Cultivating future stars: No funding shortages for food tech and alternative protein start-ups despite COVID-19

By Pearly Neo

- Last updated on GMT

Start-ups with a focus on technology related to F&B supply chains and alternative protein product development are in the strongest positions to attract investments in the post-COVID-19 era all across the Asia Pacific region and beyond. ©Getty Images
Start-ups with a focus on technology related to F&B supply chains and alternative protein product development are in the strongest positions to attract investments in the post-COVID-19 era all across the Asia Pacific region and beyond. ©Getty Images

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Start-ups with a focus on technology related to F&B supply chains and alternative protein product development are in the strongest positions to attract investments in the post-COVID-19 era all across the Asia Pacific region and beyond.

Start-ups with a focus on technology related to F&B supply chains and alternative protein product development are in the strongest positions to attract investments in the post-COVID-19 era all across the Asia Pacific region and beyond.

This was according to an expert panel consisting of China’s first food tech VC Bits x Bites VP Winnie Leung, Coca-Cola Amatil’s venture capital (VC) arm Amatil X Head Alix Rimington, vegan chocolate start-up Bite Society’s founder Simon Newstead, and dairy firm Koita Foods’ Founder and CEO Mustafa Y. Koita.

The panel was convened virtually in the Start-ups, New Business Development & Funding webinar held as part of FoodNavigator-Asia’s Unlocking Innovation Online Series and was moderated by our Editor-in-Chief Gary Scattergood.

The webinar focused specifically on the start-up landscape in APAC as well as the investment and funding aspects to bring these from fledgling firms to major players in the regional F&B industry.

Technology and alternative protein development were revealed as major areas of focus for many investors in APAC today – in China for example, Leung told listeners that a lot of investment was going into start-ups that targeted pain points for physical store operators and used technology to overcome these.

“Companies that add value to operational efficiency such as helping grocery stores and restaurants to run more smoothly using technology such as data analytics [have been in a good place this year], for example Candao and Order Handler both raised US$14mn in 2019,”​ said Leung, who also gave a detailed presentation on the start-up scene in China.

Technology to improve and disrupt the food supply in China was highlighted as a particularly important local trend, with many of the current supply challenges in the country a result of having to go through many middle-men for foods to go from farm to fork.

“We definitely continue to see a need for [start-ups focusing on technology for] supply chain disruption, technology to allow self-sufficient food production in China, cellular agriculture, and so on. There is now more urgency and a faster timetable for these to come to market and achieve impact at scale,”​ said Leung.

“[Another area] is plant breeding technology. Many crops like coffee and cocoa are under threat due to global warming and land degradation, and this is where tech could provide solutions to develop more favourable and resilient crops for a stable food supply.”

Rimington concurred with the importance of technology, highlighting Amatil X’s focus on new and disruptive business models which could support Coca-Cola Amatil or accelerate new growth, especially in technology.

“We have six investments right now across  Australia, Indonesia, Singapore and New Zealand [which range from] restaurant technology to AI platforms and cargo freight solutions,”​ she said.

“COVID-19 forced many start-ups into cash-preservation mode – the same has occurred for all big or small businesses – and this is challenging for early-stage start-ups, but it is precisely the solutions from some of these new start-ups which are needed to help the F&B industry tide through these difficult times.”

Alternative protein product development

Another major area of focus for investors was highlighted as the alternative protein scene, particularly plant-based and cell-based alternatives.

From the perspective of a plant-based chocolate start-up, Newstead said that he had observed more people taking notice of the sector after plant-based meat firms Beyond Meat and Impossible Foods achieved widespread success.

“Many people have seen the success of Beyond and Impossible in the plant-based meat area, and are now looking at these opportunities beyond just meat, but to plant-based milk, cheese, chocolates and others,”​ he said.

“We’re seeing a new breed of importers and distributors that have shown particular interest in out vegan products as well, seeking us out to discuss opportunities.”

Based on this interest, Australia-based Bite Society has managed to successfully expand its reach to four other countries (New Zealand, Hong Kong, South Korea and soon-to-be Singapore) even through the COVID-19 outbreak.

Leung also highlighted plant-based products as a major trend in China, particularly for plant-based meat.

“In the last few months since COVID-19 hit, China has seen many plant-based meat launches by food chains such as KFC and Starbucks,”​ she said.

“There has definitely expanding consumer interest in the new wave of plant-based foods during this time, but smaller companies have also been launching ever since last year before the pandemic, and we expect this to continue.”

For start-ups, the most funding opportunities are expected in the areas of end-product improvements.

“The opportunities are tremendous for many of these offerings to improve and change consumer habits at a large scale, and improvements for these are needed in terms of taste, texture, clean label, and nutrition value compared to traditional plant-based foods like tofu and soy milk,”​ said Leung.

“All of these improvements need innovations in ingredient technology and food processing, so we will see start-ups in this space getting funded.”

Getting funded during COVID-19

All the panelists agreed that in the current economic climate, things might be more challenging for some start-ups, but also that the situation is not all bleak.

“Investors are being more cautious now and things might be especially challenging for those in the hardest hit industries,”​ said Rimington.

“People might need to lower their expectations in mind of the current situation, and can also look to see that government support might be available. For example, in Singapore there is a Special Situation Fund to help start-ups, where the government matches dollar-for-dollar private equity that goes to these.

“That said, F&B is one of the industries that has withstood the test of time and shown to be resilient to crises.”

In terms of getting funded, Newstead and Leung both highlighted resilience and resourcefulness as important factors for them when considering investing in a start-up.

“I look for those who are ‘relentlessly resourceful’ – people who can figure out how to get around problems and are willing to adapt. Also, those who dare to pivot or shut down a product when it is shown to not do well upon scale-up are those that tend to do well,”​ he said.

Leung added that: “Firms which have been through a crisis, been challenged and can demonstrate how they overcame these to come out better on the other end – apart from the original problem they are solving and their product’s suitability for the market, that is what is most important.”

What might change after funding

Koita’s firm is self-funded, and he admitted that this was a difficult route to take in the start.

“It’s really very tough in the beginning if you don’t go for external funding and look at bootstrapping as money can be very tight,”​ he said.

“The upside is that there is a lot of agility in decision-making so these decisions can go through quickly and there is no need to compromise in any aspect.

That said, as any firm grows, you still have to compromise agility when it comes to scaling up, and we’ve seen that after growing to enter 10 markets. As you get bigger, some agility has to be compromised to make strategic decisions.”

Not all investors would require start-ups to make big changes though – According to Rimington, Amatil X’s investment strategy is to take a minority share in areas they can help the most instead of acquisition, and set up agreements in a way to support the start-ups.

“The last thing we want to do is crush entrepreneurial drive -we want them to maintain their drive and magic and the way they are,”​ she said.

“It’s also why we set up our Amatil X Academy to connect people within Amatil to those in the start-up ecosystem, as we believe there is huge value for start-ups and businesses to work together.”

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