We’ve recently written a lot about the massive growth opportunity that horticultural applications bring to the solid-state lighting (SSL) market – and no, that pun never gets old, if you’re wondering. But I wanted to get some external insight into what it takes to move forward with investment in an emerging market like this. And so I spoke with our Strategies in Light Investor Forum advisor Mike Gagnon, president of Alumage Advisors, regarding his thoughts on what makes such a niche attractive to investors, or perhaps what they need to know to become more engaged in it.
Gagnon pointed out that a number of different types of companies will participate in the Investor Forum at Strategies in Light and indeed they will represent various niches — from general lighting to lighting for health and horticulture — in which they’ve achieved some measure of success. But most notable about the horticultural SSL sector, he observed, is that “It’s certainly growing rapidly; at this time last year there were approximately 40 horticulture manufacturers we were aware of and now Alumage Advisors is evaluating close to 100 of them.”
So entrepreneurs, corporate business development executives, and investors are coming to play in the horticultural SSL field. And why shouldn’t they? According to the Strategies Unlimited horticultural lighting market data that chief editor Maury Wright presented at the October HortiCann Light + Tech conference, the global greenhouse supplemental lighting market in 2017 totaled $2.74B in 2017 — with the LED sector making up about $213.4M of that. But here’s where one really sits up and takes notice: The total supplemental lighting market is forecasted to reach $4.63B in 2022, with LEDs accounting for more than 40% of that total market at $2.06B. That’s more than a sprouting phase.
But why the surge in activity around this market? Well, Gagnon made a great point. The market is solidifying around confidence and trust in technology that has met or exceeded certain standards and qualifications. “DLC [DesignLights Consortium] certifications are growing very rapidly, which is signaling that specifications have been more firmly developed and are being adhered to by a number of companies,” explained Gagnon. “Currently, there are 19 companies that offer 57 different products that are DLC certified for the horticultural space and we should expect additional companies and products to be added in the very near future.”
Gagnon also mentioned that emerging applications like horticultural and lighting for health and wellbeing hit their stride as one begins to see what he calls “killer apps” emerge. “This is also a signal of a second generation of luminaires that is looking at more than simply the performance of the grow light itself, but other features and benefits that add value, such as Illumitex products with FarmVisionAI™ capability. Horticultural lighting is beginning to experience the same evolution as connected lighting, where we are seeing 4th and 5th generation products on the market; and not surprisingly, there were five acquisitions in that segment in 2019. While horticultural lighting is a few generations behind, we should begin to see a few more acquisitions emerge beyond Osram/Fluence in 2018. ”
He admitted we won’t know exactly what other killer apps are until the Investor Forum speakers take the microphone and begin to share their business models and strategies with the crowd. But I’d speculate, based on some of the HortiCann proceedings that I looked through and the fact that Illumitex CEO Jeff Bisberg is scheduled to speak in the Forum, we’re going to hear more about that particular killer app Gagnon was referring to, regarding the merger of smart technology and lighting systems with artificial intelligence (AI) — the convergence of technologies is something that the entire conference touches upon, in each track as well as the workshops and Forum. Bisberg talked about “digital horticulture” at our 2017 Horticultural Lighting conference, and explained that “the next step is moving to an intelligent platform” — multiple integrations such as cameras and sensors for data collection as the plants respond to the lighting, and software to help analyze the information. And other speakers during HortiCann presented compelling evidence to support the potential benefits for grower operations.
I think that’s the definition of “value add.”
Gagnon will participate as the introductory speaker with our Bob Steele, and as a panelist during the Investor Forum on Tuesday, Feb. 11, and will also present “Increasing Market Value and Exit Opportunities During Industry Consolidation” on Wednesday morning, Feb. 12. Attend the full-day Investor Forum for exciting presentations on business strategy, and join us for the full Strategies in Light conference for additional talk on technology, applications and the future of the SSL industry.
