This article is based on an episode of the Red to Green podcast on food tech for sustainability and health. The first season is covering cell-based meat, dairy and seafood. Listen to this and past episodes on Spotify, iTunes and other platforms.
This episode features 3 interview guests and will give you an overview of the opportunities, untapped developments and challenges of cell ag. You will hear from two investors from Atlantic food labs and Big Idea Ventures, as well as from the founder and director of NX-Food in Germany.
Cell ag startups find it harder than plant-based to secure investment
Atlantic foods has already seen success in two companies they have backed; Meatable and Legendary Foods, now recognised as two staple companies in the plant-based and cell ag sector. Max explains that the main difference between investing in cell ag vs. plant-based is the level of uncertainty. Cell ag is a high risk sector, as it lacks any real scientific or technological research. It also offers a much slower time to market, a longer product development cycle and lab research effort.
A distinctive IP is crucial
The key? For Max it’s to “dig deeper” into the technology behind the solution and where and how the cell ag startup can build a clear IP. For a VC this is “one of the most important criteria when we look at a possible investment, because a clear distinctive IP leads to a lot of value down the road.”
“80% of the investment decision is based on the team…..Another 10% in waiting would probably be allocated to the market opportunity and the rest really to their intrinsic innovation potential or the technology that they follow.”
The Western world isn’t ready for insect-based solutions (yet..)
Could Max see Atlantic Food Labs investing in insect-based solutions in the future? Although he believes they have sustainable potential, Max believes it will be a struggle for insect-based startups to integrate into the western world as there is still a huge consumer barrier when it comes to eating insects. “It’s just so dislikable and people just are really grossed out by the fact that they eat insects.” It requires a real shift in consumer habits and since western consumers’ tastes are so deeply rooted, he thinks it will be a challenge to convince them.
“I think that’s going to be very, very,, tough thing to crack for most entrepreneurs.”
The next goal of food tech will be to improve human health
Max believes that the area we should be focusing on now is plants, as he predicts there will be a lot of companies trying to improve the way we grow plants to make them more nutritious for consumers. We have never seen plants being optimized for nutrient availability and preservation before, so there is a lot of white space in the market for startups who can do this.
“And of course, one overarching trend is changing people’s habits and diets.”
Max has seen nutrition become crucial in preventing lifestyle diseases like diabetes as well as offering immunity and life longevity boosters to help improve our overall personal health. He believes future solutions will be driven by microbiome and personalized nutrition in foodtechs next goal: improving human health.
Plant-based seafood is the next cultured meat
Big Idea Ventures has invested in the disruptive startup Shiok Meats (listen to their podcast episode here). Andrew explains that one of the biggest challenges that comes with cell-based meat is making it look right, but if it’s just an ingredient that you have to add flavour to, it doesn’t need to look like the real thing, making it easier to launch a cell-based solution on the market.
He went on to say that the market currently lacks any companies focusing on alternative seafood, and for Big Idea Ventures, ocean preservation and sustainability is core to the solutions they are looking for. Startups, take note!
Grinding it out – a crucial factor for startup success
The market is ripe with disruptive startups and Andrew says that the main criteria when looking to back a business venture is to look at the founding team and their vision and coachability. Do they have integrity? Are they driven? Are they going to have the tenacity and the perseverance to keep going in the most challenging of times?
“I think the things I was looking for in the beginning have changed over time….willing(ness) to grind it out is becoming more and more important as I’ve seen companies which have great opportunities sort of quit because it just becomes too difficult for them.”
Andrew says that when it comes down to it, they are really looking for a strong team that integrates innovation at every step of the business journey.
“There are teams out there who are just sort of trying to follow the footsteps of Memphis meat and other companies, they’re just sort of three years or four years or five years later than those companies. But they’re doing pretty much the same thing…”
COVID showed us the fragility of even plant-based supply chains
“The funny thing about COVID is, as the supply chain broke down, it sort of reinforced the point that even plant-based and its efficiency doesn’t work.”
Cell-based development may be one of the few categories in the protein space which allows increased food security for countries. More countries than ever are now looking into cell-based for increased food production as it does not require the resources of traditional farming.
“It is much more efficient and it’s closed loop or has the potential to be closed loop..”
Customers are betting on sustainability more than ever
The importance of sustainability is growing as consumer needs shift towards solutions that are nicer to our environment. Consumers aren’t just betting on sustainable products, but also on their packaging and their other approaches.
Companies worldwide are promising to reduce their carbon footprint as well as their plastic use across the whole supply chain. The biggest challenge he says? Large companies that have been building these commercial relationships for more than a decade now have to unravel these decisions to make new ones, and this is a massive change.
Cultivated meat must replicate the “real” thing to make it on the market
Fabio believes that the first cell-based products that reach the market must have the consistency, texture and taste of “normal” meat, in order to meet consumer expectations and find their place in the market.
Cultivated and plant-based meat take a long time to develop, even success stories such as Impossible Meat and Beyond burgers took time, research and intense testing to get where they are on the shelves today, and its this lengthy time to market that Fabio sees as one of the main “barriers” to commercialisation at the moment.
Consumer buying criteria in Europe differs from other countries
European consumers are highly critical because of the quality of the European “culinary landscape”. Consumers expect high class gastronomy that often isn’t found in other countries or continents. Fortunately, Fabio explains that European consumers are always looking to try new food experiences and he hopes that this openness offers an easy transition for cell-based meat to find its way onto the market.
Test your distribution strategy across every channel
A lot of startups make the mistake of thinking they know the market, but the market in Europe can be so fragmented that each country and their consumers are different. Fabio says that of all the “successful” food startups that he’s seen, like Impossible, Beyond or Oatly, they have one thing in common: they all developed a go to marketing strategy in the gastronomy sector, working with high-end chefs to perfect their products taste and texture. Why? If you are able to validate your product with such harsh critics you are sure to be left with a high quality final solution that will perform well in the market.
He also advised that food startups choose their distribution strategy wisely which includes testing it across every channel. This way you will be able to establish your target market and the channel which will perform best. Fabios tip: don’t put all your eggs in one basket when you first start out.
“You need to build up (your) own community in your own media and your own followers and fans are online and if you can leverage them in your offline distribution structure…(thats)something that’s really valuable if you are starting offline.”
Listen to the full episode on iTunes or Spotify
Maximillian Bade – supporting ambitious founders at Atlantic Food Labs. He offers his criteria for investing in the alternative protein space including plant, fungi and cell-based companies.
Andrew Dive – founder and managing partner of Big Idea Ventures. He discusses how the mindset within corporates has shifted with sustainability commitments towards both consumers and investors and how this is affecting the food industry. He also touches upon the effects of COVID-19 on the development of cultivated meat, and the emerging trends and companies we can expect to see in the near future.
Fabio Ziemssen – founder and director of NX-Food, the food innovation hub, and Founder and Chairman of BalPro; the German association for alt proteins. He shares his insights into European consumers, the importance of clear communication, and what a good sales ag marketing and wholesaler strategy looks like.
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