My Background
- I'm a co-founder in a food-tech incubator and have been actively investing in food-tech for a year.
- Experience in both private equity and real estate
- Has worked at some of Asia's top funds, including PE industry leaders
- Uniquely has experience in both deploying and raising capital
- Holds MBA
- Graduated from a target school
The Business
The IPO of Beyond Meat is a testament to the massive opportunity of investing in the disruption of the food and agriculture system. We are actively investing in plant-based / vegan foods, clean meat (real meat grown in a lab using stem cells from animals), diabetic-friendly / low-sugar foods, insect protein, data-science as applied to food, and food-related IOT. We are now on our second cohort and are incubating the second dozen companies to go through our incubator.
Ask Me Anything
I saw that there was a lot of interest in the recent Beyond Meat IPO, so also happy to answer questions about that, about the difference between plant-based meats and clean-meats (stem cell derived), or other aspects.
WSO Mentors
Do you want a 1 on 1 mentoring session with me? Here's my mentor profile - click here.
WSO Podcast: Member @Earthwalker7"
For the podcast, I discussed my 15+ year career in investment banking and private equity in Hong Kong. My struggles trying to recruit in China after getting an MBA in the US, my stint in banking and what I wished I did, as well as one piece of key advice to my younger self. Hope you enjoy (listen below)!
**$2B is the new $1B ** A mere $1 billion valuation just doesn't do it anymore. As stock in rival Beyond Meat continues to soar, Impossible Foods brought in $300 million in new funding this week at a $2 billion valuation, banking cash from the likes of Jay-Z and Katy Perry to keep making its vegan burgers. And Nextdoor, which operates a social network for neighborhoods (and is the impetus for an amazing Twitter feed), collected $123 million in new funding at a reported $2.1 billion valuation.
https://pitchbook.com/news/articles/vegan-burger-boom-leads-impossible-…
Plant-based meat is having a moment. And Impossible Foods is taking advantage.
The vegan burger startup has raised $300 million in new funding at a $2 billion valuation, adding to an already-healthy pile of VC backing and attaining unicorn status in the process. Temasek and Horizons Ventures led the round, while a host of celebrity investors are also said to have chipped in cash, including Serena Williams, Jay Z, Trevor Noah and Katy Perry.
The financing comes about two weeks after Burger King announced plans to introduce the Impossible Whopper at restaurants across the country, the biggest move yet in the fast food industry's ongoing embrace of vegan alternatives. It also comes shortly after a stunningly successful public debut for rival Beyond Meat, which saw the price of its shares more than triple in initial trading following an IPO in early May.
Beyond Meat was founded in 2009, and Impossible Foods launched two years later; both are based in California. But it was Impossible Foods that first captured major VC attention, raising more than $27 million at a $147 million valuation back in 2013. The company raised about $396 million in total venture funding prior to this week's new influx of cash, according to an SEC filing at the time, including $108 million at a $700 million valuation in 2015.
Beyond Meat, meanwhile, didn't reach a $100 million valuation until late 2015, when it brought in $17 million at a $147 million figure.
It continued to bring in more cash at a rapid rate, however, including a $50.3 million round that valued it at $1.35 billion back in November, six months prior to its public offering.
Upon the completion of that public offering, it became apparent that the enthusiasm VCs have shown for vegan food is also present in the public markets. Beyond Meat priced its IPO at $25 per share; the stock promptly skyrocketed, closing its first day of trading at $65.75 and shooting as high as $85 per share before a minor correction. But shares in Beyond Meat (NASDAQ: BYND) are still hovering around $70 apiece, giving the company a market cap of nearly $4 billion.
That massive spike in valuation—and Impossible Foods' newest backing—come as the industry is reaching at least some degree of maturity. Plant-based meat alternatives are becoming more popular among consumers, and several of the largest restaurant chains in the US are taking note. White Castle partnered with Impossible Foods last year to begin serving Impossible Sliders at its locations. Carl's Jr. has been selling Beyond Burgers since January. And companies like KFC and Taco Bell are also creating new meatless offerings.
American eaters are famously fans of red meat, but they're becoming more willing and eager than ever to indulge in plant-based alternatives. Serena Williams, Katy Perry and the rest of Impossible Foods' backers are betting the trend will continue.
Can you objectively claim that any plant-based products taste as delicious as an equivalent meat-based product at the current state?
As you say, it would be objective, not subjective. I do think Impossible Burger 2.0 tastes at least as good as a traditional meat burger.
There's also an Asian plant-based mince pork called OmniPork which I think nails the taste profile of pork pretty accurately. I'd say the Gardein chili is superior in taste than minced beef chili. The Beyond Meat sausage line tastes as good as meat sausage and less of the fatty aftertaste.
And in non-meat-substitute products, the answer is also 'yes'. Most plant milks taste better to me than traditional milks. I'm a pretty big fan of oat milk, almond milk, etc. Try Oatley sometime and see for yourself. The Daiya cream cheese and Tofutti sour cream are pretty outstanding as well.
Of course, I'm also glad that there still remains a taste-gap in most of the plant-based products, because that means that there's still an opportunity to fund the disruption. There's still big gaps to fill.
No one has even come close to making a plant-based bacon, for example
What do you think of "cell based" meat from https://www.memphismeats.com/ ?
How familiar are you with the physics of nutrition?
Intuitively, it seems like we could produce improved-mouth-feel steak with the nutritional profile of wild salmon for less than the cost of factory farmed chicken.
Is this idea just fantasy?
Do you think that the switch from the current meat consumption to a large plant-based food consumption can be solely driven by trends and the private sector or do policies need to be in place at the national level? I'm asking from an environmental standpoint. We tax companies for excessive GHG emissions - should we start imposing restrictions on food producers too or incentives for plant-based foods? Loaded question, but very interesting topic
Wow, that's a great question, and a tough one. I think at the current state, we're such a long way off from any sort of a meaningful transition to a plant-based future that major changes in government policy are a must if a transition is to be made.
To put things in perspective, we must acknowledge that food is the world's largest sector, with agriculture employing over 1bn people, accounting for more than $1.3 tn in value, and with the global food retail market exceeding $12 tn in revenue. Plant-based foods are a spec of that.
I think if we're to move to a sustainable food supply, just for the survival of our species, government intervention is essential. Market forces won't make that change happen, nor will the 'pull' factors of taste and health.
What we can do, however, as capitalist market participants, is try to make sure that there are plenty of environmentally-friendlier alternatives available.
I think the biggest thing governments can do is just to stop subsidizing meat producers. People don't realize that the steak they are eating would actually cost orders of magnitude more, if the US government wasn't providing massive subsidies and providing free grazing land to ranchers. That's just wrong. We have our own government subsidizing a product that is incredibly environmentally destructive, and bad for our health. The first step is to make meat properly free-market and get meat producers off the government teet.
I agree, well said!
I want to preface this by saying I had an impossible burger (more accurately sliders) the other day and I liked them as a whole burger (the sum parts of the burger tasted the same as I would have expected - very delicious) but tasting the patty itself I was left with just a "meh" feeling.
This may be my naivety showing, but from a pure nutritional standpoint, you're not really reaping a lot of nutritional benefit by switching from "fully-leaded" meat to the plant based alternative. While the macro benefits of reducing the need for grazing cattle - and thereby the amount of excess methane that goes into the atmosphere - is a great cause unto itself, I'm not sure it's good enough to get a carnivore to make the switch. So then you're left with people who already don't eat meat, is it worth their time to run down to Burger King just to be able to eat with the "uneducated masses" of the fast food world?
I don't want to come off as negative on the idea of meat subs and I'm specifically intrigued by lab grown meat from animal cells, but what's the investor play here? by your own admission it will likely take gov't intervention to really spearhead meaningful transition (implying natural consumer tastes wont shift quick enough before the "fad" of these products wears off?), is that really what I should be betting my (at this point fictitious) slush money on?
TL:DR - who in your view is the target audience for nutritionally similar/plant based alternatives to meat products?
Thanks Dr. Mantis. 1) the nutritional and taste performance of plant-based burgers does need to improve. The good thing is - they can be tweaked / improved / engineered, whereas traditional meat is static.
I'd argue Impossible v2.0 (soy based) is already much tastier than Impossible v1.0 (wheat based). Similarly Beyond is always improving their taste and nutrition, whereas that cow-derived product is static. Clean meat companies are working to clone the finest Wagyu been in the world, and can soon get you world-class beef, at supermarket prices.
2) 94% of the consumers of the Impossible Burger are Omnivores, NOT vegetarians. That means that an overwhelming number of people are saying that the taste is indistinguishable or close enough that they don't care, and are choosing Impossible Burger over a beef burger. I haven't seen stats on whether they are choosing Impossible for environment, health, or animal ethics, but the result is the same.
I would actually argue that taste-wise, Impossible and Beyond are already pretty good (although there's clearly room for improvement).
The nutrition - well that part sucks. Both Impossible and Beyond are loaded with salt and fat (mostly coconut oil). That is done so that they can compete with beef burger taste. However that means that even the plant-based burgers are unhealthy. What needs to happen is that plant-based burgers improve their taste profile, but also improve their nutritional profile, to the point where consumers are able to choose a plant-based product BOTH because it is tastier and healthier.
The good news is, we'll get there. That cow patty isn't getting tastier or healthier. The plant-based patty on the other hand is being improved daily.
Thought I'd add a bit on market sizing.
Burger King is rolling out Impossible to 25,000 locations.
Statistically, when Impossible (or Beyond) go into a new location, a fairly stable statistic can be used to estimate their new sales. This rule of thumb for estimating sales is about 100 to 120 units / day / store.
Funny, that's been consistent in most markets. That means Impossible will soon be selling 2.5 to 3 million units per day if it can keep up supplies.
Right now, Impossible has been facing supply challenges.
Demand vastly outstrips supply.
However if Impossible can scale up production, that means about 1 bn units / year. Company sells its patty for $3/unit. So in this one deal, Impossible is potentially looking at about $3bn in new sales just from BK.
Of course, one can argue this point, but thought I'd share this back of envelope calc for giggles.
Even back of the envelope figures are solid as a really had no idea of the size/ scope of the BK deal or production in general. Appreciate it!
Do you think the current African Swine Fever epidemic in China will change the strategy of food-tech companies and other ag-tech companies? If so, do you believe this will create more focus on disease prevention or clean meat alternatives?
Absolutely. Our accelerator is in Asia, with China ties. The swine flu epidemic has led to China burying over 200mn pigs alive, driving up pork prices and having massive pork supply shortfalls. Plant-based alternatives to meat are seen by food companies as a way of getting meat to the people in a more reliable way. The retail population in China is not yet nearly as conscious of the impacts of their food choices as US or EU populations, but the food companies immediately understand the business problem of meat shortages, and are fully open to embracing plant-based alternatives that can be credibly substituted in for meat.
It's also worth noting that globally, there are also food companies that are embracing (rather than fighting) the clean meat and plant-based meat (clean meat refers to real meat which is stem-cell-based and lab-grown). The CEO of Tyson Food has already said "if we could get meat without the animal, of course we would do it." Tyson Food is now one of the biggest investors in clean-meat in the world. Nestle is launching a plant-based meat, and has also acquired multiple plant-based food brands. McDonalds test piloted the McVegan and it was a roaring success. I see that rapidly it is the traditional food companies that will be the biggest owners/developer/suppliers of plant-based / lab-grown meats. It's just another SKU on the menu, rather than some "woke" product. The future is corporate, not hippie. And that's perfect.
Thanks for posting! Any advice for someone who may want to get into a food and beverage focused IB/PE shop? Been doing IB for a few years and have been doing freelance food writing for 6+ years and would love to do IB in a sector i'm passionate about. Would these firms care at all if I mentioned my food writing?
I think it would be a good idea to mention it, as it gives color to you as a candidate, and reinforces your desired career direction.
Congrats on making the leap and starting the fund/incubator. Exciting stuff!
What's your typical deal size and structure?
Are you sourcing portfolio companies from around the globe or focused on companies based in Asia?
What kind of traction/team metrics are you using as a baseline for screening applications?
Does your program work with ag-tech or strictly food?
Might have some connections/intros if its a good fit.
Thanks SYB.
We are typically investing $80-100k for mid-teens % of equity. We source opportunities globally.
Most of the companies have come from the US, but there is a healthy mix.
We are primarily looking for investment opportunities where the product has a chance to be really disruptive and scale, and where there is a technological moat.
That is, we would prefer to invest in companies that are clean-meat / cellular agriculture, or datascience-in-food, rather than a less defensible beverage company.
Happy to take your introductions. Please send me a DM.
Very cool, congrats on the launch/transition! Great podcast too guys!!!
Hi, thank you for doing the AMA. I was wondering if you have any advice for an undegrad who wants to get into VC/GE right after school. What are some common routes to get there?
Get an undergrad degree in a sought - after area in tech (like AI) and possibly start and exit a company. Or spend time in the TMT group of a bulge bracket in SF / Silicon Valley and then try to cross-over.
How do you justify a 60x revenue valuation for Beyond Meat? I understand the size of the market and the opportunity, but at the moment there is very little competition from the big food producers, and this is a capital intensive/capacity constrained business, not a software program that can instantly be pushed out to a billion iOS devices around the world?
I don't think it's justifiable at all. I think Beyond Meat is getting a massive over-buy due to scarcity. There is essentially no other way for investors to get exposure to plant-based meats. I think Impossible Foods will have an even bigger IPO, and their technology is even more defensible. Until there's a few more names out there in the public market, the valuations will likely be inflated greatly. That will settle with time as investors realize that there's still scaling issues with these companies, and as some of the hype dies down. It's still a great sector overall though.
Yup have to agree as a trader. It’s scarcity. Same thing happened in tilray and it sold off hard after lock-up expiration.
Also with these small floats it’s fairly easy to manipulate the stock. You can make a ton of money even if you sell at a loss. The market can’t correct the supply imbalance any more by shorting. Since borrow rates became uncapped a thing like tilray can trade at a 800% borrow rate. So if you bought at $100 and sold at $50 you could still make a ton of money collecting the borrow rate.
Really interesting to see this side of the coin. A friend and I are currently developing a vegan brand that is sort of cross between Deliveroo/GymShark. From the VC perspective, what are the top 3 aspects a brand/business must have in order to gain your investment? It's vary rare to have such a niche, food-tech type of incubator/fund, and you're definitely in a growing space; so it would be good to get your perspective on this.
Congrats on starting your company. We can take a look. On the face of it, I don't think it would be an ideal fit though. We are looking for products we can put in place to substitute for existing animal ag products. So looking for meat substitutes, alternative protein, etc.
What products are currently in the pipeline? What are the current trends?
PS. I am mostly interested as consumer.
I was wondering if you heard about the Singaporean cell-based meat startup Shiok Meat and what is your opinion on it. The startup is focusing on producing an alternative for shrimps and it is looking to raise Series A at the moment.
Certainly have heard of Shiok Meat. We were aware of them and wanted to reach out, but then they joined Y Combinator. So we missed our window of opportunity. And then they recently raised $4.6mn while still at YC. Good for them! Brava. Wish them great success. Actually it makes a lot of sense to focus on seafood, because the current state of clean-meat is pulp meat. It's less structured and textured - more of a paste. So clean-meat currently is quite good at making a pate, chicken nuggets, etc. Seafood pulp can be used for dumplings, crab-meat substitute, soup bases, etc. That is the perfect use-case for clean-meat seafood. Moreover, >90% of the ocean fish sticks have been fished already. It's increasingly harder to get the fish and crab that people want to eat. Unlike beef, you can't just breed and open up another pen. So a lab-grown substitute for that food supply is definitely needed. Shiok is in a great position. If you are asking because you know them - please do connect us.
Thanks for posting and congrats on an exciting venture. I'm curious how much you were able to raise for your VC fund? Where did you raise capital from (family offices, fund of funds, HNWI's, etc.)? How important is it to have some kind of track record in terms of prior VC investment experience/success when raising capital, as opposed to selling your particular investment thesis (i.e. your thesis around food tech/disruption of the food/ag system) to investors? Why structure as an incubator as opposed to a more traditional/passive VC structure? Finally, what are some of the broad terms around the structure of the fund (incentive fees, hurdle rates, fund term, etc.)? Thanks very much!
We have not yet sought to raise a fund. The accelerator invests capital from another pool of capital. i'm not able to go into much detail on that. We may seek to raise a fund in the future.
I don't remember from whom, but I remember being told in growing boom industries its better to be the supplier than the Front end company as you don't take the inherent company risk but can profit on the industry growth. i.e instead of trying to be a VR firm, be the firms that supply the VR industry w/ the chips.
Following this model, who are the suppliers for these plant-based, clean meat companies, are they essentially agriculture companies? What specific type of plants are they using? What is the process for stem cells, do they buy them from someone or extract their own?
Thanks for the AMA
Any ideas on further investment for retail investors besides publicly traded shares like Beyond Meat? Was thinking more in the direction of supply side, since Beyond Meat currently has only two suppliers of their yellow pea protein used to make the patties? As well, how would one participate in investing in Impossible Foods prior to an IPO? Looking to be ahead of the ball,
MDY,
I don't buy IPOs.
Too many unknowns and risks. Let's see how Beyond Meat trades over time.
GFI did a recent piece on why Beyond Meat is so unique and rare.
GFI on Beyond Meat
If you can get access, I think making growth capital investments into food tech / plant-based companies might make sense.
That way you avoid some of the product-development early-stage risks of venture.
Otherwise let's see if other companies within the space go public, and create a more invest-able ecosystem of public companies.
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