UAE-based, agritech Pure Harvest Smart Farms has raised $50 million in growth funding through a sukuk, an Islamic structured finance product similar to a bond, led by SHUAA Capital. It marks the first time that a startup in the Middle East has raised venture-debt in this way and comes after it closed a $10 million growth equity round from Sancta Capital in January this year. The startup has raised more than $200 million to date.

Founded in Abu Dhabi in 2016, Pure Harvest uses hydroponic farming solutions and internet of things (IOT) technology to grow fruits and vegetables in the region’s arid climate. The latest round will be used to grow its team, invest in research and development and expand its services in the UAE, where it is nearing the completion of this third greenhouse. It is also constructing greenhouses in Saudi Arabia and Kuwait, for which it previously raised $46.5 million.

Speaking exclusively to Wamda, Pure Harvest founder Sky Kurtz revealed that the company will be targeting another couple of rounds of investment in the near future.

“In the next quarter, we will need additional debt capital for Kuwait, we will be back to the markets soon,” he said. “It is a capital-intensive business and we have to continue to raise until some day we can secure a substantial benefactor who can provide that commitment and secure hundreds of millions of dollars.”

Similar startups in the agritech space have managed to secure large ticket sizes around the world according to Kurtz.

“We need to convince people it can be done here, it’s a younger venture market [in the Middle East], but success stories like Careem are attracting people” he says. “There are the sovereign wealth funds and some private equity funds here, we could secure billions of capital if we can come to a vehicle that allows people to capture yield in a predictable way.”

Part of the reason why Pure Harvest and SHUAA Capital chose a sukuk was to access “yield-hungry investors through a Shariah-compliant financing structure”, according to Kurtz.

This is SHUAA’s second public investment round of the year, following its investments in Anghami, which recently announced its intentions to go public on the NASDAQ via a special purpose acquisition company (SPAC).

“People are looking for instruments they’re familiar with and understand. Plus as a Shariah compliant investment, it means we can access a larger investor pool. So it’s a significant achievement for a company at this stage of growth to say they’ve tapped into the capital markets,” said Natasha Hannoun, head of investment solutions at SHUAA CAPITAL. “Securing a loan, even for the same amount, is not the same as issuing a bond or sukuk given the additional regulatory requirements, making this a milestone which will also help [Pure Harvest] with future capital raising rounds.”

Since its last funding round, Pure Harvest has embarked on several projects and partnerships and has evolved into a climate technology company solving for heat and humidity challenges in agriculture.

“We want to secure more projects for 2022 and beyond and we’re looking at new markets like Singapore and there has been interest, we have a sizeable investor out of South East Asia who’s put nearly a million dollars in the business who is interested to help us tap those markets,” said Kurtz.

Other countries Pure Harvest has in its sights is Japan, and certain states in the US that rely on states like California for their produce. 

“Our aspirations are increasingly global and now we’re entering the stage to do it,” he said. “On the climate tech, we’ve learned a lot from the challenges we’ve faced in the heat and humidity here and now we’re doing increasing investment in innovation around customising solutions in our greenhouse”, which can be exported to other parts of the world.

Our innovation has been around climate and building management systems, the integration of all this equipment and how to desert-proof that.

Longer term, we believe the public markets would be an attractive exit an IPO would be very interesting. We’re very interested in the SPAC market right now. There is a company in the US [AppHarvest] which is a very similar business to us…it did a SPAC is now valued at over $2 billion so we see that as an interesting opportunity and there are a lot of capital rich SPACs out there looking for assets and we think we can be a great candidate, much like Anghami,” said Kurtz.

The other option is exiting to a private investor, but not before raising another couple of investment rounds to help Pure Harvest scale beyond the region.