By Joshua Mitnick, VCJ Correspondent
Test-tube-grown beef. Plant-based eggs. Protein powder spawned by fly larvae.
Unappetizing as these might sound, Israeli venture incubator Kitchen FoodTech Hub is betting that reengineering cuisine is the only way to feed a growing population in an efficient and environmentally friendly way.
“We are going to have to start eating insects. Unfortunately it’s essential,’’ said Amir Zaidman, VP business development.
“We can’t sustain the livestock on the planet in order to create the proteins that we need. Some people say, ‘well, it’s so gross that i would never consider it.’ Gross is a matter of culture and getting adapted to new stuff.”
The Kitchen is part of the venture arm of Strauss Group, the Israeli maker of dairy, coffee and Sabra hummus and related dips.
Established in 2015 as one of several incubators in partnership with the Israeli government, the Kitchen has a portfolio of 12 startups sharing the goal of overhauling the food system to reduce ecological damage and boost the nutritional value of what we eat.
Executives at the incubator, headed by CEO John Berger, say the focus is on impact investments in foodtech.
The mission “is to make the food value chain or supply chain more sustainable, more efficient, more environmental, more approachable and, of course, healthier for the end user,’’ Zaidman said.
The investment portfolio includes Flying SpArk, which uses fruit-fly larvae to generate a protein powder that can be used to bake cookies and make cooking oil; Aleph Farms, which in December said it had used stem-cell technology to turn animal tissue into a minute steak; and Zero Egg, developer of a liquid protein from a plant that can be served up as an omelette or used in baking.
Located in Ashdod, a coastal city 22 miles south of Tel Aviv, the incubator focuses on pre-seed rounds, investing as much as $750,000 in a startup. Ventures get access to government R&D grants as well as the potential to collaborate with Strauss Group and its partners, including PepsiCo, Danone and Mitsui.
Foodtech is an emerging category that has seen venture and PE investment soar to $7.5 billion last year from $496 million in 2013, according to data from PitchBook.
The industry in May got a boost from Wall Street, when plant-based-meat maker Beyond Meat raised $240 million from an IPO. The company’s shares nearly tripled on the first day of trading.
Innovation in the sector is being driven by a global push for sustainable growth amid climate change and consumers’ evolving preferences for healthier diets.
Five years ago, the foodtech concept didn’t exist in the local investment community. But digitalization has created an opportunity to streamline the food-supply chain, which traditionally is low-tech and complex.
“Back then, when we talked about foodtech, people asked, ‘What are you talking about?’’’ Zaidman said. Government innovation officials who considered the Kitchen’s pitch for an incubator franchise “really didn’t understand exactly what we were talking about, but they found it very interesting.”
They get it now. Last year, Israel’s government put out a tender for a second foodtech incubator, for northern Israel.
Local investors like Zaidman say Israel’s know-how in agritech, AI and big data give ventures in the Jewish State an advantage. Alternative-protein innovation is also driven by Israel’s embrace of veganism.
Some 250 startups were established in the country from 2011 through Q1 2018, and foodtech ventures raised $845 million from 2008 through first-quarter 2018, according to the research firm Israel Venture Center.
To be sure, the capital-raising figures are modest compared with Israel’s leading technology investment areas, like cybersecurity and fintech. Investing in foodtech is a stretch for venture investors who are accustomed to enterprise software, Zaidman said.
“This is a very-early-stage sector,’’ he said. “Foodtech is further away than the regular investments that VCs are used to. So it takes more time for them to adopt this sector.”
Zaidman says the Kitchen is looking to expand its portfolio in companies focused on reducing food waste, smart packaging for food to extend shelf life, and substitutes for sugar and salts.
“Israeli entrepreneurs want to change the world and do something significant,’’ Zaidman said. “Our mission is better food, better industry, better world. And we live by that.”