In recent years, many fully automated indoor farms (vertical farms) have struggled financially or closed operations entirely. While indoor farming still holds promise, the setbacks experienced by high-tech facilities offer valuable lessons for investors and growers deciding where to allocate capital.
What you’ll learn in this blog:
- Why many fully automated indoor farms face challenges delivering sustainable returns
- How energy costs and system complexity impact indoor farming profitability
- Why crop value and market dynamics matter as much as technology
- How greenhouses can offer lower risk and more predictable returns
- Why strawberries represent an opportunity for greenhouse-based production
Tech vs. Ag Reality
Many indoor farming companies were funded and structured like Silicon Valley software startups, but they were ultimately producing agricultural commodities.
Problems included:
- VC-style expectations: Investors expected rapid scaling and software-like margins, not understanding that agriculture is constrained by biological growth cycles and commodity pricing.
- Excessive R&D spending: Hundreds of millions were invested in proprietary robotics, AI, and automation. In many cases, the technology embedded in the system cost more per unit than the crop itself could realistically earn.
The Economic Reality of Crop Value
A core lesson from these failures is simple but often overlooked: the value of the crop must justify the investment in technology used to grow it.
Lettuce, for example, has a strict price ceiling. Consumers will only pay so much, regardless of how advanced the production system is.
Read more about growing vertical here!
Energy Costs: A CEA Challenge
Energy consumption remains a defining challenge for indoor grows. Vertical farms must replace the sun with artificial lighting and climate systems, which can dramatically increase operating expenses.
A 2025 analysis on the vertical farming sector observed that high energy and utility costs have forced many indoor farming businesses into restructuring or insolvency, as they struggle to match the economics of lower-cost outdoor and greenhouse agriculture.
While lighting, HVAC, and other environmental control systems are becoming more efficient, reliance on electricity for year-round lighting and climate control remains a substantial cost — especially when energy markets are volatile.
In contrast, greenhouses leverage natural sunlight as the primary energy source, significantly lowering ongoing energy expenses. Modern glazing and design techniques can optimize light transmission and reduce the need for artificial lighting, improving long-term operating predictability.
Crop Economics and Market Saturation
Indoor farms have primarily focused on a narrow set of crops, (i.e microgreens, lettuce, and herbs) which have limited retail price ceilings. This leads to market oversupply and price compression, reducing margins for growers. Because so many indoor farms have entered the same market niche, the price of premium indoor lettuce has fallen, creating a wider gap between production costs and achievable retail prices.
Why Strawberries Are Different
Strawberries are a higher-value crop and can support more complex growing systems—when those systems make economic sense.
Greenhouse strawberry production already has a long, proven track record:
- Vertical gutter systems have been used successfully in greenhouses around the world for decades.
- Irrigation and nutrient delivery for these systems are well understood, reliable, and cost-effective.
- Moving wall systems are already common in warehousing and logistics.
- AI-augmented grow-software has existed for years and has been refined through real-world use.
Additionally, newly developed strains designed for climate-controlled environments have demonstrated yields up to 54% higher than comparable outdoor varieties and are being bred to deliver a sweeter flavor profile than their outdoor counterparts.
Watch our webinar about growing strawberries in a greenhouse here!
Complexity and Reliability Considerations
Automation brings potential strength, but also risk.
In a fully closed environment, a single system failure, such as a sensor or climate control issue, can put an entire crop at risk if not quickly corrected
Specialized robots require highly paid engineers to maintain. Many farms found that the cost of “replacing humans with robots” actually increased their overhead rather than lowering it. Greenhouses, by contrast, tend to have more modular, field-proven systems with broader technical support networks, reducing the risks.
Capital Expenditure and Investment Risk
High upfront cost remains a barrier for many indoor farms. Investors often underestimate the substantial capital expenditure required for automated vertical farms relative to greenhouses. While precise comparisons vary by project, greenhouses typically involve lower capital cost per square foot than fully automated, closed indoor farms because they use natural light and simpler environmental control infrastructure.
Emerging Hybrid Models and Industry Trends
The industry is gradually shifting toward a blend of technologies rather than pure automation.
Many successful ventures are scaling controlled-environment lettuce, herbs, and other crops using greenhouses with targeted automation coupled with sunlight
Some geographic niches, such as arid regions or extreme climates, may still justify closed indoor growing when traditional agriculture is impossible, but these cases are more limited.
The Bottom Line for Investors and Growers
Many indoor, fully automated farms have struggled not because the concept of controlled agriculture is invalid, but because economic realities, especially energy costs and commodity crop pricing, were underestimated. For high-value crops like strawberries, greenhouses combine lower operating cost, proven production systems, extended growing seasons, and the potential for premium fruit quality. Greenhouses remain one of the more resilient and economically sound investments for growers and investors alike.
Contact us to learn more.
