It is not news that eating meat is bad for the environment. Farming animals for consumption, be it for its meat, eggs or milk, contributes to the global carbon footprint and creates a lot of waste. Eating meat is therefore harming the world.
According to Gautam Godhwani and Jayesh Parekh, founders and managing partners of venture capital (VC) firm Good Startup, demand for animal agriculture has been growing and is expected to continue growing for the next several decades.
And if this goes on, the global environment will be in trouble.
However, the solution towards a more sustainable environment is not as simple as just pushing people to change their diet. “It is a very difficult and unreasonable request to tell someone to change or not eat what they grew up eating,” says Gautam.
“I think we all love that food. So I think this is about giving consumers alternatives. It’s about providing foods that they love, but that perhaps don’t have the same impact on the planet,” he adds.
Hence, the duo, with a mission to eliminate animals from the food system, intends to provide consumers with alternatives to meat, seafood, dairy, eggs and other materials that come out of the animal agriculture industry. With that, they have launched Good Startup’s first private fund that will invest solely in companies within the alternative protein space.
As both Gautam and Jayesh are both flexitarians, this venture is one that is close to their hearts. Although both have previously spent most of their careers successfully building businesses across North American and Asia, they have decided to channel their efforts to help the alternative protein industry grow.
A serial entrepreneur and investor with over 25 years of experience in the technology industry, Gautam is no stranger to leveraging technological advancement to solve global problems, having spent most of his career in Silicon Valley, with large tech and internet firms such as AOL, Hewlett-Packard, IBM and Microsoft.
According to Gautam, after he sold his last company in 2016, he developed an interest in sustainability and specifically in the animal welfare movement. He zoomed in on how alternative proteins are a way not just to impact animal welfare, which is a cause very close to his heart, but also to make a much broader impact footprint.
“Following the industry for the past few years and seeing its progress, it was even more evident, to me, that this is an area that can see huge impact,” says Gautam, referring to Asia.
Jayesh recalls meeting Gautam some 20 years ago and was glad that in recent years Gautam had the idea to move to Singapore. A veteran investor and serial entrepreneur with over 40 years of experience, Jayesh has a proven track record of driving change via transformational technologies.
Currently, Jayesh holds multiple leadership and advisory positions across organisations, such as a senior advisor at Jungle Ventures, director at Sanctum Wealth Management in India and at the Investment Committee of Aavishkaar social impact equity funds.
Jayesh observes how there is active participation or investment in this industry by the likes of GIC, EDB, Temasek as well as government statutory boards A*star and Enterprise Singapore.
He believes that Singapore is “very heavily focused and immersed in this space and would invest huge amounts of money in very successful start-ups and publicly listed companies in this space”.
He adds that starting this VC company was an intersection of three reasons: “First, I do see the jetstream of alternative protein and I feel that in the next 10 to 20 years, this industry is going to be massive. Second, this will be hugely beneficial for the Singapore ecosystem, in my opinion. Third, it is about the ESG impact.”
To recap, Singapore’s “30 by 30” strategy was first announced in March 2019, as Singapore sets a goal for almost one-third of the food it needs to be homegrown by 2030. Singapore currently imports about 90% of its food from overseas. As food safety concerns increase, the country wants to become less vulnerable to the volatility of the global food market.
Necessity, not preference
With the world population estimated to reach 10 billion by 2050, the demand for meat will nearly double compared to what it is today. “So this isn’t just about preference, it’s actually a necessity”, says Gautam.
With the growing population, Gautam is worried that the world simply will not have the resources to produce the volume of meat required, leading to a projected shortage by 2050. “The great thing is that the technology that we are using – biotechnology – is able to produce food that is far more advanced than what we had in the past with food science. We are able to produce really incredible flavours and textures and products that simply weren’t possible before,” he says.
With his and Jayesh’s experiences combined, they have successfully raised US$25 million ($33.78 million) following the first close of its Good Protein Fund I. The first close of the fund – a cross-border VC fund that invests in alternative protein companies – is a private fund that exclusively comprises individual investors and family offices.
The firm will use the capital raised from Good Protein Fund I to invest in a total of 32 companies. To date, the company has already invested in seven alternative protein start-ups which includes US-based Eat Just that has launched its plant-based egg and chicken meat alternative, as well as Singapore-based biotech company TurtleTree Labs that produces cell-based human milk.
These companies, apart from receiving monetary investment from the VC firm, will also be able to leverage on the duo’s knowledge and skills within the relevant industries.
As the Good Protein Fund I is an impact fund, it will have a fund life of 10 years. It will invest an average check of between US$250,000 and US$1 million for each company with an investment period of about three to four years.
Good Startup is focused on investing in early-stage start-ups but is also open to more mature start-ups for stronger traction and easier liquidity. “We are a multi-stage fund and are open to investing in companies at different stages. Having said that, 80% of the companies that we will invest in are early-stage companies. These are companies that are before the point where they might have revenue or even a product. They instead have a core technology or are in the process of developing their product and getting to market,” says Gautam.
“The other 20% of companies that we invest in are late stage. And we do that because there are currently certain companies in the space that have exhibited strong traction and when we have an opportunity to invest in them, it is a way for our investors to be able to see liquidity soon,” he adds.
Overall, Good Startup intends to liquidate their investment in the start-ups within three to seven years.
Multi-decade shift
In the F&B industry, food trends are aplenty and they come as easily and quickly as they go. But the way Gautam and Jayesh see it, the alternative protein space is not just a fad. It is a movement that is just in its early stages and is growing.
“When you see something as a fad, it ends up short-lived and fades. With alternative proteins, we’re seeing the opposite. First of all, it has now been around for several years and the companies that are now leaders have been around for the better part of the decade. The interest in the market is only growing, not just from start-ups, but also food companies, meat producers, governments, research institutions and universities,” says Gautam.
Furthermore, Gautam notes that the alternative protein industry is gaining popularity for its good returns. Citing Nasdaq-listed Beyond Meat as an example, Gautam notes that since the company listed in May 2019, its share price has steadily increased, with the stock trading at US$130.32 on Aug 9, some 95.1% higher from when it first listed.
“Beyond Meat is now trading at well over double the price it was when it went public. It is trading at a huge premium to sales because the market expects the company to grow substantially and get much bigger than it is today,” says Gautam, who also notes that newly-Nasdaq-listed Oatly is also trading at a significant premium to sales. As at Aug 9, Oatly is trading 14.9% lower at US$19.12 from when it started trading on May 21 this year.
In addition, Jayesh, who feels that the firm has taken the opportunity to enter the alternative protein scene while it is still nascent, says: “This is something that I think is going to play out in the next 30 years. In 2050, the world’s population is expected to reach 10 billion and we will face a big problem if we don’t do anything.”
The world is not going to change overnight and this change will take decades. But the way Gautam and Jayesh see it, the change is already happening.
Already, traditional meat companies are steering away from calling themselves “meat companies”, instead rebranding themselves as “protein companies”, while adding on plant-based meat offerings into their portfolio.
“This is a multi-decade shift, it is not happening next year or the year after. I’m not suggesting that there is not going to be some degree of disruption. There will be — there always is — with technological change. But I think we have an opportunity here to be able to move the ecosystem forward as a whole,” says Gautam.
Moving forward, the duo intends to complete its three-fund strategy, launching another two more funds after the Good Protein Fund I.
“For now, I’d say Gautam and I would sit down and drink a lot of orange juice and slowly discuss [the following funds]. To be honest, we haven’t really thought about the next fund yet as we are very focused on the current one. But if there are no objections from Gautam, we would definitely like to welcome financial institutions and other larger family offices for our subsequent funds,” says Jayesh.
Photo: Good Startup
