Quarterly Update - Q3 2020

Dear Partners and Friends,

For those who follow the “smart money”, the shift towards alternative proteins is getting harder and harder to ignore. Consumer wallet shares are shifting, with increased spending on alternative proteins at the expense of animal-based products. Analytics company Numerator analyzed consumer buying habits around the Impossible Burger recently, and found that 72% of all Impossible Burger sales displace animal-based meat products. A new industry report from UBS found that Covid-19 has increased consumer interest in alternative protein, and estimates that plant-based meat could reach an 83% household penetration rate. The report also identifies health considerations as the number one factor for repeat purchases of plant-based meat.

The phenomenon is truly global. Investor interest in Asia continues to grow, as evidenced by Green Monday’s US$70m raise led by TPG and Swire Pacific. Consumer adoption of plant-based meat in Asia is expected to accelerate in the coming year, with Impossible Foods announcing new distribution streams in Singapore and Hong Kong, Beyond Meat launching production facilities in China, and McDonald’s adding OmniPork’s luncheon meat product to its menu in over 400 locations in Hong Kong.

In Europe, cultivated meat pioneer Mosa Meat announced the US$55m first closing of their Series B funding round, bringing us one step closer to commercialization of cultivated meat. Swedish oat-milk company Oatly recently sold a US$200m stake to a group led by Blackstone, Howard Schultz, and Oprah Winfrey, valuing the company at about US$2bn.

In the U.S., the Good Food Institute (which was co-founded by Lever VC’s Managing Partner) released its first ever State of the Industry Report on Fermentation. This comprehensive report offers an excellent primer to fermentation technology and its applications in the production of alternative proteins. Lever VC is pleased to have invested in several companies using fermentation technology, with one generating major headlines this quarter (more below).

In The News

Lever VC’s announcement on the first close of the Fund generated an avalanche of news coverage in Q3, with stories from over sixty top industry and general news outlets across the globe. The close was covered by leading industry press in the US (such as Food Navigator, the Spoon, and Food Dive), Europe (such as Food Ingredients First, Private Equity Wire, and FoodBev Media) and Asia (such as Deal Street Asia, Asia Venture Capital Journal, Asian Private Banker, and VC Earth), in addition to mainstream news outlets including SCMP, Yahoo, MSN and others.

In other news coverage, in the U.S. Lever VC was prominently profiled in a comprehensive Pitchbook piece on the cultivated meat space. In Europe, Managing Partner Nick Cooney shared his thoughts with Just Food on the impact of Covid on alternative protein and on Blackstone’s blockbuster investment in plant-based dairy company Oatly. And in Asia, China Daily covered Lever VC’s approach to investing in alternative protein, while leading China investment industry news outlet 财经涂鸦published a lengthy profile piece on Lever VC.

Portfolio Value

While Lever VC is still early into its deployment, with most investments having been made in 2020, the portfolio is already generating strong value growth for LPs. Five quarters into deployment, the portfolio had already increased in value with a 50% IRR on invested capital thus far. (Markups are based on most recent fundraising round. Companies that have grown in value but not raised a follow-on round have not been marked up.)

Current LPs, please check our formal quarterly report which will be emailed separately in the coming days for a detailed financial breakdown.

Recent Deals

We are proud to announce Lever VC’s pre-seed investment into Mozza, a revolutionary California-based startup that is producing real dairy proteins in plants, in order to create animal-free cheese that stretches, melts, and tastes like conventional cheese. Mozza has been operating in stealth mode for the last 2 years, and has pioneered incredible innovations in dairy protein expression. Mozza’s technology will allow for the manufacture of real dairy cheese at scale, without the need for cows, at a price point that is comparable to animal-sourced dairy cheese. Lever VC is the company’s first outside investor.

In August Lever VC made its first follow-on investment, participating in a Seed round extension for Bond Pet Foods. The round extension opened and closed in one month, with strong excitement from both existing and new investors. Landmark news from Bond is just below.

News on our portfolio companies

In a ground-breaking move reported by Forbes, Mission Barns became the first company in the world to make its cultivated meat products available to consumers. Working with two renowned restaurants in San Francisco, Mission Barns’ cultivated bacon (a combination of Mission Barns’ cultivated pork fat plus plant-based ingredients) was served to 100 restaurant-goers during a trial period in August. Mission Barns has just kicked off a Series A fundraise.

In yet another world first, Bond Pet Foods publicly unveiled the world’s first real meat protein produced by fermentation. Bond debuted real chicken protein produced through its fermentation technology platform, as well as sharing the results of a successful initial health trial in which a number of dogs received dog treat bars featuring the chicken protein. Bond will be launching its Series A fundraise at the start of 2021.

A Dozen Cousins continued its rapid expansion into the U.S.’s largest retail chains. In Q3 the company launched into Costco and Target, the country’s third and fourth largest food retailers, building on its entry into Walmart (the country’s largest food retailer) in Q2. Sales velocity has outperformed, and the company continues to receive strong media coverage with recent coverage in outlets including Forbes and Bon Appetit.

Plant-based dairy protein shakes company Grounded officially hit the market in Q3, launching in iconic UK retailer Selfridges as well as at other upscale retail locations and D2C to rave reviews.

The BBC released a lengthy video news feature on TurtleTree Labs, highlighting the company's work producing cow’s milk and human breast milk using cell cultivation.

Investment Opportunities

Lever VC remains open to new LPs and will have a second (non-final) close in late November. In direct deal opportunities, Lever VC portfolio companies Avant Meats, Mission Barns, TurtleTree Labs and Mozza are all currently raising. 

As always, please reach out with any questions, and feel free to share this newsletter with others.

Best,

Lever VC Team

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