An Abu Dhabi-based agriculture technology start-up announced it has secured $60 million in funding to expand its Middle East operations, but said it has been an uphill task trying to raise capital.
Pure Harvest Smart Farms grows fruits and vegetables in greenhouses in the United Arab Emirates desert, and has partnerships to do the same in Saudi Arabia and Kuwait.
The harsh Middle East climate makes countries in the region heavily reliant on food imports, and the Covid-19 pandemic last year brought food security risks to the fore.
"Our pilot in the desert … showed very promising results — the potential for year-round local production at very high quality and at a very good cost structure," CEO and Co-founder Sky Kurtz told CNBC's "Capital Connection" on Monday. The start-up will use the capital to build its beachhead in Saudi Arabia, he added.
It also has plans to expand its portfolio of produce.
The company raised $50 million via Islamic bonds, also known as sukuk, which are debt instruments that comply with Shariah law. Kurtz said it was "quite novel" given that the region doesn't have a significant venture debt market.
The issuance was led by Shuaa Capital and accommodates Pure Harvest's longer-term needs for an "aggressive capex program" as well as its fast-growing nature, Kurtz said.
Separately, Sancta Capital led a equity fundraising round in January that raised another $10 million, with participation from new and existing investors.
'Relatively underfunded'
Despite its success in raising capital, Kurtz said Pure Harvest has secured less funding compared to agriculture tech companies in the U.S. and Asia. That's because the Middle East venture market is less developed, he said.
They are "maturing quickly," but it is "still a relatively nascent market," he said.
Kurtz acknowledged that having raised $200 million in capital at Series A stage is "extremely large" both regionally and globally.
"However, in an industry like ours — it's extremely capital intensive — we are still relatively underfunded," he said.
He pointed to businesses such as vertical farming firm Plenty in the U.S., which has raised more than $500 million, according to Crunchbase.
"A lot of these companies have secured a lot more capital than we have, yet admittedly, our market need is great," Kurtz said. "We fundamentally import 80% to 90% of the fresh fruits and vegetables in this region."
He added that Pure Harvest's capital has been sourced from all over the world and "we've had to fight" for it because attracting venture capital to the Middle East is more difficult.
"However, I think that's changing quickly, and obviously we're very grateful to the partners that we have," he said.
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Middle East start-up that grows food in the desert raises $60 million in funding - CNBC
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