Don’t mess with failure

Don’t mess with failure

For the second time in as many weeks, a supposedly promising high-tech company has foundered in Pittsburgh.

As first reported by the Pittsburgh Business Times (but a story oddly not immediately jumped on by most other media outlets), Fifth Season, an “indoor vertical farming startup featuring advanced robotics,” has gone out of business.

There’s woeful little information from the company about what happened. But when, Friday last, it shuttered its operations – a greens “farming” facility in Braddock and operational facilities on Pittsburgh’s South Side — it was pretty clear that Fifth Season no longer was a sustainable concern.

As recently as a month ago, Fifth Season was touting new products and itself as “a food system pioneer creating a new category of local, fresh food grown in fully-automated vertical farms.”

It heralded that its farms “are run by proprietary software built in house, and this software and robotics system is what enabled the team at Fifth Season to deliver an unprecedented, entirely replicable farm that produces consistently fresh leafy greens and prepared salads.”

Its stated goal? To “decentralize the fresh food supply chain, grow fresh produce more efficiently in smaller spaces, and meet cravings for just-harvested, regionally-grown ingredients and inspired meals.”

So, what happened? After all, the apparently once well-capitalized company mere weeks ago was touting a robust operation with a huge client base of more than 1,000 grocery stores and other sales outlets. It even brought online a microgrid power-generating station. And it had plans to expand into Western Ohio with a far larger operation.

“Details on what led to its closure remain unknown,” the Business Times reported, “though it comes amid a local and national backdrop of difficult times for capital-heavy tech startups seeking additional investments amid tightening economic conditions.”

Or, in the case of Argo AI, the autonomous driving company that went belly up a few weeks ago, investors pulled their backing plug.

And as the website Technical.ly (https://technical.ly/startups/fifth-season-shutting-down/) reminded in a late Monday post, the experts it “spoke to about this turn of events agree the closures are just a reminder of a harsh reality: Startups frequently fail.”

Olga Pogoda, chief operating officer for KEF Robotics in Larimer, a drone software maker, told Technical.ly, “she doesn’t believe that [Fifth Season’s] shutdown signals anything bad for startups in Pittsburgh generally.”

“It does, however, remind that we’re in the middle of an economic downturn happening not just in the city [of Pittsburgh] but throughout the country.”

And as AgFunderNews reported:

“Large farming facilities are extremely capital intensive. CNBC recently called out Fifth Season’s Ohio facility that was planned for 2023. The 180,000-square-foot vertical farm would require a $70 million expenditure — or roughly $17 million per acre.

“And while demand for locally grown, pesticide-free food is growing, it’s sometimes not enough to offset the cost of operating these high-tech operations,” the website noted.

As we just reminded this past Monday, such failures are a normal and, yes, necessary characteristic of a healthy free-market economy. They help to direct scarce and valuable resources to their most efficient, and profitable, use.

And that means no government interventions with taxpayer dollars to attempt to “save” companies X, Y or Z from failure. For such failures are the marketplace speaking, loudly, about what works and what does not.

As we always say, taxpayers have no business being turned into venture capitalists for private concerns to begin with. But it’s even worse – pure ignorance mixed with arrogance — when government-know-best types believe they should and can use your money in an attempt to prop up what the marketplace has rejected.

Markets shake out. There will be winners. There will be losers. Just don’t force taxpayers to pick up the losers’ pieces.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).