Posts tagged: VC

When Mosa Meat served up a first-of-its-kind, lab-grown hamburger in 2013, it cost over $300,000. Eleven years later, around 200 startups worldwide remain hopeful that growing meat from cells, rather than slaughtering animals, will one day be a major portion of our food supply. 

Despite their optimism, such success is not a given. In 2024, the industry has hit such rocky times that multiple startups have been forced to scale back or close shop. 

The industry is talking about eventually producing about 30 million pounds of finished product annually. However, over 100 billion pounds of traditional meat is produced annually today. And if plant-based meat accounts for about 1% of all meat by volume, it’s going to take time for cultivated meat to get to that point, said Better Meat CEO Paul Shapiro, who wrote a book in 2018 called “Clean Meat.”

Any goal that puts cultivated meat in big box grocery stores or on fast food menus in the 2020s is “unrealistic,” he told TechCrunch.

“Even if it were ready now, and the funding was available now, the time that it takes to build these factories is years. And the fact is, the money isn’t there for it, which is why a lot of these companies have abandoned their plans for commercial-scale factories,” Shapiro said.

For instance, New Age Eats shut down in early 2023, with founder Brian Spears posting on LinkedIn that the company was unable to secure funds to complete its pilot facility. Berkeley-based Upside Foods laid off workers and put plans on hold for a new Chicago-area facility. Israel-based Aleph Farms let go of 30% of its staff in June, also citing difficulties in raising capital. 

San Francisco Bay Area-based SCiFi Foods also permanently closed in June. SCiFi CEO Joshua March shared on LinkedIn: “Unfortunately, in this funding environment, we could not raise the capital that we needed to commercialize the SCiFi burger, and SCiFi Foods ran out of time.” 

“It’s a really tough time right now, not just for cultivated meat, but any biotech related field,” said Tufts University Professor of Biomedical Engineering David Kaplan. “The economy is in the toilet, the investing funds are not there and people are being very, very cautious these days.”

It’s important to note that the startups pursuing lab-grown meat are not just pursuing scientific curiosity or a more humane, but equally nutritious, protein alternative. Most global organizations, including the United Nations, are throwing out 2050 as the date when we will need to be producing 60% more food to feed the nearly 10 billion people expected to be inhabiting Earth. 

Those working on cultured meat hope it will be a significant portion of that 60%, with no need to slaughter animals or use the kind of land, water and energy resources needed by the traditional meat industry.

Still, as promising as this field was 11 years ago, there has been frustratingly slow progress on the industry’s main barriers. 

Companies working on lab-grown meat — although the industry prefers the terms cell-cultured or cultivated meat — make it from animal cells, typically stem cells, that are fed growth factors in some sort of cell-feeding solution, or medium. The cells are fed and grown in bioreactors, then processed with ingredients and flavorings to mimic the taste, texture, look and mouth feel of traditional meat.

Yet most companies are unable to produce large quantities of meat from their processes, much less at a low-enough cost or even at price parity with traditional meat. Moreover, the facilities cost hundreds of millions of dollars and take years to build. Achieving taste and texture is also a problem, as is changing the perceptions of people who tend to think of these products as unappetizing “Franken meat.”

On top of all that, very few companies have achieved regulatory approval in the U.S. for their cultivated meat processes.

Perhaps the biggest difficulty of all is the downturn in venture capital funding. In 2021 and 2022, cultivated meat companies pulled in over $1.6 billion in venture funding, according to Crunchbase analysis. As of June, Crunchbase was showing around $20 million in funding into this industry so far in 2024.

“Changing the world and reinventing the food system is hard, which is probably the least shocking conclusion that one can come to,” Amy Chen, chief operating officer for Upside Foods, told TechCrunch.

However, she, like all others in the cultured-meat industry, believes it can be done. She thinks there will be a point in development where some kind of Moore’s law equivalent will kick in, and the industry will start seeing dramatic increases in production and achieve regulatory approval, which will increase the ways this product is brought to market, driving affordability and public acceptance.

Government funding to the funding rescue?

Before these companies can solve their technical problems, they must first overcome their funding ones. Lever VC managing partner Nick Cooney says investment into the category “has dropped considerably in the last year or so,” largely due to the general drop in VC funding overall. “But this sector is outpacing that drop,” Cooney said. 

The problem is that (other than all things AI), VCs are currently avoiding funding tech that has enormous upfront capital costs, doesn’t currently produce much (if any) revenue (let alone profits), and may never prove to be viable businesses. 

“VCs have largely made this shift from growth to profitability, and that’s wreaked havoc” on this industry, said Alex Frederick, senior emerging technology analyst at PitchBook. It’s difficult to be profitable when you don’t have a product to sell, he points out. 

PitchBook puts fundraising into cultivated meat at a double-digits decline over the past few years, Frederick said. The first quarter of 2024 was on pace to somewhat match the low pace of 2023 funding with 12 deals logged so far. Another 20 or so more potential deals are in the pipeline, he said.

At the start of 2024, there were around 200 cultured meat companies worldwide, according to PitchBook. But because most cultivated meat companies are startups, if they lose their ability to raise more venture funding, they tend to go out of business or be acquired. That’s the stage where Tuft’s Kaplan says the market sits now and, unfortunately, he has no prediction on when that will change, or how many will survive.

One possible solution is for startups to outsource cell manufacturing, leasing equipment and production rather than each of them spending $100 million to $200 million on their own facilities, Frederick says. Venture capitalists have liked this approach and infused some funding into companies doing this, like Ark Biotech, Prolific Machines, Pow.bio, No Meat Factory and Planetary.

Another funding option, Kaplan points out, is if governments are willing to kick in. Singapore, the first country to approve cultured meat for consumer consumption, is doing so. It’s committed $230 million to research of alternative proteins. And the Israel Innovation Authority has an $18 million fund for alternative protein startups and research. Tufts’ Kaplan believes we’ll see more countries follow.

“In a world that’s kind of struggling right now with food security, it will become how much can the government invest into this approach,” he said. “Just like the government has invested in battery technology and chips, they are going to have to do the same thing for cultivated meat if we are going to make this work.”

He has reason to hope. He points to Mosa Meat’s $300,000 hamburger, saying that most companies today can make the same hamburger for $20. 

Yes, that’s still way more costly than a McDonald’s Big Mac, but in 10 years, there was a four orders of magnitude reduction in cost with minimum government investment, he said.

‘Massive’ engineering hurdles 

Others point out that even if money wasn’t so tight, the industry still hasn’t figured out how to make enough meat. Upside Foods knows about this. A lot about this. 

So does competitor Eat Just. Founder Josh Tetrick said his company has sold 10 times the amount of cultivated meat as the entire rest of the industry combined. “But that’s hardly any meat,” he told TechCrunch. “It’s in the single digit thousands of pounds, just to give you a sense of how small the volumes are, since only a handful of companies have regulatory approval.”

Eat Just and Upside Foods are two of the only companies to receive regulatory approval to sell this meat to consumers, with Eat Just being the first to sell in Singapore and then the United States. Tetrick is using this market advantage to focus on how to make millions of pounds at or below the cost of conventional meat. But “there are massive engineering and technological hurdles to be overcome,” he said. 

For instance, his company is working on increasing cell densities, or edible cells produced per unit volume. That’s a key metric for manufacturers in order to produce the maximum amount of meat from each bioreactor. 

There are a variety of bioreactor technologies, each with different approaches to cell density. Some use batch methods (fixed amount of cells and the growth food medium processed at one time); others use continuous methods (a steady stream of inputs/outputs). Some stir the cells when adding fresh cell food; others suspend the cells and rotate the walls of the reactor.

Which of these technologies will be reliably best is still a matter of scientific research. Cultivated meat producer Believer Meats, for instance, showed in a 2023 study that cells grown in suspension can deliver densities of over 100 billion cells per liter — which it claims is over 17 times the industry standard. This increased process yields from 2% to 36% weight per volume of edible meat per run. 

Costly cell food

Beyond the reactor engineering, another major hurdle is both the engineering and cost of the cell growth medium. Cell media typically includes a mixture of an energy source, like glucose, that includes amino acids, salts, vitamins, water and other components. 

Along with the hundreds of millions of dollars to build a facility, the cost to produce this media at scale is quite expensive. A 2022 study by the Department of Agricultural Economics at Oklahoma State University found that 1 kilogram (equal to about 2 pounds) of cell-cultured meat was estimated to cost $63 to produce. That was compared to $6.17 per kilogram for beef.

Wildtype, for instance, is making cultivated salmon. It started with a single cell and hasn’t needed to go back to an animal to obtain more cells for five years now, according to co-founder Aryé Elfenbein. It has now gained more understanding in how to best feed these cells to improve cell density.

“We’ve improved the yield of that process over time by understanding what nutrients these cells do best in,” Elfenbein said. “Raw fish is just extraordinarily complex, and all the aromatics and different components are something that we’ve aspired to create a more difficult, structured product from the beginning.”

The industry is also still working on methods to get the cells without taking them from animals. MarineXcell, for instance, is developing a way to produce embryonic stem-like cells, called induced pluripotent stem cells, or iPSCs, from crustacean cells — like lobster, shrimp and crab — using advanced nuclear reprogramming technologies. 

The Israeli-based company says the technology, spearheaded by chief scientific officer Yossi Buganim, accelerates cell growth twice as fast as adult stem cells, but also maintains differentiation and cell growth potential over time, even under suboptimal conditions. Buganim’s lab was able to do this with bovine cells and is now applying similar techniques to crustaceans.

Getting along with the government

Founders say that the lack of regulatory policies is holding the industry back, too.

“It’s the main reason why quite a number of companies haven’t launched products yet,” Wildtype co-founder Justin Kolbeck said. “They’re on the journey during a multi-year regulatory review process, which is what consumers are watching. They want to make sure that the food regulators are taking their time looking under every stone, making sure that what we’re putting out on the market is as safe as possible.”

That said, no one thinks food safety is an area to skimp on — Wildtype’s conversations with the U.S. Food and Drug Administration were “constructive and positive iterative processes for a number of years now,” Kolbeck said. However, the company has also had conversations with potentially large customers interested in buying their products today. And Kolbeck doesn’t want to speculate when Wildtype’s regulatory approval will come.

Upside’s Chen said progress is being made. She believes regulators now have a better understanding about what cultivated meat is and more educated safety and regulatory concerns.

“When we got the first FDA approval, and others followed, it pretty much answered the question of, ‘Could this ever be approved and is it safe?’ Now our next-generation products need to go through a similar regulatory process, but that’s more of a ‘when,’ not an ‘if,’” she said.

Public perception

Both Upside Foods and Eat Just tested out their cultivated chicken products in a few restaurants following regulatory approval. However, Upside’s Chen and Eat Just’s Tetrick say those pilots have ended until they can scale further. 

One thing they learned: Wide consumer appeal remains a problem, with people calling it “Frankenfood,” “faux meat” or “lab-grown” meat — which technically it is — but those descriptions don’t sound appetizing. Florida has even already banned lab-grown meat. 

“A challenge for all of us is how to help consumers fall in love with the category, understand what cultivated meat is, why we are behind it and what’s in it for them,” Chen said.

Tuft’s Kaplan believes that more education, more transparency by the industry and more peer-reviewed published papers from respected universities, will all help. 

Chen expects the field to be very different even two years from now. She’s optimistic that consumers in a variety of geographies will be able to take their first bite of cultivated meat and “that it will be delicious.” 

Lever VC’s Cooney also sees real progress being made. He points to Lever’s portfolio company Clever Carnivore, a cultivated meat company that has raised around $9 million. “From a price point reduction standpoint, they’ve found a way to produce meaningful pilot quantities at quite a reasonable capex,” Cooney said.

In the meantime, Eat Just’s approach overall will be what the company is doing currently in Singapore with launching its cultivated meat in retail. The product is 3% cultivated meat, while the other portion is plant-based proteins. 

Tetrick admits it is significantly less than the 60+% Eat Just first launched in 2020. However, by developing meat at 3%, he believes the company can significantly drive the cost down, thus building more consumer experience and awareness around cultivated meat.

He has a plan to increase that 3% over the next three to five years, while at the same time working on a lower-cost infrastructure, working on getting cell densities up and working on getting media costs down.

“We don’t think there’s anything magical about it,” Tetrick said. “We just have to do the necessary work across those different dimensions to get it done.”