New Crop Capital accelerates animal-free foods through impact investment
Developing animal products without animal agriculture requires not only brilliant ideas, but also serious funding. That’s where funds like New Crop Capital and business leaders like Dan Altschuler Malek come in.
Managed by Unovis Partners, New Crop Capital gives early-stage funding to innovators creating plant-based and cell-based meat, eggs, and dairy. The fund has backed dozens of new companies, such as UPSIDE Foods, Good Catch, Zero Egg, and Miyoko’s. Serving as Unovis managing partner, Dan focuses on deal flow, strategic opportunities in North America and Israel, decision assessments, and day-to-day operations.
Dan has a deep interest in food, startups, and sustainability, as well as an MBA from Babson College in Massachusetts. He has previously established a snack business, started a restaurant, led a logistics company, and overseen a creative agency. In addition to being a board member at Zero Egg and Alpha Foods, he’s currently a mentor at Food-X, WeWork Food Labs, and Startup Bootcamp.
What’s more, as a speaker at September’s Good Food Conference, Dan will share insights from his experience investing in plant-based and cultured meat. We sat down with him to get a quick teaser for what he has in store!
Julia: Why are Unovis & New Crop Capital funding the shift from animal proteins to plant- and cell-based alternatives? Why is this cause a priority?
Dan: Animal agriculture is a major challenge with the global food supply. It’s damaging the environment, our health, animal lives, and the sustainability of humans on this third rock from the sun. And it’s inefficient. Feeding animals involves massive quantities of land, water, and energy. In the best-case scenario of chicken, it requires nine or 10 calories to generate one calorie of chicken meat, reducing efficiency by 90 percent. More and more land is being cleared away for animal agriculture. Fish stocks have been depleted, and coral reef destruction is causing significant consequences. There are more of us on this planet every day, and as the population continues to expand, we cannot continue consuming resources the way we do.
The solution we believe in is replacing animal products with proteins developed from plants, fungi, and cells. From a social impact point of view, what’s greater than saving our environment? What’s greater than ensuring food for everybody on the planet in 20 to 30 years when we’re more than 10 billion people?
What do current investments in the plant- and cell-based industries look like, and how quickly are these investments growing?
Through New Crop Capital, we have made close to 40 investments since the end of 2015 in a variety of countries, including the United States, Israel, Europe, China, India, Mexico, and New Zealand. Our investments have supported companies developing direct replacements to beef, chicken, pork, lamb, fish, shellfish, dairy, and egg products—mostly plant-based alternatives, but also cell-based and fungi alternatives. We invest in companies when an entrepreneur has an idea, an idea and product, or an idea, product, and some sales. We help them figure out the next steps to get to $10 to $15 million in annual revenue, then let later-stage investment firms take over.
Timing is key in business. For different reasons (which include social media and the internet, Hollywood productions such as the Netflix documentaries disseminating a lot of information so people are more aware of the challenges), there’s greater interest in the environment, the workings of animal agriculture, and the health consequences of animal products, at a point when food technology has improved significantly. So, you get awareness, demand, and this beautiful breeding ground for entrepreneurs to bring their creativity and energy together using the technical infrastructure. Investors like us are fanning the flames. And this huge momentum keeps growing. We see it because there’s more interest from consumers, who often say, “I’ll gradually reduce consuming animal-based foods if the alternatives meet my criteria (taste and texture) when these convenient options become available.”
What’s the most important factor when you’re deciding which companies to invest in?
We evaluate potential investments based on what we call our Food PACT, which stands for Price, Awareness, Convenience and Taste. It looks a bit like this: First, what’s the product they’re proposing to bring to market? Does it taste great? Will people enjoy it?
Secondly, is there a path towards the product being cost-effective and priced at what the market’s willing to pay, in terms of growing at scale? We’re looking for potential to decrease price in a sensible amount of time. If something created using the most expensive nuts is five times the cost of the competition, if it has very expensive raw materials to start with, it’s hard to fathom that it’ll be able to drop in price. However, if you look at products using pea protein, quinoa, or other grains, in the long-term, these products should be more affordable than their animal counterparts.
Next, we’re looking for convenience. Are these products something consumers can eat how they’re used to? Can they prepare them at home? Can restaurants cook them with existing infrastructure? If you present this amazing alternative to cheese, but its melting point is 100 degrees higher than ovens in pizza joints worldwide go, it won’t happen. We need to be mindful that we’re plugging things into the existing ecosystem.
We want companies that can build an emotional connection with clients through branding.
People are a defining factor. A great team will eventually make things work. I’d rather invest in a great team with an okay idea than an okay team with a great idea because it’s about passion, people who’re going to put it all on the line, who are going to think, breathe, and sleep their startup. It’s about collaboration. You need to build relationships with co-manufacturers, suppliers, distributors, retailers, consumers and organizations such as GFI, so you need to play well with others.
Where’s the greatest need for innovation in the plant-based or cell-based space right now?
There are lots of opportunities across the board. I’m looking for companies to do more pork analogs and analogs for different fish or shellfish. We don’t have enough of those. People who go plant-based usually miss cheese most. In any large supermarket, you’ll see an abundance of different cheeses, so that’s another area that has room for more.
You serve as a mentor at Food-X, WeWork Food Labs, and Startup Bootcamp. Is there a piece of advice you find yourself sharing time and time again?
Food companies take a while to build out, so there needs to be patience. I suggest companies go deep into a very, very small market, learn, learn, learn, learn, and then start spreading out. Beyond Meat is a 10-year overnight success. I’m excited about new distributions of food, including direct to consumer, delivery, and e-commerce. But most food is still sold through retailers and foodservice, so if a launching company goes direct, the volumes aren’t there today to ramp up. Understand the industry and play well. Its rules are there for a purpose, and it’s a dialog. It’s about understanding its set of priorities and constraints.
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