The partner and chief technical officer of SOSV’s accelerator IndieBio on funding pre-seed start-ups that can create new sectors in food and agriculture

By Murielle Gonzalez

Pae Wu has more than a decade supporting biotechnology research and development initiatives for public and private organisations and has become a specialist in finding and funding entrepreneurs with ideas on paper that are scientifically robust to solve some of the world’s pressing issues around food, health and sustainability.

She was in Barcelona, working for Telefonica’s ‘moonshot factory’ Alpha, when the opportunity to join the US-based investment firm SOSV as a partner knocked her door – and she took up the chief technical officer role to help manage the portfolio of its science accelerator IndieBio. “We are an accelerator, and we bring pre-seed companies in and work with them very hands-on every single day for about six months. And SOSV is a lifelong investor into its alumni,” she says.

Chilean plant-based foods maker NotCo, animal-free egg replacement producer Clara Foods, and cell-based meat maker Upside Foods (formerly Memphis Meats) are all IndieBio’s alumni, and a testament to the calibre of businesses the company has nurtured to date.

IndieBio has built a reputation in the investment and start-up communities for having a technically focused team, and Wu is no exception. She is a doctor of electrical engineering with a background in biotechnology.

Likewise, all IndieBio’s portfolio companies – more than 100 – have science and technology at the heart of the solution and the business they are building. Wu says that as many investors in early-stage companies, IndieBio also places a big emphasis on the people who make up the start-ups. “We look for the match between the strength of the team, the technology, and the commitment to the problem they are trying to solve,” she explains.

SOSV is an active investor in the booming plant-based food segment, and Wu recognises the alternative food category is turning a corner, and new challenges have come to light.

“Alternative proteins were the natural first area to address, and the past five years, we’ve seen a huge number of companies working on this space, whether plant-based or cell-based proteins. Now, the consumer is not only interested in the sustainability of these products, but these foods have to be delicious,” says Wu, noting companies and investors are turning their sight on the brands that deliver an enjoyable experience.

The next challenge

Flavours, textures, and fats are all key components in making food tasty, but Wu also notes there are a whole lot of issues around processing and manufacturing that new companies have begun to address. “Flavour, textures and fats are all at the molecular level, and a lot of effort is going into process and manufacturing now, finding ways to turn a pile of proteins into a product that’s appealing and meets all the sensory requirements,” she explains.

For Wu, it’s clear that the consumer demand for animal-free alternatives is changing and what’s really exciting is that many companies are coming to this space beyond the issue of meat. “There are companies that are really thinking about how do we make other indulgences more ethical and more sustainable. For example, we have a company in our portfolio working on an ethical and sustainable chocolate product. It’s called California Cultured,” she explains, noting there’s more to the statistics we know about child labour in the chocolate industry. “I wasn’t aware of the extent of deforestation that’s occurring to make way for cocoa planting and harvesting – it’s just crazy,” she says.

California Cultured was founded last year and is using cell-based technology to produce chocolate products. In a statement on IndieBio’s website, the company explains that around a decade ago, cocoa bean cells were cultured in giant, 20,000-litre bioreactors and that it worked, except for using the toxic herbicide Roundup to get the cells to grow.

That’s where California Cultured comes in – it uses food ingredients one could find in grocery stores to promote cellular growth. The technology allows the company to control the bitterness and sugar content. California Cultured plans to enter the market with a direct-to-consumer subscription model.

For Wu, companies like California Cultured signal the new dynamic in the market and reflect SOSV’s IndieBio investment approach.

To the point

Pae Wu

How do you assess companies when there’s no product-market fit or an addressable market?

Many of the companies we invest in are ideas-on-paper, and we know that we come in at the beginning of a journey – and creating a whole new sector is a really big journey!

It’s not just about getting the technology to work or getting the product out there. We identify the strong trends from that emerging technology push and the intersection with the market pool of solutions – and we engage heavily with strategic corporates, so we have a sense of what they’re thinking.

We also have an understanding of what the early adopter market looks like and how the emerging technology might help solve these problems. That’s the valley in which our decisions have to sit.

What are the assets under management?

SOSV has $855 million assets under management and we have six accelerators. IndieBio is one of them and focused on science.

We reserve about 75% to 80% of the fund for follow-on investments, and we have a couple of follow-on investment funds. And our initial deal is for $500,000 that gets spread over six months.

Are follow-on investments guaranteed?

No, and it really depends on the quality of the company and our continued belief and understanding that the company is making progress – about 70% of our companies go on to raise a seed round within the first nine months after graduating from our programme. We do not lead follow-on investment, and that’s how we maintain discipline.

What’s next to plant-based foods?

We’ve seen an evolution, and if you look at the portfolio of IndieBio, you can appreciate that. The plant-based product space has been on for some decades now – soy protein, chickpea protein, tofu, etc. That’s the first generation of companies thinking about how to make a protein that is nutritious and healthful without using animals.

Then, with Memphis Meats, now Upside Foods, came cellular agriculture, and we have companies like Finless Foods, producing fish from cells. And now a lot of attention is on producing proteins using microbes, so via fermentation – we have a company called New Wave Foods, and it’s making shrimps using algae.

So there are different approaches, but we think something is missing around texture and flavours and the fat in these proteins, and we’re bringing in companies that can address these challenges.

How can idea-on-paper companies address manufacturing?

That is a kind of ‘behind-the scene’ issue. For example, in the cell-based meat space, companies have to grow the cells using very expensive media, so now we have companies in our portfolio with different approaches to making more economically feasible and scalable cultured media.

And we’re thinking beyond that and about what sort of technology can allow us to produce a whole cut of meat with fat. We have a portfolio company now, called Sundial Foods, which is going to make plant-based chicken wings, and have come up with a technology to make the skin for the chicken wings – and that will offer the consumer the whole experience.

We are in the early days of foodtech, but there are a lot of ‘me-too’ products in the alternative protein space. Are you afraid of market saturation?

I’m not concerned about it. The important thing is that a sector grows out of this new movement around more sustainably produced foods and that the consumer does not need to make a choice between eating well and enjoying it.

The bigger the sector, the better because that means more options for the consumer. If you get more people eating alternative proteins, we have a better chance of making a meaningful dent in the overarching problem of producing food sustainably.

Wu says she gets great satisfaction when pre-seed companies grow and scale-up, and recognises the go-to-market at scale is a path that can take many shapes. “Scaling-up is a process that varies and depends on the approach of each company. Some start-ups go for manufacturing themselves and others use contract manufacturers. There’s no silver bullet, but it all depends on the economics and the margins – and the closer a company gets to its consumer, the better,” she concludes.

Date published: 15 April 2021

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