Investors in new food technologies are divided up into two categories. Those that invest in a food technology through a deep understanding of the sector, and those that invest because everyone else does and they don’t want to be left behind. Which category are you in, or do you want to be in?
Fundamental to our understanding of investing in cutting edge food businesses is realising that food is now technology. Companies like Impossible Foods, Perfect Day, TurtleTree Labs and so many more are technology companies that make food.
Considering their businesses from this perspective explains the insatiable iteration of their products. As Peter Diamandis says in his book Bold: “Anything that becomes digitised (biology, medicine, manufacturing, and so forth) hops on Moore’s Law of increasing computational power.”
This access to Moore’s Law is what enables them to drive down costs while continuously improving their product attributes and consumer benefits.
The days of long innovation pipelines and 18-month delivery of new products from idea to release is dead and gone.
The establishment of venture capital arms by large food companies represents a surrender in the innovation war against start-ups.
These large companies have simply acknowledged that they lack the innovation culture, skills and agility to compete in today’s – and indeed tomorrow’s – environment. Will it save them? Will they simply squash any new acquisitions into the same uncompetitive mould? Only time will tell.
The long-term view
A client recently told me that three-to-four years ago, it turned down an early-stage investment opportunity in Clara Foods, a precision fermentation manufacturer of egg white proteins. Why? Because it sounded too much like science fiction!
By some estimates, Clara is currently valued at north of $100 million and backed by $6.2 billion ingredients company Ingredion. Had my client been able to access the right advice from a technology and future/foresight perspective the outcome could have been quite different.
This example clearly demonstrates that deep technical insight is now a prerequisite for investing in cutting edge food technologies. But this is only half the equation. The other half is the ability to put these technologies and their exponential growth in perspective.
This is where a foresight-based investing approach becomes essential.
It could be argued that all investment is based on foresight, but the difference is in the fundamental approach. Too many investors simply look at things from the old, tired linear perspective rather than an exponential one.
Simply saying: “If it took X years to get to Y, then it’ll take two-times X years to get to two Y” typifies this approach. Such investors are blindsided by exponential growth and miss the opportunities.
An explorer or follower?
If there’s one thing that the Covid-19 pandemic has clearly demonstrated, it’s the danger of thinking linearly in an exponential world. In the end, it comes down to whether investors want to be explorers or followers.
The explorer mindset accepts the risks of new technologies, but not blindly. They prepare, keep watch, constantly scan the environment, and embrace the risks since they realise the rewards for doing so can be great.
The follower mindset involves keeping the explorers just in sight, but minimising risk through being too cautious. Lacking knowledge and foresight, they’re doomed to at best pick up the scraps.
This is not to say that being first-mover is essential, even though it gives the highest returns if successful. The key explorer trait is knowing when you’ve found something worthwhile to expend resources on, and indeed, which “opportunities” to ignore.
The new mindset
Investors need to adopt a new mindset for early-stage food industry investment. This new mindset, including all of the above, can be encapsulated by the INVEST acronym. To choose wisely you need:
In-depth knowledge, to produce
Novel insights, by
Viewing food as technology, and
Embracing these exponential technologies, through a
Strategic foresight approach, so you can
Take informed investment risks.
This acronym is a simple, step-by-step process for finding your way through the often treacherous terrain that is investing in cutting edge food technologies.
Although simple it requires a dedication to keeping up with the exponential changes in the food industry – hours a day of research would not be an uncommon commitment.
A cross-functional team with scientific, technical, managerial and marketing expertise helps round out the resources required. Building such a team takes time and effort, but is well worth the investment to generate high investor returns.
If you don’t have the internal resources to do it all yourself then use a specialised boutique advisory company like my collaboration partner Bright Green Partners. They can help review the technology, market opportunities and players to maximise your probability of success in an ever-expanding and challenging food investment space.
The future is a dynamic, exciting place, and remember, the bold dare to create their own future.
