Almost three-quarters (70 percent) of the $23 million raised by Lever VC for its debut alternative protein and cultured meat fund has come from Asian family offices, the firm’s founder said.
Nick Cooney told Agri Investor Lever VC Fund I is expected to reach its $50 million target by Q2 2021, with other investors into the vehicle including family offices from the US, Europe, the Middle East and one European corporate.
“Some of our LPs are already making direct investments in the sector,” Cooney said. “Others are with, at or affiliated with companies that want to be directly acting in the sector, with an eye towards, down the line perhaps, acquiring a company in the space, launching a company in the space or working with companies in the space.”
Hong Kong and New York-headquartered Lever targets 35 percent internal rate of turn over a seven-year fund life for Lever VC Fund I, which will support up to 25 investments of as much as $1 million into early-stage alternative protein and cultured meat companies, explained Cooney.
Lever has already deployed $5 million from the fund to back 10 startups. The firm’s portfolio includes plant-based yogurt company Marvelous Foods, Mission Barns, which produces pork fat cultivated from animal cells and TurtleTree Labs, which provides cell-cultured human breastmilk and cow’s milk replacements.
While there are investors active in both markets, Cooney compared the relationship between alternative proteins and cultured meat to that of electric vehicles and driverless cars, highlighting that investors in the latter remain largely those with an existing familiarity with cutting-edge science and technology.
“If you are investing in a company on the plant-based side, you are basically betting that you have a really good-tasting product that is going to be marketed well to the public. On the cultivated meat and dairy side, you are really investing in technology and IP,” he summarized.
Lever intends to invest at all stages of the value chain, Cooney said, including in growers and seed producers working on feedstock crops, startups with processing equipment or technology and companies offering branded products. Though he expects the geographic focus of the fund to follow the pattern set by early investments spread roughly evenly across the US, Europe and Greater China (which includes Singapore), Cooney said the firm tracks more than 1,000 companies, which includes promising startups in Israel, Brazil and elsewhere.
“We do not have bright red lines about how much we are going to deploy in a specific geography, it is really based on where the best deals are,” he said.
In launching Lever, Cooney draws on experience as co-founder of New Crop Capital, a venture capital trust supported by a single-family office he declined to identify that invested in companies including Beyond Meat, Memphis Meats and others.
Cooney estimated there are nearly 300 investors currently active in alternative protein markets, a group that includes an assortment of angel investors and dedicated family office vehicles, alongside a larger group of funds that have made one or two investments. The influence of such funds, he said, has been mixed.
“Some of those folks [funds with one or two investments] are making smart investment bets, but we have seen others making bets that we do not think are the best bets to be making, sometimes in terms of company, team and product, other times in terms of valuation,” Cooney said.
“In situations where you have a lead investor setting terms with a valuation that is way out of line with what is justifiable for a company, in most cases it is an investor that does not really have a wide enough understanding of the space to know all of the similar companies to the one that they are investing in and to have a sense what, therefore, the true market value would be – and true value period would be – for the company they are looking at.”
Covid-19 has only accelerated what had been already growing interest in alternative proteins among many national governments in Asia, especially China and Singapore, added Cooney. In addition to investing directly and offering incentives to startups that have included access to commercial space, technology, partnerships and capital, he said, regional governments are working quickly to craft regulatory pathways for new products.
In addition to its global fund, Lever has raised a separate $6 million investment vehicle from Chinese family offices to focus on nascent-stage companies in China. Cooney said the Chinese government announced earlier this summer that plant-based meats were among three areas of agriculture (alongside pork and poultry) that would be the focus of efforts to attract foreign investment.
“It [the Chinese government] views plant-based meat as a key area within the protein landscape for the country going forward,” he said. “As they are working to grow the sector, the government has also announced a pretty significant amount of grant funding to universities working on cultivated meat or plant-based meat R&D. There are also a number of government-affiliated technology parks and similar that are looking for cultivated meat and plant-based meat and dairy companies to come be a part of the park and offering various incentive packages.”