they're willing to fund that. Now, for me, there's pros and cons. There obviously, okay, we give up a lot of how dynamic our company is. We give up the fact that we're cash flow positive at the moment and we're able to be working capital positive. And that means that we can pursue opportunities as they come around the world. There is no logic to which countries we launch in next or which states we launch in next. We kind of go with the client and we set up our team accordingly. And so that's been a big challenge. Fortunately, right now there's not a lot of VCs or investors throwing money at act. So I've had to ask myself to licking their wounds. But it is something that you constantly think about.

[0:49:05] Alexander Kappes: It's like, okay, could I be growing faster with external money? Do I want to take that external money? Do I want to give up a certain degree of flexibility and what's going to come with that in terms of the promises we need to make, in terms of the commitments we need to make in an industry where we're all still learning and how we can do this better?

[0:49:24] Harry Duran: Yeah, good point. There's a lot of strings attached when you take on money like that and a lot of people to answer to. So, given the audience and you've listened to some of the episodes here, it's a lot of your peers, colleagues in the space have been leaving space and time at the end of each of these conversations for you, for any messages or anything you have to say to folks in the industry or thoughts that come to mind for your colleagues in the space.

[0:49:53] Alexander Kappes: Yeah, great question. I think there's two things that I'd like to talk about. I think one of them is the opportunity of upskilling. And we've been speaking to folks in Canada who were talking about educating people of First Nations and looking at people that are in remote communities, in communities that struggle with food self sufficiency. How can you upskill them? How can you train them, how can you teach them to do these things? I think there's a lot of good that we can do in our industry and I think most people that got into this industry did so either because of the environment, because of food security, those are two biggest reasons. And then maybe money if you were a bit foolish. But there's a lot of good that we can do and there's a lot of great opportunities out there for education, for upskilling and so on in underserved communities that struggle with food security, that struggle with employment. And then on the other side. There's a concern that I have, which is the use of plastic in our industry. I think for people who pride ourselves in saving 90, 95% of water and not destroying any land and no till and regenerative and so on, we use a lot of plastic. If you've ever seen a greenhouse, a finished greenhouse before, they've carted off all of the garbage, all the trash, it is just mounds and heaps and heaps of plastic. Whether it's the stickers that are on the polycarbonate sheets which are plastic, all the PVC that's being used and being cut off, all the plastic bags that the Cocoa Peak gets transported in Rockwell, we don't really know how to basically recycle Rockwell at this point. Whether it's Dutch buckets, whether it's NFP channels and so on.

[0:51:51] Alexander Kappes: We use an insane amount of polymers of PVC and plastic and we have no plan of what to do with it. And I think that's something we need to really be thinking about because we don't want to be caught with our pants down when people figure that out. And we should be responsible enough and we should be mature enough to say that this is a problem right now. Let's encourage people who are working on this and let's constantly look at how we can reduce the use of plastic because it's a huge problem in every industry. And as a new industry, we should not be repeating the mistakes of every other industry and we shouldn't be walking blindly.

[0:52:32] Harry Duran: Yeah, I'm glad you brought that up because it's something as I've been having these conversations over the past two years, it's always been interesting for me to think about is this being addressed, is this being swept under the rug? You just go into the supermarkets and it's just the produce aisle is like that prepackaged salad section is just a wall of plastics if you really think about it. So it's really something. I'm glad you brought it up and I think there is an opportunity there, I imagine, for folks who are looking for unique ways to create materials that can support this industry that won't continue to harm the environment. And I think I would hope that there's folks that are listening or that are thinking about this and working on ideas because I think there is some potential for some interesting innovations to happen in the space. And this would be the industry that would be poised to adopt someone that can create something that would be helpful to mitigate our use of plastic in this industry.

[0:53:28] Alexander Kappes: Yeah, absolutely. 100%. I think that's super important. And there's no one I've spoken to about this who's not 100% in agreements and I think all of us would be happy to support any entrepreneur that comes up with a solution for that. And we'll be the first ones to adopt it, the first one to test that and we'll tell everyone about it if we get good results.

[0:53:47] Harry Duran: I had a conversation with Albert Lim, I believe, from Vegbed. I think it's a Rockwell alternative. So I don't know if you've heard of that or looked into that, but happy to make an interest to you.

[0:53:58] Alexander Kappes: If that's something you're yeah, please. That'd be great.

[0:54:02] Harry Duran: Well, Alexander, I really appreciate this conversation. The hour tends to go by pretty quick when you're talking about a topic that's near and dear to my heart. So I appreciate you coming on and sharing your story. I'm grateful that we got connected in Dubai, and it's just fascinating to see what's happening in that space and how you've really doubled down and made it so that you're actually there on the ground and seeing firsthand what the opportunities are. So I appreciate you giving us firsthand knowledge of all the opportunities that are existing in that space.

[0:54:31] Alexander Kappes: I really appreciate your time. This was a lot of fun. And, yeah, the time really flew by. I can't believe it's really about an hour.

[0:54:37] Harry Duran: Yeah. So it's greenercorp.com anywhere else? Greenercrop.com? Yeah. Greencroft.com.

[0:54:44] Alexander Kappes: Sorry.

[0:54:44] Harry Duran: And we'll make sure those links are in the show notes. Any other place you want to send folks to get connected with you?

[0:54:50] Alexander Kappes: No, that's great. And if you want to connect directly with me, my email is alexander@greenercrop.com. So feel free.

[0:54:57] Harry Duran: Yeah, we'll make sure all that's available and Michelle as well. So I really appreciate you coming on and sharing your story. Thanks for your time.

[0:55:05] Alexander Kappes: Thanks a lot, Harry.