Bankrolling start-ups: What are investors looking for in alternative proteins?

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©GettyImages/lchumpitaz (Getty Images/iStockphoto)

Significant investment is required to get innovative protein start-ups off the ground. So what are investors looking for when deciding to bankroll new talent? And what do they predict for the future of protein? Cargill and S2G Ventures weigh in.

Innovation in the alternative protein space is booming. As Givaudan’s president of EMEA flavours, Henning Hartnacke, put it: “There is not a single day that passes without another Incredible, Impossible, Amazing, Beyond, or alternative meat and protein product launching in the market.”

The biggest name in alternative protein investment may well be Beyond Meat, which made headlines earlier this year (May 2019) becoming the first plant-based meat company to go public on the Nasdaq Stock Market. Within the first few hours on the market, its IPO price had risen from US$25 to US$65.75.

Whether it be “[plant-based] burgers, egg-less eggs, or milk-less milk”, there is dynamic development in the space, Hartnacke continued at FoodTech IL in Tel Aviv this week.

High levels of innovation require high levels of investment. So what criteria will help investors decide which start-up, entrepreneur, or innovator is worth their money?

Cargill looks to Series A and beyond

“When we think about investing in the food innovation space, a couple of things come to mind. One is really filling a niche or gap that we see in the system,” revealed Cargill’s strategy and business development lead for alternative proteins, Dominique Harris.

The alternative protein boom

The alternative protein market is on the rise. According to insight firm MarketWatch, the global market for neutral alternative protein is expected to grow at a CAGR of roughly 6.8% over the next five years. The company predicts a market value of US$6.62 just five years from today’s US$4.47bn.

The global agri-food company is no stranger to investment in the alternative protein market. In 2017, Cargill invested in cultured meat company Memphis Meat. The agri-food company is also an investor in plant-based protein through Puris, which has developed a new pea-based protein.

And earlier this year, Cargill contributed to a Series A funding round in alternative protein start-up Aleph Farms. The Israeli-based firm makes ‘slaughter free’ cultured meat using a 3D tissue engineering platform.

In terms of criteria, Cargill looks at ‘Series A and beyond’, Harris continued during a panel discussion at FoodTech IL. “We are looking at the technology, but we also like to say that we invest in people.” This means being confident in the leadership team and CEO, and ultimately, “figuring out if there are ways that we can leverage the scope and capabilities of Cargill to drive value for the start-up and for us”.

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Cultured meat will enter the market quicker than most expect, says S2G Ventures' Matt Walker ©GettyImages/nevodka (nevodka/Getty Images/iStockphoto)

For S2G Ventures (Seed 2 Growth), an investment company that funds innovation across the entire food supply chain from ‘soil to shelf’, the hunt is also on for that special ‘something’ in a product, whether it be the sourcing of its key ingredients, or its supply chain distribution.

The US-based firm has had a number of key brands in its portfolio, including Scottish vertical farming start-up Intelligent Growth Solutions (IGS) and Californian alternative meat company Beyond Meat.

“There has to be something…that we think provides some kind of lasting advantage. Otherwise, I think it’s harder for us to get comfortable,” S2G managing director Matt Walker told delegates.

What is sparking investor interest?

Cargill is intrigued by the ‘next new ingredient’ or ‘new innovation’ in the alternative protein, nutrition, and ingredient label space, according to the company’s strategy and business development lead for alternative proteins. “We are very proud to be an investor in Aleph Farms,” she continued, which is “looking at cell based and how that can potentially be an opportunity to feed a growing world”.

S2G’s Walker revealed the venture firm is interested in developments in alternative seafood. “Seafood is interesting, I think it’s nearly there. We are looking to make an investment in that space.”

In other alternative protein innovation, “we like products that tout fibre, whole fat varieties, and when it relates to the ingredients side, we look at platforms. We are not so…interested in a single hero ingredient unless…it is a large category. We like to look at technologies that can provide many products down the line.”

Cultured meat is also at the doorstep of the protein revolution, according to Walker. “I think it is really going to be something transformational…it will come to market sooner than a lot of people think.” The S2G managing director also predicts a trend towards ‘optimising’ real meat, whether it be through the mouthfeel or colourisation of real meat via cultured, hybrid products. “We think animal-based meat is peaking. We are just getting started in the alternative space,” he continued.

“There is a lot of direction there, there is a lot of opportunity there, and you see a lot of institutional capital going into the space. We are very excited about what cultured meat can do.”