This week, the Good Food Institute released its quarterly alt-protein investment update, so I thought it’d be a good time to check in and see which way things are trending.
At this point it’s well-known that the alt-protein investment climate has had a couple tough years, and the latest numbers show things remain tough.
According to data shared by GFI, alternative protein companies raised $233 million in Q3 2024—a 37% decrease from Q2, but a 25% increase year-over-year. The drop from Q2 is notable, exceeding the 20% decline across the broader venture capital market. However, the 25% year-over-year growth in Q3 is a potential bright spot and could indicate that the second half of 2023 marked the low point for the overall market.
Source: GFI
GFI also broke things down by sub-sector, and it’s clear that fermentation technologies are where investors are placing their bets:
- Plant-based proteins raised $56 million in Q3, bringing the year-to-date total to $194 million.
- Fermentation technologies, which saw the largest share of investment, raised $174 million in Q3, with $572 million invested year-to-date.
- Cultivated meat and seafood companies raised $3 million in Q3, reaching $133 million year-to-date.
It’s important to note that the overall alt-protein investment numbers can be heavily influenced by a few large deals. For example, Q2 2024 saw $118 million invested in the cultivated meat sector, largely driven by a $55 million Series B investment in Prolific Machines, a cultivated meat infrastructure company, and a $42 million investment in Dutch cultivated meat pioneer Mosa Meat. These larger deals led to an average deal size of $10 million for cultivated meat in Q2, compared to a paltry $396,000 in Q3 2024.
Similarly, Q3’s fermentation investment numbers were significantly impacted by two major deals: a $61 million investment in fermentation startup Formo for its Koji cheese products and a $45 million Series B for precision fermentation startup Helaina, focused on its human lactoferrin product.
GFI notes that lower interest rates moving forward could provide a boost to the alt-protein space, but cautions that the cost of capital remains relatively high. They continue to advocate for alt-protein startups to explore non-traditional funding sources, such as government-backed loans and programs.
Looking ahead, I predict that fermentation-based startups will remain the most attractive area for investors in the coming year. Investment in cultivated meat startups will likely focus on infrastructure players with game-changing technology, like Prolific Machines. Meanwhile, many cultivated meat startups that raised significant rounds in the past few years to scale manufacturing have put those plans on hold as they work to extend their funding runways during this ongoing VC winter.
According to GFI, the alt-protein space has seen a cumulative $16.3 billion invested since 2015, a decent number overall but still relatively small compared to other sustainability focused-sectors. To give you an idea of just how small the space is compared to other sectors, the solar industry raised $6.9 billion in venture capital in 2023 alone, and that number jumps to $34.3 billion when factoring in corporate funding.
One thing that the space needs to attract bigger dollars is a more attractive exit outlook. Overall, the exits in alt-protein has been disappointing, as have the results of those companies that have gone public. Until we see a big investor success story in this space, the dollars may remain relatively small compared to other markets.
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