With venture capital investment in alternative protein companies plummeting last year, has the way that investors look at the alt-protein space changed completely? Well, yes and no. That was the verdict from venture capital investors in a panel discussion that took place at the Future Food-Tech Alternative Proteins Conference in Chicago June 17–18.

Expectations around an alt-protein startup’s unit economics and scalability have heightened, but bottom-line, investors are still looking for the same thing: a company whose products are addressing an unmet consumer need, several panelists concurred.

Consumer demand is focused around taste, price, and nutrient density, said Ashley Hartman, managing partner, Bluestein Ventures. “I think if you have all three, you’re in a really great position because you’re actually servicing the consumer.”

At PeakBridge, the bar has been raised on revenue expectations for startups, said Nadav Berger, founding general partner of the agri-food venture capital firm. Investors want to see strong revenues and potential for commercializing products sooner than they did a couple of years ago, he said.

“We are much more cautious,” Berger said, noting that PeakBridge has changed its criteria for making an investment in a startup. “Now, for us seed [funding] is a half million and above, [in revenue],” he said.

With an environment in which funding options are more limited than in the recent past and expectations high for startup founders, resilience is critical for startup teams. “If I had to distill it down to just one thing, what we’re prioritizing more than ever before is founder resilience,” said panelist Rosie Wardle, a partner with Synthesis Capital.

“It’s not just scrappiness and thinking about use of funding and building a business model with an execution strategy for the interest rate environment that we’re in now,” Wardle said. “It’s also about just sheer personal resilience. … We’re trying to prioritize finding the founders and the founding teams that we think can really cope with such a tough environment. “

It’s incumbent upon funders to provide founders with support, Wardle and Shayna Harris, managing partner, Supply Change Capital, agreed.

Coaching, leadership development, and mental health support are among the areas the team at Supply Change Capital is leaning into, Harris said.

“As investors [we’re] trying to give them as much hands-on support as they need to really survive the winter that we’re in now,” Wardle concurred.

Panelists suggested startups look for funding from other sources in addition to VC investment. That can include government funding, university partnerships, and equipment financing, they said.

Panelists consider alt-protein investment trends.

Panelists consider alt-protein investment trends.

Panelists consider alt-protein investment trends.

Panelists consider alt-protein investment trends.

Decoding Consumers’ Alt-Protein Expectations

In another session at the Future Food-Tech Alternative Proteins Conference, panelists analyzed the roadblocks to consumer acceptance of alt-protein products, many of which gained a toehold during the COVID-19 pandemic but since then have failed to sustain repeat purchases.

Kate Toews, an associate partner with consulting company McKinsey, theorized that market watchers may have misinterpreted consumers’ response to alt-protein products during the pandemic.

“We saw tremendous adoption [of alt-protein products]—what we perceived as adoption, I guess, during the COVID time window. And following that, it’s really fallen off,” Toews observed. “And I think what we consistently hear from consumers and from CPGs that have explored this space is maybe that adoption period that we perceived as really this starting to move up the S curve was not adoption. Maybe that was really trial. Maybe that was curiosity, interest, experimentation. And we [now] consistently hear continued disappointment around taste and texture with respect to [alt] meat products in particular.”

Often consumers have aspirational goals about incorporating more plant-based/alternative protein products into their diets, but that’s very different than the decision-making process that’s applied when someone is considering what to eat, said Suzannah Gerber, a senior research investigator with Tufts University. “Rational decision-making is not usually the primary way that decisions are being made. These things are probably more influenced by habit, taste, hunger, being in a rush—these sorts of contextual cues.”

As for the technologies like cell culture or precision fermentation that are applied in formulating al-protein products, consumers care most about a product’s taste and texture and are less interested in the science behind how it was created, panelists agreed. For that reason, it’s a mistake to overemphasize the science in consumer communication.

“When we present these things by saying, ‘Look how cool this science is,’ we’re really actually creating an intense barrier between the consumers and this product when what we should be doing, I believe, and what I think the data has been showing so far is that, it’s food,” Gerber said. “And when you approach this like a chef, like a culinary product, when you approach it in these more traditional ways, without apologizing for it, without disclaiming it, I think you’re going to get a lot further with the average consumer.”

Decisions about food are typically emotional decisions, agreed Stephan van Sint Fiet, CEO of Vivici, which makes animal-free dairy proteins via precision fermentation. “I think that trying to rationalize what is at its core an emotional decision doesn’t work,” he said. “And so if we try focus in our consumer messaging on the ingredient, how it’s made, our supply chain, the technology behind it, I think we’re missing the mark in a major way.”

Van Sint Fiet advocates changing the narrative of product communication. Consumers of alt-protein tend to care first about taste, second about health value, and third about animal welfare and the health of the planet, he claimed. “We see that upside down with much of the communication,” he said.

“There’s a lot of talk about consumer education,” van Sint Fiet continued. “But if you go to the supermarket, how many people do you think signed up for alt-protein summer school?”ft

About the Author

Mary Ellen Kuhn
Mary Ellen Kuhn is executive editor of Food Technology magazine ([email protected]).