Khosla Ventures is among the early investors in Impossible Foods – and it formed four special purpose acquisition companies (SPACs) in February. NutritionInvestor looks at investment vehicles in the SPAC market as the plant-based burger giant plots its next growth stage
Impossible Foods is weighing the alternatives for its next funding round, and hitting the public market is on the cards, as Reuters reported on Friday. Citing unnamed sources, the report claimed the deal could value the plant-based meat business upwards of $10 billion.
The California-based vegan burger giant is considering a merger deal with a special purpose acquisition company (SPAC) as an alternative to the traditional initial public offering. The first option, however, could dilute existing shareholders by a greater extent than an IPO.
At least three SPACs are currently scouting the world for target companies, three of which are specifically formed with food business in mind – Natural Order, 2MX Organic, and PHPC, the SPAC established by the Missouri-based CPG giant Post Holdings.
Khosla Ventures made headlines in February when it formed four SPACs under the name Khosla Ventures Acquisition Co, and subsequent brand names II, III, and IV. The California-based venture capital firm participated in the Series B funding round of Impossible Foods alongside Bill Gates. The round raised $25 million in 2013.
As reported by NutritionInvestor in this article, it’s unclear whether the SPACs by Khosla Ventures target food and drink companies. However, the statements in the filling paperwork suggest that companies such as Impossible Foods fit the bill.
Natural Order was co-founded by Paresh Patel and Sebastiano Cossia Castiglioni in August. Cossia Castiglioni is the chief executive of investment firm NKGB Strategic Advisory, an early investor in Beyond Meat.
This SPAC raised $230 million when it floated on Nasdaq last year. The company revealed in a statement its intention to pursue prospective targets that are focused on technologies and products related to plant-based food and drink, alternative protein, and other alternatives to animal products.
Speaking at the Future Food-Tech summit held online in March, Hayden Stuhr, vice-president of capital markets at JP Morgan, said that SPACs are typically formed to target a single company within a sector. She noted that a handful of firms have been established with two or more targets. She revealed the bank is working with a few of them, but didn’t disclose details.
One such vehicle is 2MX Organic, the SPAC co-founded last year by Frech billionaire Xavier Niel, investment banker Matthieu Pigasse, and Moez-Alexandre Zouari from the French retail food group Zoauri.
2MX Organic entered the Euronext stock market with an IPO that raised €300 million. However, this SPAC said it aims to acquire one or more companies operating in Europe, putting the firm off the race on this occasion.
SPACs with potential
Siddhi Acquisition is another SPAC in the market eyeing a deal with a food or drink company. US Venture capital firm Siddhi Capital formed the company and filed with the Securities and Exchange Commission in March. Siddhi Acquisition seeks to raise up to $200 million in an initial public offering.
Jack Creek Investment Corp raised more than $300 million in its IPO, and the company is targeting businesses in the food and grocery supply chain.
This Nasdaq-listed company has Samir Kaul sitting on the board. Kaul is a member of Khosla Ventures.
Star Peak Corp II is the second SPAC from energy giant Star Peak. Its mandate is focused on sustainability, including businesses in food or agriculture. Listed on the New York Stock Exchange, Star Peak Corp II raised more than $400 million in its offering.
Tennis star Serena Williams is an investor in Impossible Foods and teamed up with Barry Sternlicht in Jaws Spitfire Acquisition Corporation – the SPAC that is bringing 3D printer supplier Velo3D public.
Rumour has it Sternlicht could try to leverage his connection with Williams and strike a deal for its other SPACs, including Jaws Hurricane Acquisition Corp, which targets consumer technology companies, and Jaws Mustang Acquisition Corporation, which has not selected target industry, having raised $750 million in its offering.
Impossible Foods – market penetration
Impossible Foods has raised a total of $1.4 billion in funding over 12 rounds. Its latest financing round was a Series G totalling $200 million at a $3.7 billion valuation.
Impossible Foods products are sold in more than 20,000 stores across the US. The company revealed in February that production has increased sixfold since 2019 as demand is at an all-time high.
Retail sales of plant-based meat products reached $7 billion last year, according to a report by the Good Food Institute and the Plant-Based Foods Association.
Price has been a bottleneck for mass-market uptake of plant-based protein products. Building on the increasing consumer demand and the economies of scale, Impossible Foods revealed in February that it suggested retailers cut prices by 20% to $5.49 for patties and $6.99 for a 12-oz. package.
Impossible’s price cut on the patties is on par with rival Before the Butcher’s. The US company introduced its Mainstream line last year and its burgers are now sold at about $5.50 per pound. This suggested retail price is on par with the price of lean ground beef.
Impossible Foods products are also available in Canada, Hong Kong and Singapore since October last year. In December, the company announced the appointment of former Reuters editor Kitty Bu as head of engagement for China. The move signalled the regulatory approval to begin sales in the country is imminent.
The company’s foray into foodservice has also been fruitful thanks to partnership deals with Burger King, Starbucks, and Disney-operated properties, and McDonald’s, to name just a few.
This month, Impossible Foods launched “We Are Meat”, its first mainstream advertising campaign. The marketing strategy will hit US consumers nationwide with TV spots with meaty, mouth-watering images and salacious sizzle of the company’s burgers.
Produced by US advertising agency Wieden+Kennedy, the campaign is specifically tailored to engage with animal meat eaters – it claims that Impossible Burger, which contains no animal ingredients but made from plants, “is meat for meat lovers”.
Founded in 2011, Impossible Foods has been operating in the plant-based meat market from the outset. In October, however, the company unveiled its proof-of-concept plant-based milk, confirming its intention to tap into the alternative dairy category.
It’s unsurprising to hear the rumour of the next funding round of Impossible Foods could bring the company public – it’s yet to be seen how big a splash the company could make in the stock market. Beyond Meat went public in 2019, and today shares are trading more than 400% above their IPO price.
Date published: 11 April 2021