🌱 ClimateHack Vol 11: Alt-Protein x Climate

Hey There,

The summer funding slowdown we all expected never really happened in the seed stage Food and Climate sector.

(We tracked and made more early stage investments in Q3 than Q1 & 2 put together).

We talk about the idea of investing in the "vitamins over the painkillers" and it truly feels like the looming climate crisis and record summer temperatures has accelerated the demand and urgency in the shift towards funding the things that matter.

There's a buzz in the climate-VC world going into September that feels like it's going to be a good time for builders in this sector.

What’s in today's edition? 📈 Europe's gas price reach a new record high.💰 Lunar Energy out of stealth with a $300 million raise.🌱 Conversation with an alt-protein VC on why it matters for climate.

Digest x Climate (Bad News First..)

📈 Whats up? The cost of natural gas in Europe is now 10x greater than in the US due to mounting geopolitical tension between the EU and Russia. Even the Shell chief executive Ben van Beurden predicts that the European energy crisis will be long-lasting and has strongly advised that alternative solutions be built out quickly.

🌊 A team of climate scientists say that a 27cm sea level rise is “inevitable”, even if we stopped putting more carbon dioxide into the atmosphere immediately, as the Greenland ice pack melts.

📉 Whats down? The current megadrought in California is threatening irrigation and water supplies to one of the US’s most critical population and agricultural regions, and it’s only likely to get worse with time as the state is expected to lose 10% of its water by 2040.

⛰ Researchers from ETH Zurich technical university and the Swiss Federal Institute for Forest, Snow and Landscape Research WSL say that Swiss glaciers have lost half their volume since 1931.

🇵🇰 The UN’s secretary general warned that the ongoing Pakistan floods are “a monsoon on steroids”, after they’ve submerged one third of the country and affect tens of millions of citizens.

Carbon x Climate

🔎 Australian startup NetNada raised $200,000 from Skalata Ventures for its carbon footprint measurement platform, designed to help SMEs become carbon neutral.

🌲 Berlin-based GreenTrade closed a “near seven-figure” pre-seed funding round for its carbon credits marketplace, which it hopes will provide an extra supply of 1 billion carbon credits by 2030.

🚄 Germany’s recent three-month experiment with €9 tickets for a month’s unlimited travel on regional train networks, trams and buses saved approximately 1.8 million tons of CO2 emissions as consumers flocked to use the newly-affordable public transport.

🌾 This is an interesting photo comparison of animal agriculture soil and grain agriculture soil, highlighting how ‘regenerative’ practices could be applied to crop management through the careful integration of livestock to help maintain soil health.

Food x Climate

🌱 Switzerland-based Planted raised $72 million Series B funding to launch its new whole-cut line of “clean” vegan meat, made via biostructuring and fermentation, and support further international expansion.

🛒 Swedish discounted groceries startup Motatos secured €38 million Series D funding. It sells long-life goods from the surplus inventory of large producers at a reduced price, reducing food waste and helping consumers with the rising cost of living.

🥩 Israeli cultivated meat pioneer Aleph Farms has joined the Agriculture Innovation Mission for Climate initiative as an Innovation Sprint Partner, and will invest $40 million into R&D for cellular agriculture over the next five years.

🥛 UK climate activists are suing the government for failing to take into account the recommendations of its climate committee and not effectively tackling its meat and dairy problem.

🐄 Opinion: Irina Gerry, CMO at Change Foods, put out a thought-provoking post this week on why organic farming might actually be worse for climate change.

Materials x Climate

💡 Part 2 of Tsung Xu's deep-dive into the future of biomaterials is out (long read - but very much worth it). Learn more about the future of biomaterials including snowboards from algae, apparel from spider silk, self-repair fibres from squid protein.

👟 Portuguese zero-waste leather manufacturer Zéta has partnered with Nespresso to create Re:Ground, a limited-edition sneaker collection made from upcycled coffee grounds, with each pair including 12 espressos’ worth.

🥤 Events giant Live Nation is investing $5 million into San Francisco-based startup Turn’s reusable drinkware, to avoid the sea of trash that has become so typical at festivals in recent years. Turn provides scramble-coded reusable cups and collection bins, and operates its own dishwashers, which it says are “700% faster than traditional dishwashers.”

Energy x Climate

💰 California-based Lunar Energy came out of stealth to announce $300 million of investment over two rounds in the past two years, as it continues to build a full ecosystem of hardware and software needed to make homes completely energy independent

🏭 Fervo Energy, based in Utah, raised $138 million in a round led by DCVC to build, own, and operate 24/7 carbon-free geothermal power plants, made by adapting innovations pioneered by the oil and gas industry.

⚡️ Swedish cleantech Cellfion closed a €1.3 million seed funding round, joined by Voima Ventures, for its biobased membranes, made from cellulose, that can be used as critical components in clean energy storage and conversion devices.

🔋 Finland’s Tracegrow secured investment from Nordic Foodtech VC. Its innovative technology extracts and reuses zinc and manganese from used alkaline batteries, transforming them into micronutrient products for farming.

💨 The “world’s biggest” offshore wind farm is now fully operational off the coast of Hornsea in the north of England, with a capacity of more than 1.3 gigawatts and stretches across an area of 462 square kilometers. Funny how far we've come since this.

Funds x Climate

🇮🇹 The Italian Ministry of Agricultural, Food and Forestry Policies launched a €1.5 billion scheme to incentivise the installation of solar panels in the country’s agricultural, livestock and agro-industrial sectors.

🇺🇸 The US Department of Energy announced $70 million in funding for seven projects to accelerate development of its Energy Exascale Earth System Model and tackle the climate crisis at home and abroad.

🌍 The Rockefeller Foundation announced a $5.5 million collaboration with e-GUIDE and Atlas AI to promote climate resilient infrastructure investment across sub-Saharan Africa.

🍸 Alcohol giant Diageo launched a £450,000 innovation fund to reduce and monitor the impact of water and climate crises for smallholder farms in Africa, as part of its 2030 ESG action plan.

Conversations x Climate: Alt-Protein

This week I reached out to Steve Molino, Principal at Clear Current Capital a publicly funded, specialized venture capital firm making early-stage growth and impact investments in US plant-based food/cell-cultivated meat space.

Steve is my go to source for all things alt-protein, and he regularly puts out some of the best tweets on the intersection of foodtech, VC and more.

What is one thing you know about the climate sector that you wish others knew more about?

As a climate technology solution, alternative proteins and sustainable food technologies are massively underfunded.

Animals as a Technology 🐄

Many view alternative proteins and sustainable foodtech as areas focused on health, food waste, food security, animal welfare, etc., but there is not enough talk about alt protein as a climatetech solution.

On the surface, this is mainly because people view animals as…animals. A quick google search shows that humans have eaten animals for ~2.6 million years, and until recently, there hasn't seemed to be a strong reason not to.

They offer a strong source of nutrients, some are easily domesticated, and we've even been able to optimize the speed at which animal products can be produced; however, it is this last point around optimization that leads to a problem.

Moving away from this idea that animals are animals and, instead, are technology to produce protein, it has quickly become clear that even the most optimized industrial animal agriculture technology will not produce enough protein to sustainably feed a growing population.

Currently, the FAO estimates that 50% of the Earth's habitable land is used for agriculture, with 77% of that land being utilized for meat and dairy production. Despite the massive allocation of resources, meat and dairy provide only 37% and 18% of the global protein and calorie supply, respectively.

With global meat consumption expected to rise by over 60% by 2050, it's clear that industrial animal ag's inefficiencies would require the use of almost all of the remaining habitable land on earth only to produce a small portion of protein and calorie needs. To top it off, the global livestock industry is estimated to produce 14.5% of global GHG emissions, second only to energy production. 

To put it simply: animals as a protein production technology are horribly inefficient and unsustainable.

Where There is a Problem, There is Opportunity💡

Normally when a major problem exists due to inefficient technologies, investment dollars pour into the space to fund innovation. Some would say this has been happening in alt proteins over the recent years; however, the dollars invested is not proportionate to the environmental impact created by animal ag.

This becomes more obvious when we compare the percent of global GHG emissions for three of the largest categories (energy, transportation, global livestock) to the private sector dollars invested in solutions to mitigate their climate impact. When looking at the energy and transportation sectors, there seems to be a relatively proportionate level of capital invested in each sector compared to those sectors' impacts on GHG emissions (see above chart).

However, the same cannot be said for global livestock. Despite this sector representing a greater portion of global GHG emissions than transportation, it has received only a sliver of the investment dollars that has gone into other areas, representing an ~$50B gap in alt protein investments as a climate technology solution. Even adding in the record new funding for alt proteins in 2021 of ~$5B, it barely changes the picture.

Why the gap? 🤷‍♂️

It seems the gap in funding is coming from minimally available late-stage private capital and almost non-existent public funding.

On the early-stage private capital front, investor interest is ubiquitous. It seems a new sustainable foodtech / alt protein fund is popping up each week with mission-driven investors looking to back the most innovative founders worldwide.

For instance, The Good Food Institute has an investor database with almost 400 investors/organizations specifically interested in funding early-stage alt protein companies. Separately, a quick scan of the FoodHack Investor Database shows over 100 funds actively investing in 2021, and there is no doubt that list will be much longer for 2022. While not all investors are equal, and only some will generate meaningful impact and returns, the influx of new early-stage investor interest will continue to push innovative ideas forward.

Despite this interest, early-stage investors will not meaningfully be able to close the ~$50B funding gap mentioned earlier. For instance, looking at the FoodHack database will show that average investor check sizes are in the ranges of a few hundred thousand dollars to a few million. Random outliers will be in the tens of millions, but the takeaway should be that there's only a handful of private investors writing $10M+ checks in the alt protein and sustainable food spaces.

That leaves us with later-stage private capital and public funding.

Similar to early-stage private capital, I expect late-stage investors to become more active as the space matures. With the bulk of the companies seemingly being in the early stages (e.g., pre-seed through Series A), there are only so many opportunities for late-stage investors to consider.

For the few more mature companies in the fermentation (e.g., Perfect Day, The Every Company, Meati, Natures Fynd, etc.), cultivated meat (e.g., Upside Foods, Mosa Meat, Wild Type, JUST, etc.), and plant-based spaces (e.g., Beyond Meat, Impossible Foods, NotCo, etc.), late-stage investor interest seemed to be there. I expect it to be there in the future, especially for the synbio companies (e.g., fermentation and cultivated), assuming valuations are in-line with sales expectations (major assumption).

Public Funding as a solution? 🤔

The biggest question mark is around public funding. This is also the area that seems to have the greatest potential to fill this major funding gap in alt proteins as a climatetech solution. Despite the obvious negative impact meat and dairy have on the environment, governments have generally put very little effort into funding, or incentivizing, a shift toward more sustainable solutions.

Even the historic Inflation Reduction Act, which formally recognized climate change as a legitimate focus area for US policy, essentially ignored innovation away from meat and dairy. This was a letdown, as government support for a transition to sustainable proteins would not only push public dollars into the space, but it would also lessen the risk profile of opportunities for private capital, as well.

Closing Thoughts 💬

I am hopeful other governments will begin to act on alt protein and sustainable foodtech as a climatetech solution in the coming years. In the meantime, I see it as the role of early-stage investors (like Clear Current Capital) to back driven founders with novel foodtech solutions offering the potential to generate impact alongside returns.

The more we can prove financial returns can exist alongside positive climate impact, the closer we'll be to filling the funding gap.

Steve Molino is the Principal at Clear Current Capital a publicly funded, specialized venture capital firm making early-stage growth and impact investments in US plant-based food/cell-cultivated meat space.

Follow him on twitter where he regularly puts out some of the best tweets on the intersection of foodtech, VC and more.

Memes x Climate: 

How it feels in Europe right now..

That's for reading, and have a great weekend ahead

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Curated by Nicola & Arman