The best alternative protein sources may be right under our noses
Of the 30,000 known varieties of edible plants in the world, we only use about 7,000. The ones we grow and harvest at scale number far fewer—merely a couple dozen. “If we are going to feed three billion more people, we cannot do this with traditional animal-based protein—it’s not sustainable,” Andy Zynga, CEO of Europe’s food innovation initiative EIT Food, told AFN. Rather than creating new foods in a lab, he says, “Why not explore what is already there, in mother nature?”
Partnerships are critical for doing that, Zynga adds. EIT Food, which launched in 2017, is centering itself within Europe’s food ecosystem to inspire innovation across EU member states. Elsewhere, a consortium of scientists, governmental agencies and food companies working together as the African Orphan Crops Consortium (AOCC) is undertaking genome sequencing on more than 100 “underutilized crops” in Africa. The goal is to eventually improve the diversity of the foods the continent eats, and support Africa’s plant scientists in developing more nutritious and resilient plant varieties.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
Spurring food innovation may require a change in perspective
What if we treated food like the next preventative medicine? Globally, non-communicable diseases are on the rise, largely because of a growing global middle class and unhealthy lifestyle changes that often come with an increase in income. Such diseases, which included diabetes, heart disease and cancer, and are conservatively projected to cost the world more than $30 trillion by 2030.
“If we look at food as the next preventive medicine, we could change the cost structure for governments,” posits Michal Drayman, partner at Israeli venture capital firm Jerusalem Venture Partners (JVP). JVP, which claims to be the first firm in Israel to launch a dedicated agrifood tech investment fund, is building partnerships to move the idea of food-as-medicine into practice. The company is in dialogue with the Israeli government about how food and nutrition companies that claim to have health benefits could undertake clinical testing, similar to drug companies, to validate their claims, Drayman told AFN. The regulatory costs and burden could be more than most startups could manage, which is why a modified regulatory framework, supportive financing and initiative and collaboration with large food companies, like Mars, a new JVP partner, will be crucial.
Fueling food innovation requires more capital…
Venture capital for food and agtech companies has evolved from a small, niche sector to a maturing global market. Europe, however, trails other regions significantly. Of the nearly $17 billion invested in agrifood tech companies in 2018, only $1.6 billion—less than 10%—went to European companies, according to AgFunder’s latest market report. Innovative food, which includes alternative protein companies like Dutch startup Meatable, claimed only a sliver—3%.
Globally, UK-based nutrition supplement company Huel managed to rank among the largest “innovative food” funding rounds in 2018, securing $26 million. But representation of European agrifood tech companies in investor portfolios is otherwise slim. Sheila Struyck, partner at Shift Invest, a Dutch food and agtech impact investors, said investors’ aversion to risk is to blame. “If we just [focus on] low risk, we won’t change anything,”
…and alternative sources of capital
Venture capital may get most of the media love, but as a funding source, it alone cannot finance the innovation needed to shift the world to a healthier, more eco-conscious and resource-wise food system. “Venture capital addresses some early stage challenges. But before you can get to market, you need a lot of support form bankers and suppliers,” said Kim Odhner, senior venture partner of New Crop Capital.
Often startups that succeed at securing early venture capital funding end up stuck in a position where they need additional capital to grow, but are still too “risky” to obtain credit from suppliers or debt from banks. Companies developing new technologies have even more intense capital requirements, often needing funding for research and development and financing for lab and manufacturing infrastructure and equipment.
Victor Friedberg, founder of food-focused venture capital firm S2G Ventures, launched Foodshot Global to incubate new ideas and pull in partners with different risk profiles to spread capital across the business development continuum. Foodshot Global’s diverse base of partners include Rabobank, The Nature Conservancy, and multiple foundations who “all speak same language and come from same angle,” Friedberg explained. “A more collaborative model is needed for the future, and there needs to be other voices at the table [who] look at things from global perspective.”
See: Dutch alternative meat company, the Vegetarian Butcher.
Jaap Korteweg was a ninth generation-farmer who was inspired to become a vegetarian after the outbreak of swine fever in the late 1990s. He committed to developing alternative “meat” products that tasted just as good as the real thing, and launched a small vegan “butcher” shop in The Hague in 2010. As companies like Impossible Foods and Beyond Meat were infiltrating restaurants and grocery stores in the US, the Vegetarian Butcher was quietly building up its own vegan meat empire, selling its products in 4,000 outlets in 17 countries.
But unlike the others, when it hit a critical junction in growth, it looked away from public markets and private equity investors. Instead, it chose Unilever. The consumer goods giant agreed to buy The Vegetarian Butcher in December for an undisclosed amount. When asked why the company chose to sell privately rather than publicly, co-founder Niko Koffeman said it was about scale. “In a few years, [alternative meats] will claim double-digit market share,” Koffeman estimated. Unilever’s labs and distribution channels in 190 countries give the company a significant edge in helping to drive that through by both creating new products and reaching new customers. Robbert de Vreede, Unilever Benelux’s vice president of foods and digital transformation told AFN, “It’s a scale they’d never be able to reach on their own.”