🥬 Singapore's farming dream ended

Hey Founders,

Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.

Today’s story is about how a Singapore’s agri-tech startup collapsed when the global supply chain got disrupted. Let’s get to it! 🚀

☠️ 1 Failed Startup: I.F.F.I

🚀 The Rise of I.F.F.I

🇸🇬 Founded by Nelson Lim and Alfred Tham in 2019 as a subsidiary of TranZplus Engineering (precision engineering firm) in Singapore, Indoor Farm Factory Innovation (I.F.F.I) wanted to revolutionise urban farming by establishing the city-state's first soil-based indoor mega farm.

This wasn’t just any farm. It was designed to produce the most nutrient-saturated vegetables year-round, leveraging cutting-edge technology to meet the growing needs of urban farming.

• The Problem — 🌱 Singapore, a small island with limited land for agriculture, relied heavily on imports to maintain its food security.

  • Over 90% of Singapore’s food is imported from 170 countries and regions.

  • This reliance on food imports leaves Singapore exposed to external forces – from supply shocks in source countries to disruptions in global supply chains.

• The Solution — 🥬 By cultivating vegetables indoors, I.F.F.I utilised advanced engineering and robotics to optimise farming processes.

  • Their solution combined traditional soil-based farming with state-of-the-art technology, creating a controlled environment that optimised crop yields and ensured consistent quality.

🥬🥬🥬 At its peak, I.F.F.I was projected to produce between 800 to 1,000 kg of vegetables daily, including popular varieties like nai bai and spinach. The company even planned an indoor farm pro-shop where visitors could learn about indoor farming and purchase cultivation systems.

It was mind-blowing to see how their state-of-the-art technology integrated AI systems with IoT monitoring and precise irrigation methods.

🤯 This was not just farming. It was precision farming at its finest.

📉 The Fall of I.F.F.I

However, precision farming took a dark turn. The journey from groundbreaking innovation to unexpected closure was swift and sobering.

In May 2024, news broke that I.F.F.I had ceased operations at its Tuas facility.

📌 Here’s what happened to I.F.F.I:

I.F.F.I's ambitious venture into soil-based indoor farming in Singapore showcased the potential of integrating traditional agriculture with modern technology. However, unforeseen challenges, particularly those exacerbated by the COVID-19 pandemic, underscored the vulnerabilities inherent in high-tech farming solutions that eventually killed I.F.F.I.

By May 2024, what was once hailed as a beacon for future urban farming had become another cautionary tale in Singapore's evolving agricultural landscape.

🇸🇬🙏🏻 With over 90% of food imports, Singapore remains susceptible to global supply chain disruptions, including disease outbreaks, foreign policy shifts, and geopolitical tensions.

Want to learn more about I.F.F.I’s downfall?

• Planting the seeds for the future of farming

• Mega indoor veggie farm I.F.F.I shuts down in latest blow to local food production

• I.F.F.I shuts down mega indoor veggie farm in Tuas

⚠️ 2 Mistakes

Mistake 1: High costs of production

💸 While “high-tech” farming attracts attention and looks good on the surface for sustainability — the high costs of production are hardly sustainable.

CNA has done a great job in analysing the future of agriculture in Singapore. Here are why the costs of agricultural production are crazily high (compared with neighbouring countries) in Singapore according to CNA’s analysis:

• 🏝️ Expensive land leases — Only about 1% of land is set aside for agricultural use in Singapore.

  • In 2023, Singapore had a total of 254 licensed local food farms, comprising primarily hen shell egg (3), vegetable (115) and seafood farms (131).

• 🧾 Expensive hardware + high electricity bill — Vertical vegetable farms require advanced equipment such as sensors and hydroponic set-ups and rely on energy-intensive systems such as artificial lighting and climate control, causing high usage of electricity.

• 🧑🏻‍🌾 High labour costs — Difficult to attract highly skilled labour as people prefer to work in other industries, driving up labour costs.

In fact, almost all similar players were also facing the same problem.

In 2022, VertiVegies scrapped plans to construct its indoor farm in Lim Chu Kang. Sky Greens is also scaling down its operations, with many of its greenhouses reportedly torn down.

Mistake 2: Unviable business model

😳 I.F.F.I’s core business model was to serve as consultants and designers to businesses looking to set up urban farms.

Back then it was in discussion with three potential clients — one is in traditional farming and looking to automate some processes, another is in the logistics industry and the third is in the marine sector.

While the B2B business model might work, it seemed to have a very limited market and was hard to scale its consulting services (in my opinion).

So why not B2C by selling vegetables to consumers?

🙅🏻‍♂️ After digging deeper, it could be due to a lack of consumer demand:

• With high operational costs and limited ability to scale, farms in Singapore are forced to price their produce higher than similar goods imported from overseas (i.e. Malaysia).

• Singapore’s consumers don’t seem to value local produce enough to pay a premium.

• Just imagine you’re buying groceries at a local supermarket, and you see the same vegetables priced differently ($1 imported from Malaysia, and $1.5 produced locally in Singapore) — which one would you buy?

🩸 In short, unless agri-tech companies are able to reduce costs of production, it’s extremely difficult to build and run a profitable high-tech farming company (unless you have a large amount of capital + able to continue to get funding to buy you more time to go from red to green).

🧠 3 Lessons Learned

Lesson 1: High-Tech isn’t always High-ROI

While I.F.F.I’s cutting-edge systems for precision farming were impressive, the high costs of land leases, energy consumption, and labour became unsustainable.

The farm’s operational expenses grew faster than its ability to generate revenue.

Lesson 2: Build a business model that can scale

I.F.F.I's B2B consulting model had a limited market, making it tough to achieve scalability or consistent cash flow.

The market for urban farm consultancy in Singapore is small, and relying on a few clients means you’re at the mercy of market whims.

Lesson 3: Adaptability is key

The COVID-19 pandemic disrupted global supply chains, leading to delays and increased operational costs for I.F.F.I. Their inability to adapt quickly enough to these changing circumstances contributed to their eventual closure.

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That’s all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.