3 Questions with Venture Capitalists
Tremendous innovation is taking place in the food & beverage (F&B) space, as technology becomes increasingly integrated, and start-ups pioneer new ingredients and products.
Why are food innovation start-ups so attractive for VCs right now?
Food-related businesses – from delivery services and restaurants, to manufacturers of new foods and additives – have seen an unprecedented amount of funds pour in as investors tuck into the sector.
How do venture capitalists (VCs) view the F&B landscape and related innovation opportunities, both at present and looking into the future?
Four of them, who will speak at Food Industry Asia’s Food for the Future Summit on 26 April, share their thoughts on innovation within the Asian F&B industry, and their visions for the future of food.
Simone K. Frey (right), Managing Director at Atlantic Food Labs GmbH, with a staff of BioAnalyt - a life sciences start-up developing rapid QC tests.
Dr Simone Frey, Atlantic Food Labs: If you look at investment opportunities, the tech market is competitive and almost saturated. On the other hand, the food and nutrition industry have huge potential for new products and services. The industrialized food of the 20th century has led to major public health challenges, and consumers increasingly request healthy food and for brands to be transparent. Food companies are attractive for VCs as they have to raise less than tech companies to reach $10m in revenue.
Dr Eddy Lee, Coffee Ventures: The adage “Software is Eating the World” was coined by Andressen Horowitz back in 2011. It refers to how Moore’s law has seen exponential growth in computing power, and miniaturisation of end terminals into the form of smartphones, which are in the hands of about 3 billion people. Hence, tech services are no longer fundamentally limited by distribution, but rather by the design on the product itself. This period has seen the rise of marketplace with huge market sizes e.g. Airbnb, Uber, but new marketplace seem to be dealing with niche service with smaller market sizes. VCs are always looking for the next ‘big thing’, and food as a category definitely fits this bill.
Mr Niccolo Manzoni, Five Seasons Ventures: It is so attractive because of the problems the world is facing, in terms of food insecurity. Now is the best time in history for a food tech entrepreneur to build a big business, due to the confluence of a few reasons. One reason is clearly that over the past decade, large corporations have not been so innovative, and not really set up for doing any radical innovation.
Also, the cost of technology has dropped dramatically over the past few years, for instance the cost of the revolutionary technology of genome sequencing. From a technological standpoint, there are now less barriers for developing a new technology, and the low cost enables the technology to be transferred and applied across industries.
Going back to the macro side of things, food prices have increased globally since the ‘90s, indicating a misalignment in supply chains. This therefore pushes companies for more radical innovation as well.
Matthieu Vermesch, Founder of VisVires New Protein, speaking at a recent event in Israel
Mr Matthieu Vermersch, New Protein Capital: The science of food production has not changed much over the last 20 odd years. Moreover, supply chains and distribution networks have gotten more complicated and less sustainable. Big food companies have been struggling to adapt to the multi-dimensional shifts within the system; from the environmental limitations upstream to the often fickle yet demanding consumer downstream.
Thankfully, we’ve been seeing a healthy and impressive pipeline of start-ups that could provide game-changing solutions to address the many gaps within the industry. A number of these companies are now primed for venture investment with very attractive return profiles.
What type of food innovation do you think presents the biggest commercial opportunity over the next 5 years?
SF: Personally, I believe that cellular agriculture / lab-grown meat tackling a trillion-dollar market represents the largest opportunity this century. However, unfortunately, the technology is still in its early stages, making it unrealistic to reach commercial scale before 2030. Before this wave, I expect plant-based products to replace traditional products by 2025, in particular milk (e.g. Perfect Day just raised $25m), beef (Beyond Meat raised $72m and is available now in more than 10,000 outlets) and eggs (Just Scramble has raised $240m and is available in all major US retailers) to have the largest commercial impact.
EL: The global demand for protein will only rise as more people enter the middle class. However, we are more than 5 years from price competitive, and taste-compatible steak, sashimi, or even burger patties due to the complexity in engineering heterogeneous texture and mouth feel of these products. Still, I believe that synthesis of homogeneous food products should be achievable in 5 years. And these include liquid eggs without cholesterol and milk without lactose.
NM: One is sugar reduction – that’s huge, with issues of obesity, unbalanced diets, huge healthcare costs and mortality, due to obesity and a lot of things linked to sugar over-consumption. There are a lot of start-up companies which are working on various methods of smart sugar reduction solutions – product reformulation, altering sugar molecules, etc. – and they all have part of the answer, but I think we have yet to see a company that has the full answer. Sugar reduction is clearly a big trend that is going to shape the next five years, or even more.
Personalisation of nutrition is also an area of opportunity. Consumers are becoming more aware of the nutrients and micro and macro nutrient profile of what they eat. I’ve seen lots of start-ups working on personalisation, for instance working on the microbiome, DNA, among other solutions to formulate personalised supplements and it is a super exciting space which I think food companies should pay attention to.
The third key theme that I’ve seen is alternative protein. The issue there is that animal-derived protein is incredibly unsustainable, putting a huge strain on natural resources, and its over-consumption is known to lead to health diseases. So there’s a problem there. What’s the solution? We’ve seen lots of companies that have already invested in alternative protein and mimicking meat, e.g. Impossible Foods, Beyond Meat, Hampton Creek. It is exciting to see the innovations come through, and this would definitely be a key commercial opportunity in the next five years.
MV: The ones that address an urgent existing problem within the system. For example, it is widely known that food is responsible (directly or indirectly) for 40% of chronic illnesses.
Going forward, it seems that the only way to effectively reduce the burgeoning public health costs for an aging population in developed / developing nations, are to improve on the manufacturing processes and ingredients so that food can be part of the solution and no longer a problem to human health.
We are at the stage of the process where current healthy / organic solutions are just a tiny tip of the iceberg. The end goal is to identify the technologies available which can enable us to produce higher quality food for the mass market at mass market prices.
What do you think the Future of Food looks like?
SF: In the next years we will shift our focus away from food and towards nutrition as food is only one component of nutrition. Advances in diagnostics such as non-invasive devices like FIDscreen or vitaScan will enable us to assess our nutritional status during our morning bathroom routine; the results will be send to a device to personalize mineral water and notify Habit, who will prepare a personalized breakfast based on the data. The kitchen devices will be connected to a shopping system and automatically reorder foods. A digital health coach will support us to live a healthy lifestyle - as startup UpgreatLife is doing.
Eddy Lee, Managing Partner of Coffee Ventures, at the Panel Discussion on SMEs in a World of Digistised Trade at the 12th World Islamic Economic Forum (WIEF) in Jakarta Convention Center, Jakarta
I believe that people in the future would look back as us and wonder how unthinkable and barbaric it is to rear a living animal, often in close proximity to one another and imperfect conditions, just to slay the animal for their meat. Due to overfishing, or unsustainable cattle rearing, having a piece of tuna from a living fish is going to become a luxury or novelty. The mass market will depend on produced protein products for their daily nutrition.
The future of food will be more personalised, more sustainable, and generally healthier for individuals. Less standardised, more customised, and more personal – it will no longer be just the food product that you’re eating, but the story that you’re hearing. People want to know where their food comes from, which is to say that food is becoming more transparent, and more traceable.
While we are well familiar with the ongoing trends of the food industry, we would be getting ahead of ourselves if we think we could predict what exactly the Future of Food will be. What we are certain is that food will always be at the mercy of the consumer and a function of their likes and dislikes. Our purpose as investors is to ensure that big food manufacturers are provided with the tools and technologies to adapt swiftly to their ever-changing demands. The amount of innovation required to restore the value chain into a sustainable and rational system is massive. While the investment opportunities going forward will no doubt be abundant, distinguishing between what emerging solutions are “necessary” for the industry versus the “nice-to-haves” will require some discernment.
FIA’s inaugural Food for the Future Summit will take place on 26 April at the Grand Hyatt in Singapore. This invitation-only event for CEOs and senior leaders will feature debates around some of the biggest food trends and issues relating to food innovation, reformulation, sustainability and product packaging.
A full list of the speakers that will be attending the Summit can be found here.
Dr Simone K Frey
Altantic Food Labs
Simone is the Managing Director of Atlantic Food Labs (AFL), an early-stage fund that brings together start-ups and investors in the health and nutrition space. Before she joined AFL Simone led BioAnalyt, a life-sciences company, from start-up to profitable business. She is also the founder of Nutrition Hub, a community of 5,000 nutrition experts in Germany providing trends on jobs, start-ups and latest science. From 2012 to 2015 she coordinated the European Nutrition Leadership Platform (ENLP), connecting 1,000 key players in food and nutrition.
Dr Eddy Lee
Founder & Managing Partner
Eddy has invested in more than 50 US and Asian start-ups. He relocated from the Silicon Valley to Southeast Asia to cofound Coffee Ventures to tackle unmet needs in emerging markets. The early stage fund focuses on people development, product-market iteration, and go-to-market strategy. He mentors at Stanford University’s StartX accelerator among other institutions, and was previously a consulting professor, a medical imaging scientist, and a circuit design engineer.
Mr Niccolo Manzoni
Five Seasons Ventures
Niccolò is a Founding Partner of Five Seasons Ventures, a newly established venture capital fund focused on investing in early stage companies along the food value chain. Niccolò has been investing in Food Tech since 2014 and has managed a portfolio of over 10 companies, including Impossible Foods, Clara Foods, Beyond Meat and Clear Labs.
Mr Matthieu Vermesch
New Protein Capital
Matthieu founded New Protein Capital in 2014 with a focus on innovative solutions to the acute inefficiencies of the food industry. They look for disruptive technologies to improve the interaction between food and health, solutions to tackle food waste, food safety & traceability, and to address the unsustainability of the protein production system. The fund has already deployed capital into two promising start-ups, Ynsect and Nuritas.
Matthieu has over 25 years’ experience in investment management. Most recently, as Senior Managing Director, Director of Research as well as a member of the Executive and Investment committees of Everest Capital.
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