Urban Plant Growers Raise $1m to empower indoor food production

Urban Plant Growers Raise $1m to empower indoor food production

UPG successfully raised over $1m with Equitise allowing them to expand into new markets and focus on product development.

Overview

In September 2022, innovative hydroponic smart garden tech company, Urban Plant Growers, successfully closed their equity crowdfunding raise by reaching $1,000,000+ within 3 weeks of launching to the public. 

The funds from this equity crowdfund will help Urban Plant Growers to focus on new product development, expansion into new markets, and increasing marketing capacity within their team. 

Crowdfunding Australia

Who is Urban Plant Growers

Founders Peter and Dilhan launched Urban Plant Growers in 2018 to solve the problem of food miles, food waste and food security. Since then, the company has rapidly grown from their garages in Sydney, to a global company operating in Australia, New Zealand and the UK.

In 2021, both founders left their engineering jobs at Microsoft and DeltaQ to focus full-time on their mission of creating a greener tomorrow. Since then the company has grown exponentially with $1.4m of revenue in FY22 and over 50,000 orders delivered to 30,000 customers. 

With innovation core to the fabric of the company, the product range has continued to grow. What started as a single “smart garden” offering, has now extended to a range of unique products - bringing the love of gardening indoors and helping customers to easily grow produce in a sustainable and affordable way.

Key Investment Highlights

1. Strong Traction and Unit Economics

Having sold over 50,000 products to over 20,000 customers to date, Urban Plant Growers have demonstrated product-market fit. Underpinned by strong unit economics, including an LTV/CAC ratio of over 6x, revenues have grown 103% YoY to over $1.37m in FY22. Through scale, they’ve managed to increase profit margins on main products from 65% to 70%, with margins on long tail subscription products increasing from ~65% to closer to 80%.

2. New Product Development

Urban Plant Growers have a huge roadmap of innovative new products including modular furniture with built-in electronics to enable indoor gardening that fits the style of anyone's home, organic closed loop Aquaponic kits that utilise fish waste to grow plants, and indoor grow kits for bigger plants like tomatoes and chillies - allowing everyone to grow their favourite veggies in indoor spaces.  

3. Diversified Distribution Channels and Subscription Revenue Model

In addition to their strong online platform (which accounts for 62% of sales), Urban Plant Growers has formed partnerships with more than 20 wholesale distributors, including Flower Power, David Jones, Costco, Harvey Norman and Eden Gardens. In FY 2022, 38% of revenues came from wholesale channels.

In January 2022, the team started focusing on additional subscription revenue streams allowing customers from both wholesale and D2C channels to purchase all their plant growth consumables on an automatic subscription. This is a highly profitable source of revenue with gross margin sitting at ~77%.

4. International Expansion Already Underway

Urban Plant Growers has set up strong foundations in Australia, and has international expansion underway. In September 2021 a UK store was launched with encouraging results - selling out completely by March 2022, and making £66,465 in FY22. New Zealand was not far behind, with an online store launching in February 2022. The NZ store is currently making ~$12,000 NZD in monthly revenue. The company believes that neither of these new markets have clear market leaders in the indoor hydroponics space, providing an opportunity for Urban Plant Growers to establish themselves as the leading name in consumer indoor gardens. 

5. Unique Approach in a Significant Addressable Market

Urban Plant Growers has a unique indoor gardening model. While AgTech companies in overseas markets have been largely focused on kitchen herbs, Urban Plant Growers’ technology aims to meet an increasing demand to grow both food and house plants. With an established and differentiated approach, there is an opportunity to make a meaningful dent in the $109b global gardening and $50b global fresh herbs markets. The global eCommerce industry is expected to grow, with eCommerce sales making up 17.8% of total retail sales in 2019, forecast to reach 24.5% by 2025.

6. New Revenue Streams

Having already tested their B2B vertical farming servicing in premium tech offices, such as  the Uber head office in Sydney, the company has a proven business model which is ready to expand into a range of other offices. With the aim of doubling down on servicing sales, the team has a target of servicing 100 clients by the end of 2023. With high margins and good scalability, this is an extremely profitable revenue stream for the business, which can simultaneously create increased company exposure - feeding their ecommerce top of funnel.

7. Opportunity to Combine Impact with Return

Fresh food grown at the point of consumption immediately cuts out the chance of plants going to waste, or being transported around the country, while growing them in an efficient and low maintenance manner. Furthermore, the widespread application of our products from use in urban apartments, to food scarce mining towns, and even farms with volatile weather conditions, proves that this technology can provide enduring benefits to a wide range of people. As product development continues, Urban Plant Growers hope to continue to develop a world where everyone can have access to their own indoor garden, allowing people to reduce their environmental footprint, save money and eat better. 

Key Takeaways from Raise

1. Hustle is important!

We understand that raising capital is hard, especially whilst managing the full-time operations of a start-up on the side. Hence, having founders who are on board and are actively seeking investors is important to ensure a successful raise, perfectly demonstrated by Dilhan Wickremanayake and Peter Cole. By seeking out investors from within their customer base whilst also expanding their reach, these founders personally reached out to investors and strategised online marketing, putting in the hard work to gain a successful outcome for UPG.

2. Leveraging networks outside of your customer base

By leveraging networks outside of their typical customer base, the founders of UPG connected with numerous other avenues to gain awareness about their raise. Capital Ventures supported the deal through Linkedin promotions, holding a podcast and leading numerous other speaker events, to build brand awareness during the capital raise. Being awarded Start-up of the Year by UTS this year, UTS Start-Ups also assisted during the raise by bringing in awareness for the brand through a different audience. Hence, UPG capitalised on utilising and exhausting all avenues to bring in investors, resulting in a great outcome for the team! 

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