Where We Are Investing Now: Food
Food and drink are essential for survival and are also new expressions of the emerging science of health and happiness. Increasingly, science is indicating that what we eat is the first step in medicine and prevention: Food as Medicine. We also see increasing ties between food and how we feel and function: Food as Mood.
In addition, food is increasingly under pressure. Population gain and wealth accumulation have elevated the global demand for meat, which is expected to double by 2050, driving the need for alternatives. In Q3 2020, the bioengineered foods segment saw the highest quarterly deal value in the past decade, with $1 billion invested across 35 deals. According to the Department of Health, lactose intolerance is extremely prevalent in almost all cultures except northern Europe — in fact, Pitchbook actually predicts lactose intolerance to grow, leaving a blue ocean for plant-based cheeses. All of this is exacerbated by global warming which upsets traditional patterns for growing and harvesting food from the land and sea. Future food supplies will need to be decoupled from acreage if we are to feed an increasingly crowded planet.
So, we seek companies that can transform the nature of food, reduce its negative impacts on the planet and increase its availability in an altered landscape. We look for deep science, but science alone is not enough. Our prospect companies must also have clear go-to-market strategies and strong management. They need to be world market-oriented and world-class. For the balance of this year, we’re looking for companies in these areas, as exemplified by thriving companies in our current portfolio:
- D2C and the B2B side of lab-grown and plant-based meats: The line between these two types of companies is starting to blur. We should expand this definition to include the supply side: collagen, colorants, shelf-stable ingredients, bioreactors as a service, etc., like our companies Novel Farms and Orbillion Bio.
- Coffee/Tea/Water: Only if it’s a novel delivery method or is creating a new ritual around better ingredients, like our company Copper Cow.
- Alcohol Replacement Beverages: Only if it tastes outstanding, there is clear traction, the ingredients are safe, and the method is protectable.
- New/Novel Ingredients: This includes “functional ingredients” with direct health effects like increasing blood flow to the muscles or slowing down the heart rate. All new ingredients should be scrutinized by our science team for safety and efficacy. This category will come down to taste and function, validation for which will come from market reactions, so we may invest a bit later here than in other categories.
- DNA-Based Nutrition: Science is strong for microbiome, like in our company Thryve, but in most other cases science needs to catch up. We will look at a lot of companies here, but will invest rarely as we wait for the science to mature.
- Medical Food or Food for Special Medical Purposes: We should keep an eye on the space as it develops but not move on anything yet due to tough regulation in the space. It is extremely difficult to get covered by insurance but startups (including Thryve) are starting to be able to recommend food based on your condition. It’s only a matter of time.
We should also investigate these food-adjacent areas:
- Food Robotics and AI like autonomous delivery, fresh vending concepts, and other novel technologies that can reduce the cost of food production and distribution while also ensuring food safety, like our company Yo-Kai.
- New product development to identify optimal flavors, textures, nutritional components, and ingredient combinations, like our company Aromyx.
- Customer experience to help them find the ingredients/food they’re looking for. We’re seeing applications in the home through the phone or smart devices.
- Waste Prevention and sustainable packaging: The sustainable packaging industry is worth $367B, according to CB Insights’ Industry Analyst Consensus. With certain types of plastics being banned around the world, green manufacturing will become table stakes and we should look for the companies that are democratizing this type of manufacturing (as a service, or through new innovation).
- Cell-based production: Most cell-based production is based on medical devices and methods. We should keep an eye out for people disrupting the methods and machinery needed to produce these new ingredients.
We are experiencing an exciting new science-driven revolution in food, opening new ways for us to use food to lead us toward optimized mental and physical health and ensuring food supplies for the decades ahead. If you know any great entrepreneurs focused on innovative food alternatives, we would love to hear about them.
By Managing Partner Mike Edelhart