Adjustable Vehicle Clustering in the Alternative Protein Market

Figure 9: Vehicle Classification Framework. Based on own representation

Role

Investor – Financial: This role is limited to providing capital through certain ticket sizes usually in exchange for shares and equity in the venture. The incentive of the vehicle lies in the belief of the growth potential of the portfolio venture and the resulting financial rewards in the long run.

Mentor – Growth: The primary purpose of the role is supplying ventures with operational support relating to mentoring and coaching activities. Financial support is either not given at all or in restricted amounts. Consequently, the vehicle must invest a substantial amount of time, social capital, and knowledge in building such ventures while aiming for lasting value. This can be carried out in a cohort-like, structured framework or individually as required.

Dual Role: Investors in this class combine the two elements mentioned above but are typically more developed in one role than in the other, depending on their roots and overall structure. An example of this would be an accelerator, which additionally manages a fund to facilitate follow-up investments after or while providing with the mentoring activities. However, this can also constitute a VC, which provides not only considerable capital for the venture, but also operational support.

Funding Stages

Early Stages: The investment focus of this type lies on ventures that range from Pre-Seed over Seed to Series A. The high-ticket sizes force multiple vehicles to focus on the very early stages.

Later stages: The investment focus of this type lies on ventures that range from Series A and beyond.

Overlaps to earlier stages can occur and are common due to follow-up investments.

Portfolio Scope

Food & AgTech: Vehicles operate and invest along the whole food value chain or, in other words, from “soil to gut”. Investments are usually made in ventures which are involved in providing ingredients, farming, or processing equipment, and any other upstream or downstream activity related to food. This implies a broad, unspecialized portfolio.

Alternative Protein: Vehicles invest and work solely on the downstream end of the value chain with end-customer facing ventures mostly positioned across the four verticals but not exclusively.

Extensive knowledge and network opportunities can be provided due to the particular portfolio focus.

Niches: Drilling down further, the third category emerges, which are niche specialized vehicles that either concentrate on a single technology among the verticals or specialize on ventures that want to cover a very specific product group. An example of this typology would be vehicles that scout exclusively for ventures that work with vegan products. This type can be extremely beneficial for the venture in case it fits in the vehicles’ portfolio thesis, as it is highly specialized in this field.

Investment Approach

Spray & Pray Approach: Common investment strategy in the field of alternative proteins, which is intended to achieve a high degree of diversification on various verticals due to the uncertainty about sales and success development. A typical approach of a vehicles, which follows this strategy, would be to invest in fermentation and cell-based meat ventures in the expectation that one venture will eventually take off while offsetting the losses incurred by the other investments.

Betting on one horse: According to the current portfolio, internal focus or positioning and the belief in a certain vertical, all efforts are concentrated on one technology if this strategy is pursued. This can be particularly interesting for tech-heavy ventures, as industry leaders, such as larger biotech corporates, are often operating this way.

Wait & Watch: Vehicles in this category pursue a defensive strategy and have currently only an observing role in monitoring market and technology trends. These vehicles often apply to later funding stages when some form of validation has already been obtained.

Venture Focus

Tech-/IP driven: Exclusively investments in high-tech ventures are made, with either given IP or very high IP potential. In this context, technology or more concretely, the IP potential serves as a cut-off criterion and is primarily preferred by CVCs or specialized investors, often due to their own technology affinity.

Commercial driven: The vehicles aim at ventures with a strong branding and advanced marketing strategy. Vehicles in this class often have a broader portfolio to create synergy effects in terms of marketing and sales channels. The venture ought to have an early MVP and generate first sales, which offers the vehicles a solid foundation to work with.

Asset-driven: Vehicles in this category tend to consider ventures that have tested their scalability and cost structure and can look for a partner with substantial assets to verify their thesis. Vehicles in this class often invest along the value chain and, therefore, often in upstream producers of alternative protein ventures to gain a stronger linkage and lower the uncertainties.

Underlying Objective

Strategic: The goal of the vehicle is to find a fit for their own business model, to either improve or expand it or simply to use external innovation as a driving force. Often carried out by CVCs who want to get a trend overview of the market or a new technology through investments or by accelerators to create extensive due diligence for their follow-up fund.

Financial: The main objective is the increase of the long-term value of the venture and, therefore, the potential financial returns for the vehicles due to the pressure of justifications towards the vehicles’

investors.

Impact: Vehicles that have impact-driven objectives strongly follow either the SDGs or often extended this to aim for a higher purpose. This class is often paired with the latter two with a varying degree of genuine impact dedication.

Degree of Openness

Network/Collaboration oriented: During the assessment but also the subsequent partnership, the vehicles access external stakeholders to obtain additional expertise, assessments, and potential market entry channels. These stakeholders can be trusted industry experts, former C-levels, but also venture founders from their own portfolio. This open kind of partnership allows the venture and vehicle to balance out any lack of expertise and drive innovation through external inputs and different angles.

Self-Contained: Vehicle work in close collaboration with the ventures and keep all information and expertise confidential. This often applies to CVCs, which can provide a vast amount of knowledge and other assets due to experience and best practice cases. The degree of openness and external stakeholders is hence low, which decreases the risk of “copy-cats”. This fits ventures that are looking for a partner which is at the top of their class in their respective weak spot and can protect their IP.

Type of Support

Development support: This kind of support usually requires a very close partnership in product and business development. It can be characterized by intensive technical support and expertise and steady contact and a longer timeframe of support. Practically, it can be seen as a joint venture without the legal bindings.

Sales and distribution: This is common for vehicles with established sales & distribution channels.

Therefore, it refers mostly to CVCs, which can offer ventures their own channels and even salesforce.

One example would be using a white-label approach, selling the venture's product under a corporates name through its distribution channel.

Strategic Advice: The vehicle takes on more of a support role but can be consulted when needed in an unscheduled way. Thus, experts from different fields and with different expertise are provided on an ad-hoc level.

Although the findings predominantly pointed to moving away from the typical funding stages and more to a vehicle-focused classification, this does not imply that it is representative of all vehicles and the overall market, as existing literature clearly suggests otherwise. Instead, this framework must be understood as a contribution to the prevailing understanding of financial and growth vehicles. In

comparison to the prevalent clustering into VCs, CVCs, Accelerators, and BAs, the suggested model might seem more complex and in-depth. A clear advantage would be the opportunity for the ventures to find a tailored vehicle in a more transparent way. The actual application, although, would highly depend on the level of information and insight sharing of the vehicle. Some of the included clusters can be seen as rather unique for alternative protein, as for example, portfolio scope, but the majority of clusters could eventually be applied on other areas and sectors besides from alternative protein.