4 investors discuss the next big wave for alternative seafood startups • TechCrunch

4 investors discuss the next big wave for alternative seafood startups • TechCrunch

Although investment in food technology has slowed in line with the rest of the VC world, the industry recently achieved some milestones that suggest the industry and government are aligning.

In fact, some investors feel that 2023 will be the year that alternative seafood companies and products make notable strides.

More than $178 million was pumped into alternative seafood in the first half of 2022, and the market value is poised to hit $1.6 billion in the next 10 years. One of the industry’s largest investments was Wildtype, which raised $100 million in a Series B round for its “sushi grade” farmed salmon.

If this momentum were to continue over the past six months, sector funding would reach or exceed $306 million invested in all of 2021, despite last year’s slowdown.

“Investment has been growing steadily and we expect this to continue,” said Christian Lim, Managing Partner of Blue Ocean at SWEN Capital Partners. “We see the alternative seafood industry achieving key technical and economic milestones faster than the alternative meat space, indicating potential for continued acceleration,” he said.

Many companies say they’re in it for the sustainability factor, and even with the FDA’s initial blessing of Upside Foods for their farmed chicken production process, the focus is on getting these alternative foods closer to scalability and marketability. cost of traditional meat.

“The farmed seafood industry is beyond the need to figure out the technology – the technology is there and continues to improve with each iteration,” said Kate Danaher, CEO of S2G Ventures. “Now we need to think about branding, labeling, consumer education, production at scale, and supply chain and input development and improvement that will support a scalable industry.”

Every startup journey is vastly different, but one pattern we’ve seen work is an iterative approach to go-to-market strategy, product development, and regulatory approach. Friederike Grosse-Holz, Director, Blue Horizon

And just like other fermented, cultured, and plant-based food companies, alternative seafood companies must also find the best way to get people to not only try their products, but also ask for repeats.

As we head into 2023, investors say the regulation will help alternative seafood make further inroads, and they are optimistic it will find traction. Read on to find out how active investors are thinking about alternative seafood, where they’re seeing growth, what they’re watching and more.

We spoke with:


Kate Danaher, Managing Director of Oceans and Seafood, S2G Ventures

What will it take for the alternative fishing industry to have its first unicorn? Do you think 2023 is the year for it? Which companies do you think are close to achieving this milestone?

I don’t expect the first alternative seafood unicorn to happen in 2023. The first goal we all need to focus on is the demonstration of repeat production runs at viable prices.

Cultured protein companies have made great progress in developing their products, but the big hurdle is getting a product of consistent quality and cost to market.

To date, we have seen large flows of dollars to support the first wave of farmed protein products, including seafood. To achieve the surge in valuations that will eventually lead to a unicorn, companies will need to demonstrate a quality product with margins that fit a viable business model at scale.

There has been some progress in the US towards approval of the process to produce alternative proteins. How can founders work with regulators and investors to carry out more proof of concept projects?

Many constituencies need to be “won over” to mitigate the headwinds farmed protein is likely to face when it hits the market, such as industry groups, consumer groups and regulators.

Start-up founders can support industry growth, commercialization and acceptance by building bridges with industry groups to demonstrate that farmed seafood can complement wild and farmed seafood.

In addition, they must provide transparency in the production process to win over consumer groups and join an association, such as AMPS or the Good Food Institute, who are doing important regulatory work on behalf of the industry.

Depending on who you ask, the conventional production of alternative proteins, such as beef, chicken, and pork, is still years away. How can the alternative fishing industry achieve this faster?

I am confident that alternative protein products will be available for purchase in the US in the next 12 months, both farmed seafood and other animal proteins. But for the foreseeable future, that product will be niche, premium, and limited production. Once production capacity constraints are resolved and costs are reduced, I expect these products to become as widely available as their animal protein counterparts.

One area where seafood may have a speed-to-market advantage relates to regulation, as the FDA has exclusive jurisdiction over alternative proteins, while the USDA and FDA share jurisdiction over animal proteins. .

In addition, seafood commands a higher price and its muscle structure is simpler compared to other animal proteins, making it easier to farm a product that more easily replicates wild or farmed species.

Many alternative seafood startups are also aiming to solve the climate crisis, but this industry has unique challenges, such as cost and consumer appeal. What will be key to helping companies produce sustainable products at scale?

For farmed seafood, the technology is there and continues to improve with each iteration. Now we need to think about branding, labeling, consumer education, production at scale, and supply chain and input development and improvement that will support a scalable industry.

If these products can be made more affordable and meet consumer expectations, they can make an impact on a large scale: for animals through less wild catch, for humans by offering a toxin- and microplastic-free seafood, and for the environment through less waste.

In addition, consumer education will be key. This, in part, includes raising awareness of the true cost of our food beyond what we pay at the grocery store. Consumers are increasingly aware of externalities and take them into account in their purchasing decisions, but there is much more work to be done in this regard.

What does the future look like for investment in this space? What areas do you highlight as indicators of future growth?

The good news is that cellular seafood has reached a stage where it is approaching market readiness from a regulatory, flavor and performance perspective.

Cellular seafood companies are making amazing strides in lowering price and nearing the stage where they are ready for growth capital to scale the business. I look forward to seeing more innovation and investment in advancing the consumer experience and 3D structures.

What is needed to attract more institutional investment for later stage financing to help scale the market?

I expect cellular seafood companies to be in a sell-out position in the future, because there is demand from a large segment of early adopter consumers. The next wave of investment will be in infrastructure and companies that build adjacent inputs to outsource parts of the supply chain.

We have strong indications that FDA approval is coming, and that will tick a big box for downstream and institutional investors. Once this is behind us, it will be about who is in the market showing traction and producing a product at a price that makes a compelling business case.

Friederike Grosse-Holz, Director, Blue Horizon

What will it take for the alternative fishing industry to have its first unicorn? Do you think 2023 is the year for it? Which companies do you think are close to achieving this milestone?

You’ll need a clean label and a healthy nutritional composition equivalent to that of seafood, including protein and omega-3 fatty acids.

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