The secret of humble food from expensive tech

The way we get our food is changing.

Many are discussing how to make modern farming more sustainable, but this startup working to end it entirely.

Ikuo Hiraishi is a serial entrepreneur and the Japan head of Infarm Japan, an urban-farming startup growing food at supermarkets. In fact, as Ikuo explains, a lot more of your food is grown indoors than you probably imagine.

The future of food will look nothing like its past.

t's a great conversation, and I think you'll enjoy it.

Show Notes

What is Urban framing, and why do it? Why Japanese consumer's first resisted urban farming The true value proposition for the supermarkets. The biggest costs in indoor farming are not what you think. Why, after 40-years. urban farming is finally taking off in Japan The two challenges to scaling indoor agriculture Three reasons Japan might be the perfect market for urban farming and one reason it may not be Why it's better to grow cheep veggies with expensive tech Is it better to be a founder or a VC?

Links from the Founder

Everything you ever wanted to know about Infarm

METI visiting the Infarm Growing Center in Berlin

Follow Ikuo on Twitter @ikuoch Friend him on Facebook Check out Ikuo's article about the Japan startup & VC landscape More about Ikuo

Ikuo's consulting company Dreamvision and blog He's also a Professor at Entrepreneurship Department, Musashino University ... and an AsiaBerlin ambassador

Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Food is complicated. That's why successful food related startups are so rare and so important when we do find them. Today, we sit down with an old friend after almost eight years. Ikuo Hiraishi is running Infarm Japan, an urban farming startup that is actually growing vegetables in supermarkets. Now, indoor farming or hydroponics has been fairly common since the 1980s, but the combination of rising global cost of food and the plummeting cost of technology and some innovative machine learning has resulted in urban farming not only becoming commercially viable today, but providing a very interesting value proposition for the supermarkets. And a pretty interesting value proposition for you and me as well. We talk about the future of food, why you need expensive technology to grow inexpensive vegetables, and whether it's better to be a founder or VC in today's world. But, you know, Ikuo tells that story much better than I can. So, let's get right to the interview.

Interview Ikuo: Cheers. Very nice to see you. Tim: I'm sitting here with Ikuo Hiraishi, a serial entrepreneur, angel investor, and new urban farmer. Ikuo: Thank you. Tim: So, thanks for sitting down with us. Ikuo: It's honor to be back here, to have a chat with you. Tim: It's been a while. It's been around eight years. Ikuo: Yes. I was kind of like test interviewee of Disrupting Japan. That was eight years ago. Tim: I think you were episode number four. Ikuo: Yes. A very early episode. Tim: Very early. And we're closing in on episode 200 now. Ikuo: Oh, cool. Congrats. Tim: But yeah, we're here to talk about urban farming. So, just so I can make sure I understand it correctly. So, the types of farming we have, like rural farming, which is just vegetables out in the field, like just farming. Ikuo: Yes. Soiled based farming. Tim: And then we have indoor farming, which is like plants and warehouses and things that are usually in the suburbs or in the outskirts of cities. And then we have what you and Infarm are doing, which is urban farming, where the veggies are grown like in the supermarkets themselves. So, what's the big advantage of urban farming overall, the other types of farming? Ikuo: So, of course there are lots of advantages, but so we can minimize the food mileage meaning delivery distance. So, it all depends on countries or markets and regions. For example, Europe, Germany actually Infarm originated out of Berlin. So, Germany is very cold country in general. And farming is possible only a four, five month a year. So, that's why they have to import lots of vegetables. Tim: So, when we're talking about food mileage, is the underlying concern cost? Is it CO2 emissions? Is it…? Ikuo: Transportation around Distribution has to consume lots of gasolines, lots of CO2 generated. So, meaning very big impact to global warming. So, urban farming can reduce those kind of energy consumption. And also the CO2 emission. Tim: And what type of vegetables is it good for? Is it good for growing just about anything? Are there certain types of vegetables that are better for this kind of farming? Ikuo: Technically, almost all of the other vegetables can be grown as indoor farming, LED and hydroponics. But however, some vegetables, and they're not really good as they are the current technologies. For example, roots vegetables, like radish, carrot, potatoes, et cetera, are not really good to produce by the LED and the hydroponics. However, leafy greens, spinach and all the other herbs like basal coriander, et cetera. Tim: Lettuce and cabbage and… Ikuo: Right. That can be grown by LED and hydroponics. Tim: Why is that? Why are leafy greens so easy to grow and things like beets or carrots difficult? Ikuo: Beets, carrots, the roots have to be inside the water. So, the depth has to be certain amount. Tim: Okay. So, like root vegetables just require more space? Ikuo: I think so. I'm not the engineer, the LED and hydroponics, so maybe I am wrong, but as far as I have heard from the other engineers, technically we can produce potatoes and radish, et cetera, roots products now, but the quality maybe shaped, are not qualified as a commercial products. But leafy greens, they can grow very well. Tim: Okay, That makes sense. Before we dive deep into the business model, which I really, really want to do, because it's super interesting. I want to take a step back in how you got involved with the team and you mentioned Infarm is from Berlin. Ikuo: Yes. Tim: And you and I have both been back when I was at Teco, I was in Berlin an awful lot. It's an interesting city. There's a lot of innovation going on in Berlin. Ikuo: So, you've been to Berlin? Tim: Four or five times. Ikuo: Oh, nice. Good enough. Tim: Yeah. It's a lovely town. I love it. Ikuo: So, when I was running a company called the Sunbridge Global Ventures, which we were running am event called the Innovation Weekend. We started Innovation Weekend back in May, 2011. The first three years we were only running such events in Tokyo and Osaka. However, the startup movement restarted after the financial crisis. So, we call the Lehman Shock. And then in Japan we had a Livedoor Shock. So, Tokyo Stock Exchange made that regulation very, very strict. So going public all of a sudden became very, very difficult. Meaning, exits are very difficult so that's why the investors hesitated. Tim: Now I remember the timing really well, but I'm curious, so after Livedoor, there was a lot of new regulations and a new… Ikuo: Yes. Tim: Actually, a lot more sort of guidance than regulations. But did the government change the regulations again to make it easier to IPO? Ikuo: Yes. Not the government, Tokyo Stock Exchange, because if they had kept the windows very narrow, only a few IPOs. Tim: So, when did they start loosening up again? Ikuo: I think 2009 was the bottom. And then 10-11 the time we studied innovation weekend and then kind of bounced back. Tim: So, they started loosening up pretty much as the economy started recovering from the Lehman's Shock. Ikuo: And then after three years since we studied the innovation weekend, the startup market was kind of crowded. So, I thought we should reposition our innovation weekend. At the time, I always shouted we should go global. So, that's why we changed to host overseas, like Silicon Valley, New York City, Boston, Singapore, London, Berlin, et cetera, cetera. And then November, 2015 was the first very innovation weekend in Berlin. And Infarm was one of the setup who pitched. Tim: Right. I remember they won the Innovation weekend grand finale that year. Ikuo: Yes. Grand finale 2015. Tim: So, was that the first time you'd met the team? Ikuo: Yes. In Berlin. Tim: You also led the Sunbridge Funds investment into them? Ikuo: Yes. Tim: That was after… Ikuo: So, that was after they won the other Innovation weekend Grand Finale 2015. But we also helped them conduct the other feasibility study of the Japanese market before we invested in. Tim: Atomico invested like a hundred million dollars. Ikuo: Yes. I don't remember the amount but Atomico, I don't exactly remember series A or series B. Tim: And then you brought them to Japan with partnership with Kinokuniya? Ikuo: Yes. Kinokuniya and JR East. Tim: So, how has that gone? I mean, you brought them in about two years ago like right before COVID. Ikuo: Yeah, very good question. We seriously started operation to enter the Japanese market, Old Town, 2018. We eventually decided to enter the Japanese market maybe September or October, 2019. And then we established Infarm Japan as a legal entity 2020, February 27th. Tim: Right, at the beginning of COVID. Ikuo: Right, right. So, we need to wait and suspend it. Tim: So, what happened, I mean, Japan's been opening up. Have the projects with Kinokuniya or with Summit, are they moving forward again? Ikuo: Kind of. The number of vegetables we can grow are more than a 75 or something. However, because Infarm studied from Europe, most of those varieties usually eaten by the Western people. Tim: Oh, so they're not necessarily what the Japanese consumers want to buy? Ikuo: No. So, now we are growing and selling Italian basil, coriander, Italian parsley, wasabi, arugula, kale, of course lettuces.