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How do we avoid a Theranos for cultivated meat?

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Alternative protein investor Lever VC has released internal benchmarks for assessing the scientific progress of early-stage cultivated meat companies to help investors place more informed bets in a “complex and nascent industry” and help avoid a “Theranos-style outcome.”

Lever VC is not accusing cultivated meat entrepreneurs of attempting to defraud investors (as per Theranos founder Elizabeth Holmes), stresses managing partner Nick Cooney. However, some pitch decks that have crossed his desk in cell-cultured meat in recent years have not inspired confidence, he tells AFN.

“My candid view is that if you made a Venn diagram of companies that have received meaningful funding and companies that have what it takes to succeed, I think there’s only modest overlap between those two,” says Cooney. “A lot of investors in the category—including many of those writing really big checks—do not have the scientific or technical expertise in the category, based on a set of data from across the category, to help them make the smartest decisions.”

‘If you made a Venn diagram of companies that have received meaningful funding and companies that have what it takes to succeed, there’s only modest overlap’

Lever VC has invested in cultivated meat companies including Mission Barns, Avant, CellX, Bluu Seafood, and Mooji Meats, and uses an internal scientific associate and a scientific advisor to help assess startups’ claims.

Over the past several years, its partners have invested in more than 65 companies in the nascent space, helping it get a broad overview of metrics from cell density to doubling time, to immortalization performance to media costs, says Cooney.

“I think there are some [investors] who haven’t done very basic technical due diligence and are largely just relying on the story or the lead investor’s diligence,” a phenomenon he conceded is not restricted to cultivated meat investment in recent years.

“But unless you both understand the science and have done technical due diligence on a dozen or dozens of companies, you don’t have a great frame of reference on how a particular company’s technology stands relative to others.”

From bad to good to BS…

The white paper covers the technical milestones and competencies Lever VC expects cultivated meat startups to have achieved by each fundraising stage based on industry-standard progress rates, with ratings varying from ‘required,’ ‘bad’ and ‘good’ to ‘Red flag (BS),’ says scientific associate Jasmin Kern.

“There are cases where we ended up doing really deep diligence, and a claim we had flagged as potential BS turns out to be true.

“But in many cases, we find that the way these numbers were calculated either is not the way these things are calculated in a standard lab when these measurements are taken. Or in other cases, we find out that even though their pitch deck cited this number, it was in fact a projection that they expect to get to in 5-10 years.”

A ‘first attempt at a semi-quantitative approach for cultivated meat technology scoring’

While fully quantitative scoring is not possible due to “high associated complexity in addition to the presence of intangibles,” the benchmarks represent Lever’s first attempt at a “semi-quantitative approach for cultivated meat technology scoring,” says Jonathan Avesar, lead scientific advisor at Lever VC.

“We supplement our overall scientific analysis with these quantitative benchmarks that allow us to compare progress between companies, which aids in our evaluation of the risk/reward profile. Benchmarks also serve toward understanding if certain metrics may be overly optimistic and require additional claim vetting.”

‘We’re still seeing some very generic pitches, but we’re also seeing new entrants with things that astonish us’

So with alt protein investment falling sharply over the past year, is there still a steady stream of cultivated meat startups seeking capital? Or is everyone now waiting to see how consumers respond to the first wave of products in the space before committing any more capital?

“The pace of new entrants hasn’t really slowed down noticeably although it’s going to be tough to raise money in some segments now unless you’ve got a really revolutionary approach,” says Cooney. “We’re still seeing some very generic pitches, but we’re also seeing new entrants with things that astonish us.”

Kern adds: “Quite a few of the cultivated meat companies we’ve been meeting with over the past three or four months have had novel technologies that we think could disrupt the space when it comes to high-throughput production for example.

“Over the past couple of months, I’ve seen a lot of advancements from a lot of different companies, so I’m very optimistic about the space although I still think that timelines will be longer than initially promised, of course.”

Shake-out to come?

Looking ahead, says Cooney, “I imagine there’s a number that will go under, and to be impolite they probably deserve to in that they don’t have enough unique value that it makes sense for investors to keep putting money into them.”

Speaking at the Future Food-Tech conference in March, Stray Dog Capital managing partner Lisa Feria said 2023 would be a pivotal year for cultivated meat, as a handful of well-capitalized startups hit the market and early-stage players wait to see if consumers are sufficiently enthused to motivate anxious investors to keep funding the category.

Speaking to AFN at the sidelines of the conference in San Francisco, a week before cultivated pork startup New Age Eats announced it was shutting down, Feria predicted that “a lot of the smaller companies that don’t have a point of differentiation aren’t going to get funded.”

She added: “They’re either going to get acquired by the larger ones, or they’re going to go under; there’s going to be a shaking up of that market, and we’re already starting to see it.

“But then we also have companies that are going to put products on the market in the US, Israel, and Singapore this year, and the level of consumer enthusiasm is going to be a key trigger as to whether the rest of the category can ride on their coat tails and get more funding.

“If there’s not a good consumer reaction, however, companies that are just being founded now, or are within a year or two of being founded, could be in real trouble.”

As for price, she said: “I think the ideal space for cultivated meat is at parity or within 10% or 15% of the price [of conventional slaughtered] meat, maybe if you highlight that it’s antibiotic-free or better for the environment and so on. Anything above and beyond that, it’s going to be really hard.”

  • Download Lever VC’s benchmarks HERE.

Further reading:

Crunch time for cultivated meat, some early-stage players ‘could be in real trouble’ – Future Food Tech investors

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