Silicon Valley Embraces Innovation in Sustainable Foods
Courtesy Hampton Creek Foods
“The food industry is broken,” says Josh Tetrick, a 32-year-old entrepreneur who’s creating plant-based egg replacement products that could one day disrupt the global egg industry. His 11-month-old company, Hampton Creek Foods, is working out of a food lab in the South of Market area of San Francisco, just a few blocks from such Internet startups as Twitter, Zynga (ZNGA), and Airbnb. During a tour of the lab this week, Tetrick’s lovable golden retriever and unofficial company mascot, Jake, was parked good-naturedly on a bright red couch in the lobby, underneath a photo of Bill Gates eating a muffin made with Hampton Creek’s egg-free baking product. It’s a feel-good sort of place.
Courtesy Hampton Creek Foods
In Hampton Creek’s lab, Tetrick’s staff of 19—armed with a combo of science degrees, chef experience, and food industry chops—are obsessing over eggs. What gives an egg—the result of a chicken menstrual cycle (eeww)—its unusual characteristics, and how can those characteristics be replaced with a combination of plants? The team has worked on more than 344 prototypes for their egg-yolk product and have studied 287 types of plants that range from peas to canola.
The lab is filled with industrial food measurement equipment, such as the “texture analyzer,” which basically pokes baked goods to see how much they bounce back. Before the company moved into the lab, Tetrick was doing these types of tests with his finger in his studio apartment in L.A. He discovered that switching the recipe to include a new type of pea produced the fluffy, elastic muffins that people really craved. Who knew?
Earlier this month, Hampton Creek Foods started offering customers samples of its baking product, called Beyond Eggs, which can be used in such goodies as cookies, muffins, and cakes. The team is also developing egg-free mayonnaises, sauces, and dressings, which Hampton will likely first sell to food manufacturers instead of straight to consumers. Tetrick says the company is close to a deal with a large food company, a deal it hopes to close next month. It’s also working on a scrambled-egg product.
The real reason Beyond Eggs could eventually catch on is it’s not striving to be an eco or vegan product. It will be about 19 percent cheaper than eggs, will last longer on the shelf, is safer to use, and is better for you than eggs. Then there’s all the feel-good aspects—the poor environmental and inhumane conditions of the egg industry, plus fewer carbon emissions, reduced by decreasing the amount of feed (mostly corn and soy) that goes to chickens. But all those won’t matter if the products don’t pass Tetrick’s “Dad Twinkie” test: In theory, deliver a Twinkie that’s cheaper and better for you but that tastes exactly the same.
Hampton Creek Foods is just one of a new type of eco-food innovator that Silicon Valley is incubating. The company is backed by Sand Hill Road heavyweight Vinod Khosla’s firm, which is why Bill Gates—an investor in Khosla’s fund—gave Hampton’s muffins a taste test last year (and, by the way, couldn’t tell the difference between a muffin with eggs and a muffin with Beyond Eggs). Khosla partner Tony Blair also did the taste test.
Khosla is backing other sustainable food startups, such as an organic and healthier candy company (Unreal Candy), a salt replacement product (Nu-Tek Salt), a plant-based meat replacement startup (Sand Hill Foods), and a fake cheese company. During Khosla’s limited-partners meeting last summer, Bill Gates called the budding food innovation movement—which is making food more sustainable and also cheaper—a “huge thing” that “will confound the pessimists.” Gates’s team also recently created and will soon release a documentary about four food innovation startups, one of which is Hampton Creek Foods.
Other investors (besides Khosla and Gates) see promise in sustainable food tech innovation. Valley investor Kleiner Perkins and Obvious Corp.—the company behind Twitter—have invested in Beyond Meat, a startup making plant-based faux-chicken products. NGEN Partners has backed sustainable lettuce grower Bright Farms, vegan restaurant company Native Foods Café, and stevia zero-calorie soda company Zevia.
In addition to plant-based proteins and healthier foods, other startups are working on “cultured meats” or lab-grown meats. Modern Meadow is the best-known of those, and it’s backed by investor Peter Thiel. Modern Meadow is basically looking to print out synthetic lab-grown meats and somehow overcome the ick factor that goes with the process.
Josh Balk, the director of corporate policy at the Humane Society, calls the emergence of new eco-food entrepreneurs a “tremendous movement. We see innovation in plant-based foods as the next way that technology can help animals,” he says. The first was in transportation—shifting from horses to cars—and the second was replacing animals in movies and TV with computer-generated imagery, says Balk.
This isn’t to say that plant-based proteins aren’t already a big business. Kellogg (K) owns veggie food giant MorningStar Farms, Kraft Foods (KRFT) has its Boca brand, and ConAgra Foods (CAG) has Lightlife. But these startups think their technology innovation can create products that are far better—without compromise—than current ones on the market.
Is eco-food tech the next big thing for innovators and investors? Well, a lot of the investors who backed clean power and “cleantech” companies over the years are now turning to this movement. That’s because the thesis behind cleantech and “clean food” is the same: The population will hit 9 billion by 2050, and the planet will need to manage its food better for this massive population and in particular find more efficient ways to make proteins and meats.
The meat, agriculture, dairy, and egg industries are highly inefficient ways to produce edible proteins. Many of these new startups are looking at plant-based proteins not as a way to sell eco-food, but as a way to produce protein more efficiently, more cheaply, and with less energy. In particular, developing countries that have growing appetites for meat consumption, such as China, India, and Brazil, could be strong markets for lower-cost meats.
Looking past economics and efficiency, the next generation—the so-called millennials—is becoming a lot more conscious about health and the environment. Sustainable brands that can also create better products will win out among this demographic. DBL Investors’ Nancy Pfund, who backed both Tesla Motors (TSLA) and SolarCity (SCTY), told me last year she thinks eco consumer products will be a hot area for entrepreneurs in 2013.
Finally, cleantech and clean-power startups haven’t exactly produced great returns for most investors. So it makes sense that some of these investors are looking at similar, but different, trends that piggyback on their former thesis but add a new twist. Khosla, Kleiner, and NGEN all made significant bets on cleantech.
Still, food technology—unless it’s IT-based—hasn’t traditionally been the fodder of venture capitalists. When I ask Tetrick why his company is “venture backable,” he says because it is creating a powerhouse of innovative thinkers that can come together across disciplines, and traditional food companies just aren’t as nimble. Tesla used that same argument for why, as a startup, it can revolutionize the car industry and out-innovate the large automakers.
But Tesla is an outlier on a lot of levels. It’ll be harder to disrupt more traditional industries without Moore’s Law in your corner. Meantime, as these startups sink or swim, at least they’ll be putting the spotlight on a crucial problem: The food industry is broken, and it needs technology and innovation to be fixed.
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