Targeting series A and B companies in ingredients innovation, alt protein technologies, digitalization, nutrition & health, and alternative farming systems across Europe, Israel, and the US, four months after launch, PeakBridge Growth II has completed its first closing (€100m) in partnership with Edmond de Rothschild Private Equity at around half of its target fund size.
The first two investments from the fund are in Netherlands-based Rival Foods (a spin-off company from Wageningen University using shear cell tech to make whole cuts of plant-based meat) and France-based Standing Ovation (animal-free casein proteins).
Meat alternatives: ‘If you invest heavily in technology that will be used by multiple brands, or in multiple places in the value chain, the impact is multiplied significantly’
So what is PeakBridge’s take on the alt meat space, which is typically part of any conversation about changing the food system, given the negative environmental impact of animal agriculture?
There’s no doubt something has to change, said Berger, who noted that “50% of the grains we grow on this planet are going to animal feed or biofuels, which is crazy.”
But right now, argued Glickman, echoing comments made by Tom Mastrobuoni at Big Idea Ventures, plant-based meat has hit a bit of an impasse, with firms looking for the next technological leaps that will bring in a wider audience of meat eaters that must be reached in order to displace conventional animal agricultural systems.
“Plant-based meat is going nowhere; the huge issue is consumer satisfaction, so we are looking for technologies which will increase consumer experience satisfaction, taste, and texture.”
“At PeakBridge,” added Berger, “We were very cautious about getting involved in plant-based meat; people want products that are tasty, simple, and healthy, and many products were too processed, and not tasty.
“So we always looked with a bit of wonder at why some of these companies were being listed with the multiples of tech companies, as at the end of the day, they’re working off a recipe, so we deliberately decided not to play in the field of branded [plant-based meat] products. We all come from the food industry, so we know how much it costs to build a brand, get traction, deal with slotting fees, distribution, marketing… so it's just not a VC play for us.
“Where we decided to play is to invest in technologies that can improve texture and flavor.”
Glickman added: “I think one of the critical things is as a VC fund, if you invest in a CPG you lower the amount of impact because even if it's an amazing brand, you're going to hit a couple of million consumers, but if you invest heavily in technology that will be used by multiple brands, or in multiple places in the value chain, the impact is multiplied significantly.”
Ingredients and supporting technologies, added Berger, are what will “really move the needle on the consumption of plant based and other meat alternatives by improving texture and taste.”
Cell-cultured meat: a long-term bet
As for cell-cultured or cultivated meat, Glickman is both excited by the potential but judicious about where to place bets given the huge technical hurdles: “People love meat, it’s a fantastic experience, and for some consumers, the only way to move them [away from eating animals] is to give them an alternative that is the same as what they are used to eating, just made in a more sustainable manner.”
But with that said, he observed, “We’re not going to invest in somebody who's trying to do beef or chicken. The round size [for these companies] is very large, the valuations have been large, and we think there's going to be challenges around taste and texture.
“This is a technology which will be important in four, five, 10 years from now, but it needs to be scaled, so for us, it makes sense to invest in companies working on different cell lines, different animals, and coming in at a higher value so they can be revenue and cashflow positive… and then gradually as the technology develops, they can bring in additional technologies to be able to move on larger demand.
“So one example of an investment we’re already made in this space is a company called Forsea, which is starting with eels, which are a huge market, particularly in Japan and Korea, that is about to become extinct, and no one has worked out how to grow them in captivity, plus they are very expensive, so there is an economic pathway to get unit economics [that can deliver a return].”
From new cultivation and processing methods for vanilla to tackling food waste
But so-called alt protein is only one area of interest for PeakBridge, said Glickman, who noted that its portfolio spans everything from precision nutrition (Inside Tracker) to ultra-fine filtration systems for homes or offices so consumers can enjoy better-tasting tap water instead of bottled water (Be Wtr), to developing high-value upcycled food ingredients from fruit pits that have historically been thrown away (Kern Tec).
“We all have a strong background in the industry so we understand the white spaces, where there are significant problems which need to be solved," he added.
“A good example of that is our investment in Vanilla Vida. The world loves Madagascar vanilla, but demand exceeds supply, and the vast majority of vanilla is produced by petrochemicals [in the form of vanillin], so there's a real need to be able to bring natural products to the industry [in this case by developing non GMO indoor cultivation and processing methods for vanilla plants that increase aroma and flavor and slash the curing process time].”
Another example of a PeakBridge portfolio company that seeks to solve a health and environmental problem is iwi - which makes long-chain omega-3 fatty acids EPA and DHA from nannochloropsis algae that also produces “proteins with an amino acid profile similar to egg and whey.”
Glickman added: “We’re also looking at how do we use digitization across the food chain to reduce food waste [one recent investment is Orbisk – an automated food waste monitor for foodservice outlets]. One third of all of our food is thrown away, and there are lots of digital solutions at different places on the value chain which can decrease food waste.”
Beyond the things any investor is looking for in terms of a strong team and large addressable market, he said, “We’re in a very regulated industry, so we always like to see a strong understanding of the regulatory pathway.
"We also look for real tangible IP: how can you build a defensible moat around what you're doing? And then we are food people, so we like founders who are extremely passionate about impact, but also understand that food is more than nutrition, it's about psychology, sociology, gathering people together.”
Precision Nutrition: $15m investment in Inside Tracker
Earlier this week, PeakBridge led a $15m series B round in Cambridge, Mass-based personalized nutrition firm Inside Tracker (Segterra).
Founded in 2009 by Gil Blander, PhD, and led by CEO Rony Sellam, InsideTracker integrates biomarker data from blood, DNA, activity trackers, and user-generated demographic information to create science-backed recommendations to optimize health.
According to Berger, “Over the last couple of years, we have actively scoured the market for the best technologies within the personalized nutrition space, culminating in a shortlist of 35+ companies—where it was immediately clear that InsideTracker stood out from the pack.
“We were blown away by the robust science, exceptional team, and phenomenal traction—with tens of thousands of repeat users actively using InsideTracker's platform and very small churn… they're going to increase their revenue from last year to this year by 2.5x, so it's very impressive.”
Acknowledging that knowledge alone does not always lead to sustained changes in behavior, he added: “You are more likely to change your lifestyle when you’re getting recommendations in your pocket every day than by an annual visit to your doctor when you’re told you’ve got high cholesterol and you change your behavior for a week, and then go back to your old habits.”
While some commentators have argued that so-called precision nutrition will not move the needle on public health by helping niche groups of athletes or affluent, highly engaged consumers improve their performance, Peakbridge has a different take, said Berger.
“We think this definitely can move the needle. Wealthy people in LA have their personal trainers and nutritionists, but if you can create something which is scalable and deploy software that allows you to supply smart technology to the masses, you can change the game.
“If we can do something proactive, which is going to cost many people less than seeing their GP or having to pay for drugs, you can also decrease healthcare costs by finding interventions you can make at an earlier stage.”
According to Glickman: “As with many technologies, early adaptors are always people who are more affluent or educated, look at Tesla or the iPhone, but the question is can you build these companies so that they can scale and create more democratized outcomes for many, many, people.”