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.

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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.”

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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. 

solar foods finland space mission food flour

solar foods finland space mission food flour

In fact, dramatic rises were seen in the sales of vegan and plant-based alternatives to meat and dairy products during the pandemic, and they remain high. This surge in demand even outweighed increasing sales of traditional meat and dairy products seen during the ‘hamster shopping’ season in Spring, said Cooney.

While the field in general seemed robust in the face of pandemic uncertainty, Wolfmeyer and Cooney saw some food biotech startups falling through the gaps, especially those that depended on providing food services. The ProVeg Incubator, for example, advised early-stage startups on how to tighten their belts and apply for governmental support.  

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What has also become clear this year is that startups making meat alternatives could also strengthen protein supplies during the uncertain times of the pandemic. 

We’ve seen significant disruptions in the conventional meat supply chain,” said Caroline Bushnell, Associate Director of Corporate Engagement at the Good Food Institute in a July article by Fast Company. Companies using fermentation- and cell-based production methods could better automate the meat production process and make it more resilient to Covid-19 shutdowns.

Politicians seem to be thinking along similar lines. They’re opening up new ways to maintain a steady protein supply in the face of future disruption.

We’ve also seen in the past six months governments working to move forward with further establishing the regulatory pathway for biotech-based alternative protein products, as a way to diversify the protein supply chain,” said Cooney. 

The EU has also recently allocated a €550B recovery fund with a focus on green initiatives such as making agriculture more sustainable. These funds could trickle down to biotechs working in the food and cellular agriculture space, though some worry about the lack of precise guidelines on how to spend this funding.

One of the limitations of this growing movement is the strict stance of the European Commission on products containing genetically modified (GM) ingredients. Impossible Foods is currently awaiting an EU decision on whether it will be able to commercialize its products on European soil. Some believe the company might substitute its meat flavoring for a non-GM alternative to speed up the approval. 

For many food biotech startups in Europe, though, this anti-GM environment is no hindrance. For example, Solar Foods doesn’t require the use of genetically modified organisms, since it uses a natural strain of bacteria found in soil. Similarly, Mushlabs grows mushroom roots in a fermentation system with no need for genetic engineering.

In general, the main obstacles standing in the way of getting lab-grown food into the mainstream are pricing, quality, and public image. Affordable pricing will take time while the startups scale up their technology. Food quality and public image could still have an uphill struggle given the historically mixed reception of ‘fake meat’.

Maybe it’s for companies like ourselves now to prove new products are good enough so that they don’t taste like in the past,” Vainikka said. 

So it must taste good and be equal, or better than, what we have today. Then people will naturally go for it.


Images from Elena Resko and Solar Foods

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