“It’s the perfect environment for us to be putting dry powder [from our new fund] to work in the space,” says Brian Ruszczyk, co-founder and CEO of Earth First Food Ventures.

We’re discussing EFFV’s latest vehicle, the Smart Protein Fund, which has a $300 million target and was launched in January to go after the alternative protein segment of the agtech sector, alongside partner firm Milltrust International.

EFFV previously partnered with 8F Asset Management to raise the $358 million 8F Aquaculture Fund I, which closed in March 2020.

“The venture capital index is down 58 percent since its peak and a lot of the entrepreneurs have probably been humbled now and are a lot more collaborative,” adds Milltrust International managing partner Alexander Kalis. “They’re not dictating the fund terms as they might have done in the past. We’re writing the term sheet at this point in time and that’s how we like it.”

The tech price correction in 2022 was severe, with estimates on the value wiped off of listed stocks ranging from $4 trillion to as much as $8 trillion. Job cuts were also deep, with some 97,000 job losses representing a 649 percent increase on 2021, as the industry suffered its biggest slump since the global financial crisis.

“Their game over the last three years was they wrote the term sheets, pushed it across the table and said take it or leave it and they found their money,” says Ruszczyk. “There was a lot of silly money chasing silly deals in our industry with crazy valuations. That’s all over now.”

Kalis and Ruszczyk’s assessment of the agtech space echoes that of Anterra Capital managing partner Adam Anders, who tells Agri Investor in an upcoming interview that the firm still has 70 percent of its $260 million Anterra FA Ventures II vehicle to deploy, even though the fund reached final close in February 2022.

Anders says Anterra felt things were “too expensive” last year, while the uncertain nature of the market encouraged it to keep its powder dry.

And like Anders, Kalis and Ruszczyk believe the time is now right to deploy capital in the agtech space.

Right time for agtech = right time for alternative proteins?

Milltrust and EFFV’s Smart Protein Fund will focus on opportunities in California, the Netherlands, Israel and Singapore, and is spit 20 percent to seed and early stage investments, and 80 percent to later stage series B and C rounds.

In terms of the alterative protein segments it will pursue, 50 percent of the fund will invest in fermentation start-ups, 20 percent will be dedicated to businesses geared towards the infrastructure required by alternative protein products, 15 percent will invest in cultivated technologies and the remaining 15 percent will pursue opportunities in plant-based.

“Beyond Meat wasn’t worth $12 billion when it went public. It was trading at 60 times sales.”

Brian Ruszczyk

On plant-based specifically, Ruszczyk is in bullish mood and is keen to offer an alternative perspective to some of the negative headlines being directed towards the space.

“We know there’s been a slowdown in plant-based products and there was a slowdown in consumer acceptance of a plant-based last year, but there was a slowdown in everything last year. If we have to compare apples to apples, we need to look at the numbers for Procter & Gamble, Nestlé, Tyson Foods and they were all down last year,” he says.

Thinking specifically about the share price of Beyond Meat, which has been presented as a barometer of the market by numerous observers to illustrate that the plant-based trend was nothing more than a fad, Ruszczyk says the company’s public valuation was too high to begin with and plant-based encompasses so much more than meat substitutes.

“Beyond Meat wasn’t worth $12 billion when it went public. It was trading at 60 times sales. We were treating the company as if it were Tesla, as the new thing and the new solution to our global climate problems – it’s not. It’s an alternative to meat consumption and meat production whose sales have tapered off over the last year,” he says.

If the animated and highly engaging Ruszczyk were a cartoon, this is the part in the conversation you imagine he’d be slamming his head against the wall in frustration – because he’s right. Beyond Meat was overvalued.

This is an opinion that was held by many investors and analysts at the time. RiskHedge founding partner Olivier Garret even wrote a prescient article for Forbes in 2019 setting out how reality would come back to bite the company, and he was proved right.

And while Ruszczyk is correct that the established names such as Tyson Foods and Nestlé also experienced falls in share prices, their losses were not as dramatic as that of Beyond Meat.

Beyond’s stock was trading at $66.58 on January 14 2022 and had fallen to $15.93 by January 13 2023 – a 78 percent fall. Over the same time period, Tyson Foods shares fell 31 percent from $93.28 to $64.61; Nestlé’s share price fell 6 percent from SFr120.84 ($130.66; €122.46) to SFr113.96; and the JBS share price fell 39 percent from 35.24 reais ($6.71; €6.28) to 21.50 reais .

Ruszczyk adds: “When they [Beyond] were out there as the only lady at the dance, it was a great story. Now there’s 300,000 companies producing plant-based and I would argue that this is why in our portfolio, we’re only allocating up to 15 percent to plant-based. It’s a saturated market with no IP.”

The future of alternative proteins is hybrid

So why go after the space at all, then? For Milltrust and EFFV, you still have to go for plant-based because its future is entwined with that of the other alternative proteins currently trying to gain market share.

“We’re very optimistic and very enthusiastic about hybrid technology, so basically integrating plant-based but with other technologies like cultivated,” explains Kalis. “We’re seeing some companies using the cultivated portion for texture and taste and that really changes the ballgame for the plant-based products out there.

“And then we’ll see that going forward with fermentation and plant-based and eventually, I think we’ll probably have just one broad category of alternative protein in the future and not these individuals strands. That’s where it’s heading. We’re not there yet, but it’s heading that way,” says Kalis.

Cultivated meat has been on an unbroken upward trajectory for several years now. From a base of $60 million raised across the space in 2019, total fundraising increased more than sixfold to finish at $366 million in 2020. By the end of 2021, the figure shot up by more than $1 billion to hit $1.38 billion for the year – whole year fundraising data for 2022 is not yet available.

“We’re seeing some companies using the cultivated portion for texture and taste and that really changes the ballgame for the plant-based products out there.”

Alexander Kalis

The industry’s LP base has also been on the up, growing by 62 percent to 458 unique investors in 2021, while already boasting a long list of household names such as Walmart, Tyson Foods and Bill Gates. Last year brought the three biggest nations in food into the sector, as China, the Netherlands and the US all signaled their intent to support their cultivated meat sectors – the expectation that cultivated meat will be part of the future of protein is widely shared.

“There aren’t a lot of plant-based products out there that equal the meat equivalent. Whether it’s nutrition but certainly on taste and texture, we have ways to go,” says Ruszczyk.

“We think this is going to be solved by the inclusion of cultivated technologies into hybrid products, the products that Alex alluded to. That will allow us to create, not plant-based, but maybe 90 percent plant-based and 10-20 percent cultivated meats that add flavor and texture. And eventually as we scale out with volume, [we will arrive at] an equal or lower price point than traditional animal proteins.”

Ruszczyk cites the case of San Francisco-based alternative protein company Just Eat as a case in point of what he believes is to come. Just Eat said last year that its plant-based liquid egg product achieved price parity with chicken eggs.

“I just picked up a container of their Just Egg product for five bucks. That container is equivalent to a dozen eggs. A dozen eggs today in the US you can’t find for below $8,” says Ruszczyk.

“Now that’s because of avian flu and they had to cull all these chickens and so on but it doesn’t matter. The price point of that alternative egg protein, made from plants, is at a lower price point than traditional chicken eggs. We’re reading all about it in the US because eggs have gone through the roof. Not so on the plant-based side. So there are certain pockets where we’re already breaking through that parity on price.”

This is exactly what the proponents of alternative proteins have long since hoped for – the ability to compete with their animal-derived counterparts on taste and price.

If this is a sign of things to come for the rest of the sector, declarations that alternative proteins are nothing more than a fad may well prove to be premature.