Venture fund managing partner on the lack of agrifoodtech funding in Europe and the benefit of including corporate venture funds in FoodSparks’ investment efforts
FoodSparks is an early-stage venture fund investing in European and Israeli food technologies, powered by alternative investment fund manager PeakBridge Partners.
A core member of the European Institute of Technology’s (EIT) food innovation initiative, FoodSparks offers start-ups the advantage of the European Union backed initiative’s expertise.
The VC fund’s geographical mandate covers Europe, a market that managing partner Yoni Glickman believes is underfunded in the agrifoodtech world.
Having just announced its first two investments (Vanilla Vida and Imagindairy), FoodSparks is seeking to secure another five to seven investments by the end of 2021.
Former-EVP for Frutarom Industries’ ingredients arm Glickman offers up some insight into the fund’s investment mandate and the value of involving corporate venture funds (CVC) in its partnerships with disruptive foodtech start-ups.
What is FoodSparks and how does your partnership with EIT benefit your investment efforts in the agrifoodtech space?
FoodSparks is a collaboration between fund manager PeakBridge and EIT Food, which is a public initiative to drive innovation in the agrifoodtech space in Europe and beyond, including Israel and the UK. We’re the only fund and fund manager that is officially an EIT member. When EIT Food was established they recognised there was a funding gap between angel investment and the seed and early-stage investment, particularly in Europe.
The initial idea was around how to fund all these foodtech and agritech initiatives coming out of the EIT through their various programmes. The exciting part about the collaboration is it significantly opens up this whole ecosystem for us. Besides the typical financial investors, we have two CVCs which are EIT core members, and it gives them an opportunity to participate in what’s happening in innovation in the foodtech space in Europe.
We had our first close in mid-April. I’m sure we will do additional closes and fund very closely until we’re fully invested. And we just completed our first two investments which we’re very excited about. I’m fairly sure that we will do another five to seven investments before the close of 2021.
With strong deal flow coming from Europe, our first three investments are in Israel. Israel is a very exciting hub for foodtech. And while it has been a little bit more difficult to travel due to Covid-19, being based in Tel Aviv meant this was the first place for us to be able to execute on our deal flow. But the next investments we will announce in coming weeks will come from Europe.
What is your investment mandate?
Essentially, we are looking for companies that have clear intellectual property. That doesn’t necessarily mean that they need to have the patents already but we need to see a clear path for differentiated intellectual property. Like everybody else we’re looking for scalability and the most important thing of course is who are the entrepreneurs?
In terms of areas of interest, we’re interested in where precise agriculture meets open supply and demand needs in the food industry. We’re interested in alternative proteins and we’re very interested in technologies that support the alternative protein movement. One of the big issues around alternative proteins is challenges of taste and texture, so companies that can give us horizontal leverage across that whole industry, adding taste and texture, we’re very interested in. We’re interested in alternative milks and alternative seafood. [We also look at] sustainable packaging for the food industry and upcycling ingredients from food waste.
What is the benefit for you as a fund to have CVC partners involved in your investments?
[Our CVC partners] have co-investment rights with us. If we see an interesting company, they have the right to co-invest with us in the financing round. At the end of the day, for us to be successful, and for our companies to be successful, we want to bring in the best co-investors that we can. In the case of Vanilla Vida, we recognised that it would be fantastic for the company to have a partner that had a very strong background in precise agriculture. There was nothing in it for us per se, except that we believe this would greatly increase the probability of our start-up being successful.
And how does the CVC’s involvement benefit the start-up?
First of all, they have the ability to give them greater market-access. Number two is there are often complementary technologies to offer. If you think about Vanilla Vida, every flavour house, everybody who makes dairy and everybody who makes baked goods consumes a lot of vanilla, right? So, a CVC [focused on any of these market segments] offers them immediate market-access plus technologies, just as an example.
Europe lags behind
How can foodtech and agtech start-ups stand out in what is becoming a much more competitive space?
There needs to be a key differentiator in technology. We believe that we also create a strategic advantage for the start-ups that we invest in. We’re all people that are very experienced in the food industry. We only invest in agtech and foodtech, we don’t look at additional verticals. We also have the EIT relationship which we believe offers a huge additional advantage for the start-ups to scale.
What characteristics are you seeing that suggest the start-ups you’re investing in are likely to be successful?
We look for entrepreneurs who are very ambitious, but they also need to be grounded in reality. The food market is interesting. We’re very different to pure technology in the sense that food is a very conservative space and rightfully so. It means that it’s difficult to innovate in this space because of regulatory frameworks. Although consumers do wish to try new things, at the end of the day, they’re fundamentally often very conservative. They have something they like and they stick to it. So how do we bridge that gap between all of this interesting technology and a fundamentally conservative industry? For me being grounded means understanding what your regulatory pathway is and what your business model is going to be. We’re looking at people who have an understanding not only of the technology they’re dealing with, but also the markets they have to play in.
Why do you think foodtech is so well suited to venture capital?
Food has become an interesting area of focus over the last couple of years giving much higher valuations than are happening in the corporate space. We had a great example just the other week with the IPO of Oatly. It’s still an area which is far less saturated than other industries where venture capital has gone over the last 10 to 20 years.
Why do you think there is a gap in funding within the sector in Europe compared to the US?
In the United States there has been a very strong move to investment going into the foodtech space for several years, and you already have those big success stories there. But in Europe I’m really not sure yet. Maybe the recognition is not quite there. I’m still not sure. But if I don’t have an answer to your question in a year, I’m not doing my job properly.
Date published: 15 June 2021