2025-04-24 06:47:20
AS FUNDING REMAINS DIFFICULT TO SECURE AND ALT-PROTEIN COMPANIES CONTINUE TO CONSOLIDATE, HAVING A TEAM OF INVESTORS WITH A GOOD MIX OF BACKGROUNDS AND PLENTY OF PATIENT CAPITAL IS MORE IMPORTANT THAN EVER.
“Who your investors are is as important as how much and when they invest,” Steven Finn from Siddhi Capital said during a panel discussion during Tufts’ Cellular Agriculture Innovation Day earlier this year.
To illustrate his point, Finn told the story of two now-defunct cultivated meat companies that Siddhi had in its investment portfolio: New Age Eats and SCiFi Foods.
“Both of [these companies] had weird investment stories for totally, totally different reasons with totally different investors,” he said.
New Age Eats, he explained, partnered with a lead investor that was “fundamentally misaligned” with the company from the start: While New Age wanted to sell hybrid sausage, the investor wanted a cultivated pork fat company. Because of the mismatch, “when things got a little tough, there was not enough good blood to keep it going.”
SCiFi Foods, on the other hand, teamed with a lead investor that “effectively pushed everybody else out,” Finn said. “And then [the investor] basically just walked away in the night.” This left SCiFi, he said, with several investors who didn’t have enough “meaningful skin in the game” to save the company.
In effect, Finn said, building a balanced capitalization table with a good mix of investors is an important but often overlooked fundamental for startups. For more perspective, Alt-Meat reached out to CEOs, CFOs and investors about what makes a good investor and a good mix of investors.
BRETT BROHL
MANAGING PARTNER, BREAD AND BUTTER VENTURES
I don't necessarily think that alternative meat companies are failing because of the investors that they had on their cap table. Now, there’s probably a couple of examples where that’s the case, but in general, I think it’s more likely that expectations set by both investors and founders were misaligned or were unrealistic — expectations of how quickly companies are going to be able to go to market, how quickly companies will get to price parity, how quickly companies might start driving revenue. Those investors that might not have had the capacity to continue to finance a company 10 or 15 years into the future had shorter term outlooks than what was realistic.
As a company that’s more of a deep tech company, which is what alternative protein typically is, as you’re looking for an investor, if you can pick from anyone, it’s best to align yourself with investors that have the capacity to continue to fund you for the entirety of your development process. Make sure expectations are set well and that you're being realistic about what you can get done and how quickly you can get it done.
JOE TURNER
CHIEF FINANCIAL OFFICER, VOW
The industry is going through a major shakeout process. From a company perspective, those without real technology won’t be able to raise again in this environment.
From an investor perspective, only those who are really motivated to understand the drivers of success in cultured meat are going to be able to get comfortable in the space. As a result, there are a lot of folks who maybe would’ve invested in the past that now won’t. There’s a lot of scar tissue left from companies that overpromised and underdelivered.
As a company, if you’re thinking about needing more than one funding round to get to profitability, it is increasingly critical to have a lead investor who really understands food and food economics, ideally with significant experience in alt-proteins.
That assumes that your company can stand up to the level of technical diligence that those smart money investors will do. But if you can, then it’s critical in this environment to have those real smart long-term investors on board.
DAN ALTSCHULER
MANAGING PARTNER, UNOVIS CAPITAL
My advice to alt-protein companies is to focus on a value proposition that can be sustained with the right level of funding. We’re not where we were five or six years ago, where the promise of cellular agriculture was high and the cost of money was low. Then, investors were willing to explore and be bullish about developing technologies with larger checks.
Previously, early-stage funds were counting on growth funds to come in and take the second or third level of funding for these companies. But then the growth funds came in and those companies were still far from being able to generate healthy revenues and cover their overhead. And that coincided with a drop in venture capital as investors said, ‘Wait, this situation has changed.’ This changes how founders should move in the world.
Different pools of capital have different constraints, focuses and return profiles. When we’re talking about early-stage ventures, let’s say a traditional fund is 10 years in time. That means investors are going to want to make their money, plus a nice multiple, over a period of six to eight years. If a founder is proposing something today to a fund in its second or third year, you need to be realistic and ask yourself, ‘Am I able to bring in the returns that this investor requires in the time frame that they require?’
If so, great. But if you’re proposing something with a much longer horizon, then other pools of capital — be it sovereign wealth funds or endowments — are going to be better able to sustain the ups and downs. In this case, I’d recommend bringing them in earlier and really getting them comfortable with your value proposition. It might take longer, but it will create a much more supportive two-way relationship.
ESHAN SAMARANAYAKE
ANALYST, BETTER BITE VENTURES
There are five things I’d say a company should look for in an investor: First, look for partners who offer more than just funding. The right investor can make introductions, open doors and share insights to help you avoid costly mistakes. They should connect you with corporate partners who can provide guidance or amplify your brand through media exposure.
Second, find partners with patient capital and realistic timelines because in alt-proteins, the timelines vary quite a bit depending on your technology. There are different regulatory pathways, different marketing strategies. The right investment partner understands these nuances and can help set realistic milestones and prevent the dangerous cycle of over-promising and under-delivering that has damaged many startups.
The third thing is an investment partner that has a global perspective with local understanding. This dual perspective helps companies navigate regional regulations, consumer preferences and also supply chain considerations. The right partner can help you localize not just your products but also your business strategies. They can help chart a smoother market entry with more culturally relevant products, avoiding some of the costly missteps that come from applying Western approaches to an Asian market, for example.
Fourth, find mission-aligned investors who are committed to sustainability and decarbonizing the food system. They will be more patient, supportive and proactive in helping reach financial and impact goals throughout the journey. This alignment creates more resilience when when market conditions tighten.
Fifth, find investment partners who are clear on the investment criteria and process. You want to work with people who communicate their expectations and decision-making process openly in early stages of the engagement because this saves founders’ valuable time.
RILEY JACKSON
HEAD OF PARTNERSHIPS AND MARKETING, IVY FARM TECHNOLOGIES
The first thing to note is that many startups in any nascent industry don’t make it for one reason or another. I think the stat is that only about 20% of startups make it. So if you look at that average, we’re doing pretty well. There are companies thriving and some that are not, of course, and it’s heartbreaking to see anyone go under, but we learn from each other. It’s a collaborative space. Things are still optimistic and collaborative, even after companies go under.
In terms of investment, the important things are perspective and transparency. Perspective is important so the investor understands relative pace. A venture capital company looking at what we’re doing is going to say, ‘That’s not fast enough.’ But we’re inventing this industry. It’s not going to happen overnight. We’re not going to follow a typical venture timeline. As an industry, we really didn’t know that going in. We’re making progress, and we’re moving much faster than your typical new biopharma tech. Having that perspective is important.
Transparency and being able to say, ‘These are the challenges,’ is the other. I think many companies are afraid to say that to investors. But great investors appreciate transparency and say, ‘Great, now I know the risk, so I can make an informed decision.’
ELYSABETH ALFANO
CEO, VEGTECH INVEST
Get the investors that get the vision. Don’t bother to work with those that don’t get the vision because they’re not going to be with you for the long haul. You really have to work with those who can see the long-term vision, rather than the quick delta in profit.
I also think it’s important to work with investors that see the value of building out foundational elements, like the supply chain and infrastructure, and not just the value in the innovation or the product. Infrastructure and supply chain are less sexy, but you want to work with someone who understands the value in investing in that.
In terms of finding the right balance of investors, it’s not as if there is an overflow of investors and we can all cherry pick which ones we want to work with. In today’s economy, you have to be realistic and get the money where you can get it. It remains a very dry, lacking capital kind of market.
Should you be lucky enough to be able to cherry pick, I think it’s great to have a good portion, at least 30%, of visionaries that can help you strategize, stay true to the mission and go through the valley of death with a targeted vision. It’s also nice to have a third that’s there just for the money because you don’t want to have everybody up in your business all the time. That doesn’t work. And if you’re lucky enough that you can get non-equity capital, those grants and things that don’t change the cap table, well, then you’re really blessed.
JOHN STAPLETON
FOOD-TECH INVESTOR
It amazes me when it is claimed that a business going bust is due to having the wrong investors. It doesn’t happen like this. This excuse suggests it is someone else’s fault. It’s not. It is always management’s fault.
When a business goes bust it does so because costs are higher than revenues. If businesses are relying on shareholder’s funds to plug big holes in working capital and shareholders don’t want to put more money in, that amounts to the same problem. The company can’t survive.
if the business has no revenue or is a long way from realizing revenue, then it shouldn’t be raising funds. The time to raise funds is when you have your playbook worked out. This usually means you understand your target customer and have at least a few of them paying for your product. Up to then, you need to bootstrap.
‘Build it and they will come’ is a high-risk strategy. If shareholders come in on this promise, they are either gullible and believe your hype or they don’t really understand the food industry, or both.
Applying this to the alt-meat sector, too many investors either came in on the back of a lifestyle claim (‘saving the world through veganism’) or with the belief that new technology was going to deliver non-meat alternatives that are as good as meat. Neither has materialized. Not enough consumers are prepared to save the world through veganism — certainly not enough are prepared to pay a premium for this benefit — to make the types of investment seen in the heady days of 2020-2021 make any sense (now).
Concerns over cost and ultra-processed foods haven’t helped but growth in the alt-meat sector has plateaued. Initial dramatic growth was fueled by lifestyle motivations. Growth beyond this relies on flexitarians, but feedback has been that product quality is not sufficient to convince flexitarians to convert.
The sector now has a double problem. Those businesses who haven’t yet gotten to breakeven are reliant on raising further funds to bridge working capital losses. As the investment climate hardens, cash for businesses without a clear and immediate path to profitability has become scarce. This has nothing to do with having the wrong investors. It has everything to do with having the wrong strategy. Building revenue without knowing when profitability is going to materialize is hazardous. Building technology without knowing when revenue is going to kick in is reckless.
FRANK KLEMENS
MANAGING DIRECTOR, GENERATION FOOD RURAL PARTNERS FUND, BIG IDEA VENTURES
The plant-based meat space right now has the highest failure rate. And I don’t think the investors are to blame there. The companies are either not led by the correct person or they can’t get to revenue at price parity or cheaper than what’s already out there.
For an investor who’s looking for revenue, they’re not getting it from plant-based meat either because the leader doesn’t understand that a company isn’t a research project or they’re using exotic materials so they can’t get to price parity.
With cultivated meat, I think the problem is that there’s a misalignment of expectations between the investors and startups.
I was in Boston recently, and I talked to a company that said, ‘We’ll have a product out in two years.’ And when I asked how they plan to get there, they hadn’t even figured out their science yet. An investor is going to expect revenue in about two years. But there’s no way the company can deliver.
Some radical transparency in the due diligence process, I think, would really help the investors and the companies. A lot of these investors don’t understand the science, and I don’t blame them for that. But due diligence needs to be more realistic.
We need patient capital in cultivated meat right now. We need companies focused on getting the science connected to the commercial piece. If those two things would come together, I think companies would get that follow-on investment.
ROEE NIR
CEO, FORSEA
I see the investor-entrepreneur relationship as a long-term investment, and that is why it is important for there to be a good atmosphere between the two parties from the beginning. I’m looking for partners and investors that can actually work with us on this journey.
Most of our partners are food-tech or impact VCs that specialize in the domain where we operate and can contribute — not only from the financial point of view but also with making connections to the relevant food partners and future investors. Different investor partners can help you cross different funding stages at different points in your growth. We also have relationships and investments from several food companies, primarily in Japan, and these investors help us develop the product and adapt it to the local market.
These are challenging times, but even in challenging times, it’s important to choose your investors because really the idea is to collaborate along the way on this complex journey. And you need partners who can, on the one hand, push you forward and on the other hand support you. I can say that it is evident from my current partners that I made the right choice.
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MEETING YOUR MATCH
https://library.alt-meat.net/articles/meeting-your-match