Alternative milk protein start-up on its go to market strategy and tackling high production costs
Imagindairy is an Israeli start-up using proprietary technology to produce milk proteins without the use of animals.
Fresh off a $1.5 million seed round, CEO Eyal Afergan is now looking to scale the business, employ more staff and focus on R&D efforts as it works towards producing its first product in the next two years.
Plans for the start-up include offering a white-label B2B solution via its technology platform that helps to reduce production costs.
Afergan sits down with NutritionInvestor to discuss Imagindairy’s plans for growth, the challenges of securing investment at a pre-product stage and the crossover between IT and foodtech investors in Israel.
How did Imagindairy come about?
I’m a father to two young daughters, seven and nine years old. And I have a bachelor’s degree in Biochemical Engineering and a PhD in pharmaceutics.
After my academic studies I joined a company named Enzymotic that at the time was the biggest dietary supplement manufacturer in Israel. I joined the research and development team and then I moved into the business side after a year.
In my last role I was VP global sales, responsible for all the dietary supplements sales all over the world. Then I joined Algatechnologies, who are experts in micro-algae cultivation, as VP business development. After three years, we sold the company to a French group and for me it was the time to fulfil my dream to open my own venture.
I met with Jonathan Berger, the CEO of The Kitchen Foodtech Hub and and he introduced me to our now CTO. Led by Strauss, they are the first and most well-known food incubator in Israel.
We identified the technology of Professor Tamir Tuller from Tel Aviv University. He joined us in establishing Imagindairy and our main objective to address the industry bottleneck of high production costs.
There are around eight to 10 start-ups in our field that deal with precision fermentation while trying to create animal-free dairy.
But what differentiates us from all the others is that we have enabling technology and we are the only one addressing the main bottleneck of the industry.
Via our platform, which is based on machine learning and big data capabilities, we are able to boost production and maximise the potential of our offering, which in the long run will be cheaper than standard milk.
How did you find the process of seeking out investment?
When we founded Imagindairy we raised $1.5 million via The Kitchen Foodtech Hub, together with the Innovation Authority of Israel, and four global leading VCs. The first one is Entree Capital which are experts in deep tech companies and usually invest in the cybersecurity and AI. Their last investment was in Monday.com.
The second VC is CPT Capital from London, and then New Crop Capital from California and FoodSparks, which is part of Peak Bridge VC.
One of the benefits of being under The Kitchen Foodtech Hub is they are well connected. They have helped to put us in front of VCs, at least in the beginning when nobody had heard about us.
Once we met with investors, they liked the idea that we are a very experienced team. Again, we have a very practical approach in that we want to address the industry bottleneck and not just focus on ‘changing the world’.
You mentioned some of the benefits of working with The Kitchen Food Tech Hub. Do you see that there is real value in working with an incubator?
Yes, definitely. When you found a new venture there are so many things to take care of and they helped us in many areas. One of them was connecting us to a very wide network of investors and suppliers.
They have a lot of experience from other companies and they put us in touch with other ventures in their portfolio. There are synergies between the different companies and between the CEOs. I can pick up the phone to another CEO and ask him about a specific topic. It’s very helpful.
What’s your strategy for the business now that you’ve got some seed capital under your belt?
We just initiated our Series A fundraising and with that we want to accelerate our R&D efforts. We are increasing the team’s size and we are looking to get into more meat proteins. Of course, the most important thing for us is time to market for our first product.
And what does the product journey look like?
Our go to market strategy is as a B2B offering. This approach is based on two main pillars. The first is to produce a protein powder in order to work with the big global dairy companies to develop a new format. That is why we are also building a very strong application team to support us in this approach.
Once we have the finished product, the second pillar is to offer white-label and private-label solutions for small to mid-sized companies. We will produce the product and they can put their own label on the package. We are expecting to launch our first product within the next two years. I think the Series B would be once we have a product and we’re ready to launch.
Do you think it’s more difficult to secure investment pre-product launch?
I don’t think so. It depends on which VCs you approach, there are ventures that will that take more risk. When you are an early-stage company you take more risks, but then in parallel, the valuation is lower. Once you have the product, the risk is very low, but the valuation is much higher. It really depends on the VC’s profile so you need to choose carefully.
What are your plans for geographical expansion?
The first market we’re targeting is the US. Our second market will probably be the EU. The reason we chose in this order is partly due to regulation. The regulatory process in the US is much shorter compared to the process in the EU.
What are your longer-term plans for the business?
At the moment, we are focusing on building a great company. Once you have a great company, to IPO or to be sold to a bigger company is just another milestone to promote the company even further. It’s not our strategy nor our target. Our target is to build a strong company that will change the world.
And how many of you are there in terms of staff currently?
We are around seven employees and we’re in the process of recruiting more people. I assume that by the end of the year we’ll be around 12 employees? This is our target.
Why is Israel such a hub for foodtech innovation right now?
Israel has always been considered a start-up nation. This is the nature of people here. We’re always thinking how to innovate and how to open a new start-up. But until now, it was mainly focused on tech, cybersecurity and biotech industries.
In the last five years, the Kitchen Foodtech Hub was founded by Strauss Group, and together with the Innovation Authority of Israel, built the ecosystem for foodtech start-ups.
Everything is moving very fast. Once there were more and more VCs joining and opening offices in Israel, existing services started to look at this segment. Then money started to flow into the ecosystem. The Israeli dream ultimately is to do an exit.
Has there been any crossover from some of the other tech sectors in terms of venture capital?
Some, yes. But I think the main motivation for foodtech was The Kitchen Foodtech Hub together with the Innovation Authority. It was a decision taken by the government to invest in this field and it was the same process they did with the IT sector.
Date published: 23 June 2021