Motives & Portfolio

Considering the different types of vehicles interviewed in the APM, their investment objectives and strategies as well as portfolio focus have been thoroughly discussed, which has led to similar findings, but also larger deviations between the vehicles.

The Difference in Investment Objectives

The reason and objectives for vehicles to invest and work with ventures in the different verticals are often two-fold, and the respondents had different opinions on their goals, but also showed some convergence throughout their comments. Most respondents, working within financial vehicles, showed a clear mission of their company such as the objective of maximizing their return on investment. Therefore, engaging with the ventures is incentivized by monetary objectives or differently said: “not being judged by the impact of our investments just by the financial return”

(VC2). Growth vehicles such as accelerators and CVCs indicated more strategic incentives to

cooperate with and invest in ventures, as it can be derived from the next comment made by an interview partner:

“Of course, often we're not investing for the sake of financial return. And so, there's always you could argue Nova holding (a financial vehicle) that is doing that, for those who want to invest, but for us, there's got to be some strategic element to it.” (CVC1)

While the primary motive of investment and growth vehicles show a discrepancy, there is a coherent view and vision of their investment objectives on a meta-level, which is best expressed by the following:

“Essentially, it's answering a very simple question, which is how can you use biotechnology to solve the future protein needs of the world, and there are proteins that are used for nutritional purposes.”

(CVC2)

This combines the objectives of growth and investment vehicles into one common higher purpose as to focus on incremental and disruptive innovation in life or food sciences to “feed 9 billion people in 2050 (…) to do that sustainably” (VC2) and “creating system change along the Food and Agriculture value chain.” (VC1). On the ground of these statements, impact can undeniably be identified as another motive besides strategic and financial ones. In this context, this motive refers to both technological and sustainable impact, but according to the reasoning of the previous statements, these go hand in hand most of the times.

Impact as Prerequisite

Essentially, the ventures within the alternative protein sector work on the supply of sustainable and alternative proteins, which can be classified as “a sector where you can have a lot of impact” (AC1, VC2).

Even though most of the interviewed experts did not explicitly define their vehicle as impact-driven or as “impact investors”, their purpose and portfolio thesis is increasingly guided by the sustainable development goals, deeply incorporated into their overall strategy: “So we were the first company to basically rewrite our corporate strategy based on the SDGs.” (CVC1). Sustainable impact is for the majority of vehicles even seen as a prerequisite for potential investments as experts from various vehicles explained: “So we had a corporate strategy process that concluded last summer and you could say your entry ticket of investment areas into that entire process was that there needed to be substantial sustainability benefit” (CVC1).

This respondent even highlighted that sustainability and profit have the potential to go hand in hand in the long-term instead of destructing each other, especially in a market which aims at a more sustainable way to feed the growing population: “So all of our investments have to solve one of ten sustainability goals set by us, I think the entire world is moving to a more sustainable food future.

And if you're part of that, either by owning companies within the space of financing them as a bank, you are almost bound to make a quick profit in the future.” (VC1)

The investment thesis of the vehicle has a significant impact on their portfolio, and with the increasing popularity and attention of alternative proteins a broader niche market is emerging for investors which results in a series of more specialized vehicles: “This sort of landscape developing and of course, since when we started in, sort of officially start in 2013, I think the official number of food and agriculture, tech investments was 100-200, maybe 300 million USD to 19,8 Billion in 2019” (VC2).

Considering claims and the overall sentiment, most of the interviewees would agree on the statement of one of the VCs that they “only invest in food technology companies that have a sustainability angle” and that is must be seen as an “imperative” in the sector (VC3).

Portfolio Resembles Value Chain

The portfolio approach of the vehicles is relatively broadly based within the niche market of Food &

AgTech and best described as working with ventures which provide and develop products and services “from soil to gut” (VC2) or “plant to shelf” (VC3). Due to the interlocking elements and technologies along the value chain in the niche market of food and agriculture, the broad portfolio strategy is meant to create synergies across the ventures to cause an amplification effect between the different ventures (VC2). The effect and motivation behind this strategy was particularly enclosed by one respondent: “Soil health is essential. If you have healthy soil and create healthy food and healthy food should enable healthy human health.” (VC1)

The breadth and variety of portfolio companies that work on products “from inputs for animals and plants, all the way down to the consumer” does show the novelty and uncertainty of the market as also players with more strategic motives are involved and try an assortment of areas (VC1, VC2).

This was also addressed in the next statement: “So it's all sorts of things right, so it's a rather messy area from that respect compared to maybe other more cleaner areas and investment thesis, it's also across you'd say whole value chain” (CVC1).

In this context, the vehicles' investment strategy within the verticals also shows significant deviations.

Some vehicles chose to rather spread their investments along all verticals, due to uncertainty as one

interview partner stated: “So we need to see if we can assess which technology will win out in 10 years’ time, which one is going to be the big one. And we don't know basically. So instead, what we're doing is we're spreading our bets” (AC2). This “betting on all different horses, and then let’s see who wins” (CVC1) or “spray and pray” (VC2) strategy is not supported by all vehicles. Some respondents pointed out that they explicitly deselected some verticals, such as cell cultured meat as explained in the following: "For us and our science, arguing that it's too far away from market reality” (CVC2). Concerning insect-based ventures, certain respondents displayed a strong disbelief in their potential, as illustrated by this statement:: “We've basically made that assessment and fairly crude concluded that we don't think it's going to be a major thing in food for humans” (CVC1). On the other hand, there are vehicles that are looking for investment opportunities in the APM but are still holding off (AC2, VC1).

Considering the classification of ventures within the APM, these findings also brought up a differentiation between technology- and brand-driven ventures, which will be explained more detailed later. In the alignment of their investment thesis and objectives, the majority of the interview partners clearly favored an attention on tech-driven ventures, because “We believe this sector will be disrupted by technology” (VC2). This conviction was reinforced and supported by almost all interview partners through similar statements like this: “We are a technology company. So, we will always be looking at what's the core technology that they have, going typically after companies that have a tech angle” (CVC1). Another interview partner underlined his focus even more explicit:

“We are obsessive about IP, obviously, and data. So, we will never invest in a purely, I mean, never say never, as usual. But purely branded businesses are not terribly interesting to us, there needs to be IP, and there needs to be data that scales. That's interesting. So, we're a tech investor in that respect.” (VC2)

In general, all respondents favored a portfolio strategy that involves multiple different technologies along the value chain of alternative protein, both on the supplier and customer-facing end as well as with a strong focus on tech-heavy ventures.