Middle Eastern start-up that grows food in the desert raises $ 60 million in funding

An Abu Dhabi-based agricultural technology start-up announced that it has secured $ 60 million in financing to expand its operations in the Middle East, but said it has been an arduous task to try to raise capital.

Pure Harvest Smart Farms grows fruits and vegetables in greenhouses in the desert of the United Arab Emirates and has partnerships to do the same in Saudi Arabia and Kuwait.

The harsh Middle Eastern climate makes countries in the region highly dependent on food imports, and the Covid-19 pandemic last year posed risks to food security.

“Our pilot in the desert … showed very promising results – the potential for local production throughout the year with very high quality and a very good cost structure,” said CEO and co-founder Sky Kurtz to CNBC’s “Capital Connection” at Monday. The start-up will use the capital to build its bridgehead in Saudi Arabia, he added.

It also has plans to expand its product portfolio.

The company raised $ 50 million through Islamic bonds, also known as sukuk, which are sharia-compliant debt instruments. Kurtz said it was “quite new”, as the region does not have a significant risky debt market.

The issuance was led by Shuaa Capital and accommodates Pure Harvest’s long-term needs for an “aggressive investment program” as well as its fast-growing nature, said Kurtz.

Separately, Sancta Capital led a stock fundraising round in January that raised another $ 10 million, with the participation of new and existing investors.

Despite its success in raising capital, Kurtz said that Pure Harvest secured less funding compared to agricultural technology companies in the US and Asia. That’s because the Middle East risk market is less developed, he said.

They are “maturing quickly”, but “it is still a relatively nascent market,” he said.

Kurtz acknowledged that raising $ 200 million in capital at the Series A stage is “extremely large” both regionally and globally.

“However, in an industry like ours – it is extremely capital intensive – we still have relatively insufficient resources,” he said.

He cited businesses like the vertical farming company Plenty in the United States, which raised more than $ 500 million, according to Crunchbase.

“Many of these companies have secured much more capital than we have, but we recognize that our market need is great,” said Kurtz. “Fundamentally, we import 80% to 90% of fresh fruits and vegetables from this region.”

He added that Pure Harvest’s capital comes from all over the world and “we had to fight” for it because attracting venture capital to the Middle East is more difficult.

“However, I think this is changing quickly and, of course, we are very grateful to the partners we have,” he said.