Disruptive Foods: What Seemed Impossible Sizzles in the Private Market
May 31, 2019 | Blog

Disruptive Foods: What Seemed Impossible Sizzles in the Private Market

Earlier this month, Beyond Meat completed what became a blockbuster IPO followed by a continued valuation surge in public markets. This performance may be representative of the surging interest in alternative food companies. In fact, investors have shown an appetite for private companies poised to disrupt the food we all eat. Based on our analysis of Pitchbook data, the amount of money food product companies raise has accelerated.

Funding in the Food Products Industry

The specific criteria for companies included in our analysis are: currently venture capital backed, U.S. based, founded after 2009, and in the food products industry. Impressively, this cohort of private companies has raised nearly $3 billion in less than 10 years.

In our deep dive of this food vertical, we found that a few companies are driving the collective funding markedly higher, while many smaller players have seen a multiplicity of primary rounds– the private market appears to provide companies the capital they need to satisfy the hunger growth requires.

Private IPOs & Unicorns

Our analysis identified six “Private IPOs” - a primary funding round generating $100 million in funding or more - of which two companies have taken all but one. These six rounds account for 33 percent of all the funding this larger cohort has mustered so far. This concentration is significant given over 400 distinct funding rounds have taken place for the queried companies.

The food products industry only has two current unicorns. Again, we only included currently VC backed firms founded after 2009. Those unicorns are Impossible Foods and Just.

Impossible Foods

Impossible Foods, founded in 2011 by Stanford biochemist Patrick Brown, is a leading developer of plant-based meat. The Redwood City, California based firm is currently scaling the manufacturing of its Impossible Burger - a ground beef substitute - and is developing other meat substitutes to replace animal agriculture at large. The Impossible Burger is sold in thousands of restaurants worldwide. According to climate scientists, animal agriculture contributes roughly 30 percent of annual greenhouse emissions. This scale of emissions is the reason Dr. Brown gives for leaving Stanford. In its current form and according to the company, Impossible Burger uses 96 percent less land, 87 percent less water, and generates 89 percent fewer emissions compared to traditional beef. Investors have shown they too see value in changing how we produce meat– Impossible recently raised $300 million at a $2 billion valuation. Current investors include Gates Ventures, Khosla Ventures, Jay-Z, and UBS. We will continue to monitor how Impossible’s heme-oriented pursuit continues.

Just

Just was also founded in 2011 by CEO Josh Tetrick and Josh Balk under the Hampton Creek Foods name. The company develops plant-based food. Currently, Just produces plant-based eggs that they use in four different products: scrambled eggs, mayonnaise, dressing, and cookie dough. The company also produces Power Gari, a fortified cereal, and is developing a cultured meat process to bring Wagyu to the world– just not from a cow. This Unicorn is taking a diversified approach to disrupting foods, starting with the ubiquitous egg and addressing malnutrition in the developing world. Clearly this company is not putting all their faux eggs in one basket. Just is in the process of raising a targeted $200 million, which is on top of the $150 million it raised in 2017 to become a unicorn. Current investors include Horizons Ventures, Khosla Ventures, Marc Benioff, and KBW Ventures.

If funding in food product companies continues to accelerate, we expect more unicorns to be minted from the industry. Albeit, this thesis is far from certain. These companies benefit from secular tailwinds vis-à-vis the rise in private funding and the recent Beyond Meat success coupled with changing climate consciousness in consumer preferences. It might have seemed impossible to change the way we eat just 10 years ago, but the innovation economy engine continues to prove cynics wrong.

Funding in the Food Products Industry
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The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.

Alejandro Ortiz

Alejandro Ortiz

Alejandro is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Valuation Analyst at Duff & Phelps with a focus on TMT industries.
PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.