Paris program director on how the alt-protein accelerator and VC sources investment opportunities and the value of working with multinational food groups
For alternative-protein focused accelerator and VC Big Idea Ventures (BIV), the support of meat multinationals like Tyson Foods is crucial in helping its start-ups gain traction.
Henrietta Hearth, program director for BIV’s Paris office, details the key metrics the VC looks for in potential portfolio including a unique IP and technology priority.
She also outlines BIV’s approach to due diligence when sourcing new start-ups to ensure ESG is really at the heart of their business.
With hubs in Paris, New York and Singapore, BIV has its finger on the pulse of the latest foodtech innovations and upcoming trends in the sector.
How do you separate the accelerator from the VC fund at Big Idea Ventures in terms of investment mandate and potential portfolio companies?
Under the accelerator we offer $125,000 in equity and then we also offer $75,000 of what we call in-kind support.
I won’t go into exactly what equity we take because that’s normally between us and the start-up, but our deal for start-ups is better than the majority of other accelerator models. The first thing we look for is it needs to meet our investment thesis. Our thesis areas are plant-based, cell-based, fermentation-enhanced meat, seafood and dairy, ingredients and technologies to facilitate those categories. We believe we can work with amazing entrepreneurs and corporate partners to create alternative proteins in far more sustainable ways than the traditional meat, seafood and dairy industries.
Interestingly we partnered with key players in those traditional industries to find new ways to provide what consumers are demanding. Then the next thing we look for is it a big idea? Is this something that’s scalable? Is this something that’s going to be applicable globally? There can be some great brands that are very local and that work specifically for one market but will never grow. We want to help support entrepreneurs and teams who will have a global impact.
What we see as an investment plan that we’re able to offer is the fact that we have offices in Paris, Singapore and New York and we’re able to offer a global reach, and we’re able to help our companies grow. We’re not here just to give a check. The whole point of the accelerator is that we’re able to help people grow and get to the next step. And so, for that reason it’s important that they’re able to grow, that they have the vision, drive and tenacity to go global.
The first thing I personally look at is IP. Is there some technology there that’s really interesting? Is there something that’s very different? Or is this something that we’ve seen before? And what’s really interesting is some people say to me ‘your investment thesis is very narrow’, yes, it’s narrow but we’re getting a lot of deals. There are a lot of start-ups in this ecosystem now, but also, when you’ve looked at one plant-based egg company you can only see that view, whereas when you’ve looked at six plant-based egg companies, you really start to understand what is actually different and relevant.
We’re able to really compare how interesting and innovative a company is to what’s currently available on the market. We have a narrow focus but we are the absolute experts in alternative protein and all the innovations within our space. Its a complicated space, there’s no room for surface level generalists, that’s how you lose money and don’t have an impact. If you are interested in alternative protein, we’re the people to talk with.
We look at whether a company has a unique technology. Is this technology something that’s really innovative? What typically happens is that very early-stage ideas come from a university, so I’m also interested to know whether the university is going to own the IP or has the staff been able to develop it in a way that they own the IP?
Other things we look for is what has the team done previously? Do they have good credentials? And then finally I would say the fifth factor is just a feeling which isn’t very precise, but when you go through the process a few times you start to understand how committed people are, how much work has gone into a company already and whether they really have what it takes to become a global business. It’s quite difficult to explain exactly what that looks like.
For the direct investment we still cover Seed and pre-seed, so it’s still early. Direct investment tends to be companies that have a bit more experience and don’t need the support of the accelerator. The accelerator definitely works incredibly well for people with a very science-specific background that don’t have as much of a business head, as well as people that are first time founders or first-time founders within this industry.
The direct investments tend to be companies that have a bit more experience and are have achieved some key business milestones. For example, we invested in a Swedish company that came out of an incubator. We did a direct investment after that because we felt like what they were doing was really innovative. With direct investment the IP is number one as we need to really prove to our investment committee that the technology these companies are developing is different to anything else out there. It would be very rare that we would do a direct investment in a B2C company because it would be difficult for them to prove that what they’re doing is really innovative. Other companies that we have made a direct investment in Shiok Meats which is the biggest cell-based seafood company in Asia.
And then we have Wild Earth which is the plant-based dog food company in the US. There’s a company called Jellatech that our founder built with a group of thought leaders, great entrepreneurs and some forward-thinking investors. There are a number of different ways that we do direct investments but the key things that are different in direct investment are the IP needs to be that bit stronger and also really innovative.
In such a competitive space as foodtech has become, how do you narrow down further between companies beyond IP?
First is the founders. It’s quite easy to determine founders that you can understand and see how experienced they are. It’s also quite easy to see the people that, especially the early stage, might come for investment but they’re not really working on the project, they’re just setting the scene. Of course, we need to make sure that they’re fully invested in the project.
The other thing is, we invest more in businesses with a competitive or technological edge rather than branded businesses. Some of our companies have been working on their IP for a number of years. That’s very different to someone that had an idea to create a vegan pizza for example and is then coming to look for investment. When it’s a consumer facing company it’s often very difficult to have defensibility unless there’s also some technological edge.
As ESG becomes an increasingly common factor for all types of investors, what’s your due diligence in terms of ensuring a company’s ethos is deeply impact focused?
I agree with you and I have my own views on B Corp, (a social and environmental performance certification for for-profit companies) mainly that I think it is a great programme and some people do it because they just want to have a sticky label on their business and not because they actually care about the planet and sustainability. But I don’t really care why people get there, it still means that they have a company that has sustainable practices.
We are focused on investing in companies which can have a global impact. Every company we invest in is better for the planet. Yet because we are looking for companies who will have a global impact, as they achieve their objectives, the create real wealth, jobs and communities. We believe it’s possible to do the right thing for the planet, for consumers and for investors driven by wealth creation.
We try to help our companies to source the best quality ingredients and make sure that they have sustainable supply chains. We help our companies do good and achieve a sustainable future as we have a good network of people within that space. We do believe right now that that’s the best method.
Why did you choose Paris, New York and Singapore as key hubs for the accelerator?
We launched in Singapore and New York on the same day. Asia and North America were the regions where we initially saw most innovation and consumer interest in alternative protein. North America is one of the fastest spaces for alternative-proteins and it’s where most of the deal flow comes from. Also, our founder previously drove one of the earliest food tech accelerators making global food investments. North America is a key market for consumers looking for new, great tasting alternative protein products. New York is a great location for alternative-proteins and food-based start-ups.
We’ve had a team in Singapore since we began Big Idea Ventures. Singapore is recognized as the leading hub for food innovation in Asia, we have long standing relationships throughout Singapore and the government. In Singapore they need to increase the amount of protein that they’re able to produce as a country because they import a lot of food from the region and further afield and so that’s one reason why they’re focused on cultured meat as a source of greater food security. We believe that’s where some of the most interesting innovation is going to be coming from in the next five to 10 years.
For Paris we wanted to have a European base. We chose Paris so we could have access to the European Union ecosystems and we have some fantastic corporate investors and partners in France. Partners like Bel Group and Avril who are incredibly supportive of our European portfolio companies. We do also spend quite a bit of time in London as we do also invest in UK companies as well as companies globally.
What are the benefits of having financial backing from major meat and food manufacturers?
I think they invest in us for a couple of reasons, certainly to get an idea of the new technologies that are coming in the sector. And secondly, they usually look to become better every day at serving their customers, consumers and shareholders. By working together, we can create more sustainable products, ingredients and technologies to respond to where the market is going. .
There are companies like Buhler and Tyson Foods and we meet with them every month, and discuss new trends that we’re all seeing in the industry and how we can continue to be the thought leaders in our respective areas. And we also have specific partnerships where we work together on some of the most innovative companies in different sectors of the alternative protein categories. Some of our LPs like to partner with a start-up and we’re able to create this real ecosystem where start-ups can work with them and they’re able to see each other’s technologies.
We are such a small industry right now where only 2% of global protein eaten is plant-based. We have so much to do and where traditional industries are very highly competitive, we really believe in collaboration between our start-ups and industry partners.
Do these partnerships also provide an early look at potential acquisitions for these multinationals?
I’m sure that’s another reason they do it. My background was in food I used to work for Mondelez and Danone and we see that’s exactly what these companies are doing. Unilever had a plant-based incubation unit and in the end, they shut that down when they bought The Vegetarian Butcher. They wouldn’t probably buy at this stage that we’re invested in but maybe five or 10 years down the line. They would invest in these companies though either directly or through our New Protein Fund.
What trends do you expect to emerge in this space over the next few years?
I think we’re going to see more of these plant and cell-based hybrids. What we’re seeing a lot of our companies do is take cell-based technologies to improve plant-based products. For cell-based technologies, it’s going to take a while until they’re available on the market because regulation is slow.
I personally believe that we have a real shortage of plant-based products in restaurants. It’s becoming very easy to cook vegan or plant-based alternatives at home but when you go to restaurants it’s much more difficult to find alternatives to more dairy-heavy products. I think we’re going to start seeing more companies create very specific alternatives for cooking and food service. Finally, we’re going to start to see these plant-based trends appear in countries outside of Europe, North America and Asia. We have a couple of companies in South Africa doing really interesting things and I think we’re going to see more companies coming out of Africa and also South America.
Date published: 13 October 2021