It’s safe to say that food and agriculture founders haven’t had an easy start to the year. With rising inflation and interest rates, money has gotten tighter, and Silicon Valley Bank’s crash has greatly exacerbated the situation. But not all is lost. Let’s check out the details. 

The rise, fall and consolidation of alternative proteins 

Let’s start with the meat of the matter. There’s been an exceeding amount of analysis and speculation regarding the future of alternative proteins this quarter. And of all the food and agtech solutions, it seems to be the hardest hit by the current economic conditions. 

Here’s my take: Yes, the startups over-promised, and investors have overhyped and overfunded them. Yes, the products are still too expensive, and most don’t deliver the taste and texture they set out to. Despite these challenges, alternative protein is not dead. 

One major criticism the sector faces is that products are overprocessed and contain too many "artificial" ingredients. Opponents claim that this keeps consumers away. But only a small proportion of consumers is primarily interested in minimally processed, natural foods. So I don’t think that is what’s preventing adoption at scale. Once cost does come down and quality goes up (and consumers start understanding that meat and dairy from industrial agriculture aren’t "natural" either), I bet these products will still move from niche to mass market. 

Over the past decade, the alternative protein industry has focused on bringing a diverse plant-based product pallet to market too soon. Startups making alternatives for every imaginable animal product have sprouted up at a stunning scale. Rather than each capturing their own market share and replacing animal-based products, they have been cannibalizing each other’s sales channels without significantly reducing the purchasing of traditional dairy, meat and egg products.

So what needs to happen for broader alternative protein consumption? Consolidation and more strategic investments in manufacturing, marketing and product placement. Rather than helping bring hundreds of mediocre and expensive products to market, investors should focus on getting a dozen truly amazing products right, scale them to compete on price and win over average consumers. Once that foundation and trust are built, it will be easier to start slotting other products into their rotation. 

OK, that’s enough unsolicited advice from me. Here are this quarter’s notable alternative protein developments:

Money is still flowing: Among the many smaller deals of the quarter, Oatly’s $425 million, No Meat Factory’s $42 million and THIS’ $18.5 million raises stood out. Plant-based chicken startup Rebellyous Foods also brought in $9.5 million to invest in new production equipment.

There’s a big manufacturing push: Natural foods manufacturer SunOpta plans to open a $125 million "mega facility" in Texas to double its production capacity by 2025. Meati Foods opened its largest-yet production facility in Colorado. Canada's No Meat Factory plans a $20 million production facility near Seattle. British Naylor Farms has begun constructing a $41 million facility that it claims will be the first in the world to extract brassica protein from cabbages. 

Signs of scaledown: Impossible Foods, Eat Just and others have announced layoffs. New Age Meats has closed for good. General Mills shut down alternative dairy brand Bold Cultr and Remilk hit pause on a planned large-scale fermentation facility in Denmark.  

Cultivated meat is plugging along: GOOD Meat has been the second company to receive a "no questions asked" letter from the U.S. Food and Drug Administration, ticking an important box for commercialization. Spanish Cocoon Biosciences raised $16 million for a new bioscience process to make cultivated meat production easier. Israel-based Ever After Foods launched a patented bioreactor system that promises to make cultivated meat production scalable while dramatically reducing cost. 

Is agtech the next bursting bubble?

Alternative protein isn’t the only industry in which investments don’t match customer demand. In my view, agtech is running a very similar risk. Billions of dollars have flowed into drones, satellites, precision management, automation, soil sensor and digitization tools, among other technologies. Yet their adoption has been painfully slow. 

One problem is that many of these tools haven’t been designed with much input from farmers. Another bigger challenge is that most farmers don’t have the capital, expertise or time to test and adopt new technologies, even if they would help them. Finally, there’s the slow evaluation cycle farmers deal with — it takes several years of testing a new process under different conditions to determine whether it truly is an improvement and worth scaling from test plots to their entire operation. There is only one growing season for a crop per year. 

VCs should work with farmers to pick the leading options, test them thoroughly and figure out how to implement at scale.

Unfortunately, I don’t see these challenges adequately reflected when scanning the landscape for new investments. Too much money flows into technologies that are far removed from the reality of farmers and directly compete with each other's customer bases. Similar to the alternative protein space, I think it’s time to narrow things down. Work with farmers to pick the leading options, test them thoroughly and determine how to implement them at scale. 

That would be quite the deviation from the current venture capital model of making investment bets across the board, throwing the technologies out randomly and hoping something will catch. But to me, a more strategic and precise approach seems a better use of money and time. (I know, here goes my future VC career!) Having gotten this off my chest, let me tell you who has actually cashed in this quarter. 

Most big launch and fundraising announcements have evolved around sensing and decision-making tools. Alphabet brought agricultural startup Mineral, which uses large photographic and other sensory datasets for farm analytics, out of stealth mode. Earth Optics raised $27.6 million for its soil sensing and data platform that promises to produce real-time data on soil health and structure. Wingtra netted $22 million to expand the production of its crop protection mapping drones. And Cropin raised $14 million to leverage a cloud intelligence platform for better agricultural decision-making. 

Next to these data tools, a few other innovations stood out. Loam raised a $105 million Series B for microbial crop seed coating that claims to sequester carbon in farmland. And SwarmFarm netted $8.3 million for more diversified autonomous farming equipment.

Other trends of note

Interesting developments haven’t only unfolded in alternative proteins and agtech this quarter. From the food system updates I keep tabs on:

Interest in aquaculture is increasing: PureSalmon closed a $506 million salmon production deal with Saudi Arabia. Springworks Farm raised $22 million to expand its aquaponic greenhouse system that combines fish and plant farming in Maine. Canadian startup ReelData AI cashed in an $8 million investment to enhance land-based aquaculture with better data and automation tools. 

From trash to value: Divert raised $100 million to expand its offerings of turning food waste from retailers into biogas. Israeli startup TripleW reeled in $16.5 million to manufacture lactic acid and bioplastic from food waste. Vermont-based Wasted got off the ground with a new service that turns port-a-potty solids into fertilizer.

So, even though the quarter is ending on a somewhat sour note for startups, it hasn’t all been bad news, and I don’t think it will continue to be doom and gloom for the rest of the year. There are bumps in the road, but they won’t derail the climate movement that has been decades in the making and has more robust global and multi-stakeholder backing than ever before. Onwards we go!