Future Food Now: alt protein funding 2020 in Asia Pacific

Welcome back,

Together with Sonalie Figueiras, founder of Green Queen Media, we’ve been working on something cool: estimating how many $$$ in total went into alternative protein startups in APAC. It’s tricky, with source data all over the place and not all the funding rounds public.

Fortunately we both have close connections with the region’s startups. So we’ve reached out to founders and asked if they’d share numbers with us for research purpose. Nearly all of them said yes and I am grateful for their trust.

Numbers tell the large part of the story (spoiler: it’s meaningful and growing rapidly). But to make it more fun for you to read, I added some analysis and asked founders, investors and industry insiders for their views.

Enjoy this deep dive into APAC alt protein funding scene,

Michal

PS. If you like this edition, please forward it to your friends/coworkers - and spread via social media. Check out the shareable infographic at the end of this email.

Let's start with some numbers...

Here is the headline figure: over US$230 million in funding raised by alternative protein startups in Asia Pacific during the past 12 months*.

What matters even more is the growth rate: over 350% compared to investments from the previous three years combined. To be clear: that’s not YoY growth, that’s 4.5 times more in just one year than total funding in prior 36 months.

I have watched this rapid rise since I have started this newsletter a little over 2 years ago. My goal has been to shine a light on alternative protein startups, investors and products that are transforming the food system in Asia Pacific region. But the industry was so nascent that in the first edition I was only able to feature 3 local startups! Fast forward to today and there is no way I can fit all news in a single newsletter issue.

My co-author for this research, Sonalie Figueiras from Green Queen Media, shares a similar sentiment:

The funding numbers we are releasing are in line in what we see in our newsroom every day: the APAC alt protein scene is exploding with launches and announcements almost daily.

To put the numbers in a broader context, GFI reported $820 million invested in alternative protein startups globally in all of 2019 and US$1.5 billion between Jan and Jul 2020 (which includes $700m for Impossible Foods alone).

Let’s dig more into the data, starting with a breakdown by sector:

Perhaps not surprisingly, plant-based startups are dominating with 86% share of the funding pie. Cell-based (or cultured) meat, seafood and dairy as well as precision fermentation protein are still relatively new technologies with only a few active startups in Asia Pacific. The number is poised to grow - there are at least several entrepreneurs I know of in early-stage research and prototyping while existing cell-based startups continue to attract more funding.

Here is a look at most funded alt protein startups in APAC during last 12 months:

Leading the pack is an Australian plant-based meat startup v2food. During the last 12 months it announced closing two separate growth rounds with a total of US$80 million. Their cap table reads like ‘who is who’ of top Asian funds: Temasek, Horizons Ventures, China Renaissance, Sequoia Capital China and others.

The company’s flagship products v2burger and v2mince have recently been rolled out across 1,400 outlets of two major supermarket chains in Australia, Coles and Woolworths. v2food is now scaling up - building its own factory in Victoria region - and preparing to go international. CEO Nick Hazell told me recently that they have already exported small quantities of their plant-based beef to several Asian countries (Korea, Japan, Singapore) and had a private tasting of plant-based pork prototype in Shanghai. Mainland China is a top focus market for v2food.

Source: v2food

Number 2 on the list, Green Monday Group, closed US$70 million round in September, joined by TPG’s The Rise Fund, Hong Kong conglomerate Swire Pacific, Sino Group’s Ng Family Trust, CPT Capital, as well as celebrities like the singer Wang Leehom, filmmaker James Cameron and environmental activist Mary McCartney.

The group operates a network of plant-based restaurants and retail shops under Green Common brand, acts as exclusive distributor for brands like Beyond Meat and Califia Farms and has a product business called OmniFoods, making plant-based pork products under Omnipork/Omnimeat brands.

This year the company announced a number of food service & retail partnerships, including 7-11 Hong Kong, Starbucks China, Taiwan dumpling chain Bafang Yunji among others. Its latest product, Omnipork Luncheon has debuted at breakfast menu at McDonald’s HK locations in October. The latest round of funding will be used for international expansion with flagship Green Common stores opening in Singapore and Shanghai in Dec-Jan.

Source: McDonald's Hong Kong

No. 3 is Starfield Food Science & Technology, currently the most funded alt protein startup in mainland China.

The Shenzhen-based company closed several rounds in 2020, initially from Dao Foods / New Crop Capital, later joined by well-known Chinese VCs: Joy Capital, Matrix Partners China and most recently Lightspeed China Partners.

The total funding number is not disclosed and I am not allowed to share it (we used it for aggregated figures). The company officially announced US$10 million funding in August.

While the startup is using co-manufacturers so far for their plant-based meat, co-founder Chen Suiwen told me over email that they will “start building our own production facility to manufacture our original plant-based products including beef, chicken and more”. 

Starfield’s go-to-market strategy? Food service partnerships. The most recent one: plant-based chicken patty and nuggets for Dicos, 3rd biggest fast-food chain in China. For Starfield, it means its products are widely available (Dicos has 2,600 locations, including in many tier 2/3 cities) and accessible (the burger is priced at affordable 20 yuan or ~US$3).

Starfield x Dicos chicken burger and nuggets, source: Sixth Tone

Fourth on the list and the most funded cell-based startup in the region: Shiok Meats, developing cultured seafood products, initially focusing on shrimp. After US$3 million bridge round earlier in the year, Singapore-based company closed US$12.6 million Series A in September. The round was led by Aqua-Spark, Dutch ‘sustainable aquaculture’ fund and joined by Enterprise Singapore’s investment arm SEEDS Capital, Japanese government backed Real Tech Fund, Korean VC firm Yellowdog and others.

Shiok prototyped cultured shrimp product and used it in siu mai dumplings (I had a chance to taste it in early 2019). The company says that the funds from Series A will go towards the construction of its first commercial pilot facility in Singapore.

Source: Shiok Meats

Closing the TOP 5 is Growthwell, also from Singapore. In April it announced the closing of US$8 million round led by Temasek and joined by DSG Consumer Partners, Insignia Ventures, Genesis Ventures and others.

It is arguably the least known company from the list and has quite a unique story: it started in 1989 as a family business known as SuXianZi & OKK Vegetarian Food Products Company - classic “mock meat” manufacturer and distributor with a presence in Malaysia and Singapore.

Now led by a new generation of the family, it is moving towards “modern” versions of plant-based meat products. The company partnered with popular casual sushi chain Sushi Tei in Singapore to develop a seasonal plant-based menu.

Growthwell also acquired a significant stake in Israeli startup ChickP and is planning to commercialise their proprietary technology - protein ingredient derived from chickpeas.

Source: Sushi Tei & ChickP

Alt protein startups on fundraising

I asked some founders of alt protein startups across APAC to share their experiences with raising funds from investors.

Basically, all agree there has been a large spike in interest from investors last 6-12 months.

Sandhya Sriram, co-founder and CEO of Shiok Meats:

Definitely much more interest especially from Asian investors, which was not the case 2 years back.

Dan Riegler, co-founder of Karana (Singapore):

Since the launch of Impossible Foods in Asia and the Beyond Meat’s IPO it’s pretty rare to find an investor who is not curious about the space.

Karana’s other co-founder, Blair Crichton adds:

A lot of investors just wanting to talk to you to learn - they haven’t made a decision yet if they are going to have a thesis around the industry and invest in it.

George Peppou, co-founder of Australian cell-based startup Vow sees additional acceleration from Covid-19:

Covid highlighted a few things to investors: 1. industrialised animal agriculture is a threat and will be increasingly scrutinised and 2. food sovereignty is a very real trend. Cultured meat is seen by a lot of them as a solution to both of these.

I was also curious how familiar with alt protein space and specific technologies are the investors in the founders’ eyes. Here are some of the observations.

Nick Hazell from v2food:

Most of the investors are pretty sophisticated and are well across what is happening in the alternative protein space. They recognise the urgency and share our mission of solving the global food challenge.

Michael Fox from mushroom-based Australian startup Fable:

I’ve found investors are very familiar with the sector. Before actually kicking Fable off I spent a lot of time speaking with various VCs and investors to get their thoughts on the space.

It seems to be a bit more tricky with more deep tech startups like precision fermentation and cell-based meat.

David Bucca, founder of Change Foods:

Most we’ve spoken with are somewhat familiar with the alternative protein space, however there is a large degree of variability when it comes to understanding of the various technologies. A common problem has also been a lack of resources or limited technical know-how within the firms to perform effective due diligence.

Sandhya from Shiok Meats:

[Some] do not understand cell-based meats in depth. Often equate it to plant-based meats which is very different. So a lot more education on the cell-based meat technology is required.

Fengru Lin, founder of cell-based milk startup TurtleTree Labs on how she is addressing this technology understanding gap:

Having come from a business background and needing to grasp some of the more complex concepts from our scientific team has afforded us [non-scientific] founders the useful skill of explaining technical terms in more layman terms to investors because we know exactly how they feel.

Finally, what are some of the common challenges startups encounter in their fundraising process?

Nick Hazell from v2food and Yuki Hanyu, founder of Japanese cell-based startup Integriculture were sympathetic with early stage investors, who bet on the company at the stage where there is little to show yet and a long road ahead.

Nick:

When we started fundraising [more than a year ago], we were asking investors to invest in a risky business, with only a limited track record of success, and massive growth ambition ahead of us.

Yuki:

We have to make a promise on something we have to start from basic research and explain the long timelines with large margin of uncertainties.

Blair Crichton (Karana), David Bucca (Change Foods) and Sandhya Sriram (Shiok Meats) each shared their perspective on approaches and attitudes of investors in various geographies.

Blair:

A lot of South East Asian investors want to see more traction and invest at later stages. There seem to be not as many funds willing to take those bets on early stage companies. Lots of US investors that invest at the seed stage but they generally don’t invest out of their geographic proximity.

David:

The biggest challenge in Australia/NZ is investor conservatism and higher risk aversion. This is further exacerbated for deep tech (such as cell ag and precision fermentation), and companies that are pre-revenue or pre-prototype. There is also an aversion to SAFE notes or convertible securities.

From my experience, Asian investors are generally more accepting of longer term payoffs, open to notes/convertibles, and have a higher appetite for risk in supporting deep tech and endeavours that are R&D intensive.

Sandhya:

Asian investors are still slightly risk averse but things are changing for the better. Also, due to COVID and travel restrictions, fundraising in general is hard.

Tim Noakesmith, Vow co-founder mentioned Covid impact as well:

For us, it was not being able to meet with investors in person. Having a founder pitching is one thing. Feeling the energy, seeing our culture and people in action is way, way more impactful. It was impossible for us to recreate this experience, and the belief that comes with it remotely.

APAC investors on alt protein deal flow

I also talked to VCs and angel investors from the region (some of which I co-invested with), asking for their thoughts on alt protein deal flow evolution in APAC and recent challenges.

There is a general consensus, in line with my own observations, that the deal flow quality & volume is improving rapidly.

Samantha Wong from leading Australian VC Blackbird (invested in Fable, Sunfed Meats, Heuros, and Vow):

There is no shortage of deal flow and quality has improved as the sector matures. Mega rounds raised by the likes of V2food are inspiring the next generation of founders. We are on track to do as many investments this year as we usually do, despite Covid challenges.

Albert Tseng (Dao Foods - China) and Andrew Ive (Big Idea Ventures - Singapore), who run hybrid fund-accelerators/incubators in the region have both seen a surge of applications as well as successful follow on rounds for their cohorts:

Albert:

Dao Foods Incubator team reviewed over 70+ applications and selected 4 promising companies for our first of six cohorts.

Andrew:

We have seen an increase in the number of APAC startup companies applying to the Big Idea Ventures accelerator program. Of the 12 portfolio companies that completed the first cohort of BIV accelerator program, 10 have successfully raised funds, ranging US$500K to US$2.5M.

Manav Gupta from Brinc - that recently partnered with Lever VC to bring their accelerator program to mainland China - agrees, but points out there is still a gap compared to the US & European startups:

Quality has improved but still has ways to go to catch up to their well funded Western counterparts who are able to raise larger rounds and invest heavily in deep benches from marketing to tech to commercialisation. 

[Initially] investment largely concentrated on plant-based B2C companies, interest in previously overlooked areas such as cellular agriculture, precision fermentation and hybrids has undoubtedly picked up in the past 12-18 months.

Samantha and Manav commented on increased interest from generalist VCs.

Samantha:

Generalist funds get comfortable with investing in this space. There is more angel activity seeding companies, and then at the other end of the spectrum, family offices and institutional LPs [limited partners], particularly with an ESG [environment social governance] mandate are keen on investment in growth stage.

Manav:

High profile IPOs, such as Beyond Meat, have peaked interest from generalist funds that invest at arguably inflated valuations in a hot market. Despite COVID-19 slowing down investments in many other sectors, alt protein continues to hold and looks likely to continue into 2021.

Covid-19 remains the main challenge for the sector. Samantha from Blackbird echoed some of the sentiments expressed previously by founders:

Borders remaining closed is proving challenging and in some cases fatal for conducting due diligence on companies. For example if a company doesn’t have a product in market yet and we can’t sample the product. Or, if the company is in lab or pilot stage and we can’t visit their facilities. There are also some intangible things you can sense when you visit a company’s workplace that convince you they are building a world-class culture. 

Andrew Ive (Big Idea Ventures) believes in creativity and grit of the founders:

Thankfully entrepreneurs don’t often get stopped by obstacles but find creative ways around them. We’re convinced this will help us identify the strongest teams as they respond to the challenges [like Covid-19] put before them.

What's next for alt protein in APAC?

What do investors wish they will see more of in the next 12 months?

Manav Gupta (Brinc) makes a solid list:

More startups providing upstream, B2B solutions that supply ingredients and technologies to B2C companies. Plant-based companies with technical defensibility and IP, as well as those that serve an unmet demand such as clean-label, functional, healthy plant-based alternatives, culturally specific foods with large markets or white-space areas such as seafood. Lastly, more and more startups providing economically accessible food options at a near price parity to the conventional counterparts.

Samatha Wong (Blackbird) mentions the need for more talent and government support:

We need more technical and food science talent to step off the sidelines to support the needs of our growing companies. I also hope governments will exercise leadership and create the regulatory and investment environment for sustainable protein to become a major industry. 

Simon Newstead, a fellow alt protein angel investor (invested in Shiok Meats, Change Foods, Fenn Foods and Fable, among others):

The quality of founders and the support community around them has accelerated greatly over the past year. This is reflected not only in increased consumer adoption but also in accelerating deal flow and investor interest. I believe we will see much more over the next 12 months and beyond!

Manav Gupta took a long view on alt protein industry:

This will be one of the largest shifts of behaviour in one of the world’s largest multi trillion dollar industries and thus represents one of the largest opportunities in our life times - to back the game changers who are working day in and day out to build a more sustainable, ethical and scalable food system. 

Feels like a good closing for this issue of Future Food Now - could not say it better myself.

Shareable infographic

Feel free to share this infographic via social media. Just remember to tag Green Queen and me (Michal Klar or Future Food Now):

Make sure you also read Green Queen's take on our collaborative research:

Exclusive: APAC Alt Protein Startups Raised More Than US$230 Million In Past 12 Months

In the past 12 months, counting from mid November 2019 through mid November 2020, APAC alt protein startups have raised just over US$230 million in total from angel investors and funds, which is over 350% (more than 4X) more than total funds raised over the previous three years combined.

www.greenqueen.com.hk  •  Share

* Methodology

Those interested in how we arrived at the number and what is included/excluded, please read below:

• All funding figures confirmed in person and in writing with Sonalie Figueiras or Michal Klar – some of the figures are off the record (not publicly disclosed) but the startups agreed to include them in the aggregate number,

• Period: mid-Nov 2019 thru mid-Nov 2020 (applies to closed rounds announcements or founders/investors declarations),

• Investment funding totals do not include accelerator funding, government grants or any competition prizes,

• Alt protein is defined as plant-based meat, seafood & dairy, cell-based meat, seafood & dairy and precision (acellular) fermentation dairy; the figures do not include algae and insect protein.