In recent times, an unexpectedly large number of investments have closed in biotech startups offering sustainable meat alternatives. Why are investors flocking to this field amid a raging pandemic?
Traditional agriculture is a major polluter, especially in the case of meat production. The highest estimations place its share of global greenhouse gas emissions at up to 20%. In an effort to meet the growing demand for sustainability, many biotech companies are developing less energy-intensive sources of protein via fermentation and plant products.
In spite of the financial chaos resulting from the Covid-19 pandemic this year, big money has gone to biotech startups producing meat alternatives. In the US, the prime example is Impossible Foods, which genetically engineers yeast to give plant-based meat alternatives a realistic meat flavor. Last month, Impossible Foods raised a Series G round of €169M ($200M) to accelerate the commercialization of its technology globally.
In Europe, a similar pattern is emerging. The Finnish startup Solar Foods raised a total of €18.5M in a Series A last week. By late 2022, the company plans to launch a protein food ingredient grown from bacteria using electricity, carbon dioxide, water, and nitrogen.
Add to the mix an €8.5M Series A round raised by the German startup Mushlabs, which grows protein-rich mushroom roots via fermentation, and a €19.5M fundraise by Lever VC, a venture firm financing companies developing protein alternatives. Within just a few months, the field has started to blossom.
According to Albrecht Wolfmeyer, International & National Head of the food startup incubator ProVeg, these rounds are just the tip of the iceberg. “Think of precision fermentation and companies like Legendairy in Germany, Remilk in Israel, or Perfect Day in the US, which just raised €254.3M ($300M) in its Series C,” Wolfmeyer said. “In Europe, the investment rounds are still way smaller but they are growing along with the enthusiasm.”
There are several reasons behind this funding surge, said Nick Cooney, founder and Managing Partner of Lever VC. For example, more startups in the field are emerging than ever. And as the first wave of products establish themselves in the market, investors get encouraged to join the party.
“In my freezer, I have pints of ice cream from the grocery store that have real whey in them produced via fermentation, without the need for live animals — the whey comes from US-based Perfect Day,” noted Cooney.
Pasi Vainikka, co-founder and CEO of Solar Foods, likened the situation to the rise of the digital tech sector at the turn of the 21st century. The development of the first mobile devices “was basically laying the foundations for a new industrial sector in the global economy,” Vainikka explained. “I can see the same with food now.”
What is most remarkable is that all of this progress comes in spite of the fact that the pandemic threatens economic recessions around the world. “Covid-19 didn’t turn out to be as destructive to the food innovation and investment ecosystem as we first thought,” said Wolfmeyer. “Investors were not as reluctant as expected but mostly rather bullish.”
“As food companies, they are all deemed ‘essential businesses’ so never had to pause operations or stop going into the lab,” added Cooney.