August 23, 2017

Memphis Meats, a San Francisco-based startup that is developing methods for growing clean meat from animal cells without the need for breeding, raising, or slaughtering animals, announced it has raised a $17 million series A led by leading venture capital firm DFI. The round also included a long list of notable investors such as Cargill, Bill Gates, Richard Branson, New Crop Capital, SOSV, Fifty Years, Atomico, KBW Ventures, Inevitable Ventures, Kimbal Musk, Suzy and Jack Welch, Kyle Vogt, and multiple research institutions.

This round brings Memphis Meats’ total funding to $22 million after raising a $5 million Seed round from Fifty Years, Indie Bio, New Crop Capital and New Crop, SOSV, and Westcott LLC in March of 2016.

With the backing of the new funding, the company plans to pursue the development of new products, scale up production, and reduce production costs to align more with traditional meat production costs.

“Clean meat is an enormous technological shift for humanity, and an opportunity to invest in something so important does not come along often,” says Steve Jurvetson, DFJ Partner. “This is a moment where the investment potential and the potential to do good for the world are both off the charts. Investors have been watching this space for years, and Memphis Meats has emerged as the clear leader.”

The Pipeline

Meat production uses one third of the world’s fresh water and land surface, while also generating one fifth of all greenhouses gas emission. And as evidence mounts that the global animal protein production system is not sustainable, Memphis Meats states on its website that its goal is a simple one – “to change the way meat gets to your plate”.  

To do this, the company is creating products grown in a lab from animal stem cells that require up to 90 percent fewer greenhouse gas emission, land, and water than traditionally produced meat.

“We’re going to bring meat to the plate in a more sustainable, affordable and delicious way,” explains Uma Valeti, M.D., co-founder and CEO of Memphis Meats. “The world loves to eat meat, and it is core to many of our cultures and traditions. Meat demand is growing rapidly around the world. We want the world to keep eating what it loves. However, the way conventional meat is produced today creates challenges for the environment, animal welfare and human health. These are problems that everyone wants to solve, and we can solve them by bringing this incredible group of partners under one tent. This group will help us accelerate our progress significantly.”

In February 2016 the company proved its methodology is viable, revealing its first lab-grown meatball.

“This is the first time a meatball has ever been cooked with beef cells that didn’t require a cow to be slaughtered,” said Valeti at the time.

One year later, in March 2017, the company unveiled the world’s first lab-grown chicken strips, and announced that it had created lab-grown duck as well.

“We did it with a beef meatball last year. And now we’ve made history again by debuting the world’s first ever poultry products grown from animal cells. This represents one of the biggest technological leaps for humanity…” said the company in a statement on their website earlier this year.

The Writing on the Wall

The deepening of the connection between consumers and their food supply chains, along with a rising popularity of veganism, concerns over animal rights, and awareness around the hormones, antibiotic usage, and unsustainability inherent in the global livestock industry have pushed many people to look toward alternative ways to get protein into their diet.

However, consumers are not the only group pushing for this sea-change in consumption. At the end of September 2016, a coalition of 40 institutional investors with a combined valuation of $1.25 trillion called for the greater adoption of alternative protein sources including plants, insects, algae, nuts, seeds and grains, and lab-cultured meats. In the treatise, “The Future of Food: The Investment Case for a Protein Shake Up” published by the Farm Animal Investment Risk and Return (FAIRR) initiative, the group claims that over-reliance on livestock production to feed a growing global population would be unsustainable and would “lead a financial, social and environmental crisis.”

Even top players in the meat industry are seeing the writing on the wall and are diversifying capital into alternative protein businesses.

In October 2016 Tyson Foods, the company whose very name is synonymous with the meat industry, announced that it had acquired a 5 percent stake in California-based plant-based protein company Beyond Meat for an undisclosed amount.

Although quite small in comparison to Tyson’s 2014 acquisition of Hillshire Brands for $7.7 billion, this move by Tyson carries significant weight in what it signals.

“We’re enthusiastic about this investment,” said Monica McGurk, Tyson Foods’ executive vice president of strategy and new ventures & president of foodservice at the time, adding, “which gives us exposure to a fast-growing segment of the protein market. It meets our desire to offer consumers choices and to consider how we can serve an ever-growing and diverse global population…”

For Cargill, its involvement in this Series A for Memphis Meats is the continuation of a recent shift in priorities for the company. In May of this year, Cargill sold its last two remaining feedyards located in Leoti, Kansas, and Yuma, Colorado, enabling the company to completely exit the U.S. cattle feed business, and providing additional capital to allocate toward other investments that will strengthen its North American protein business.

“We are committed to being the leading protein provider that nourishes people, animals, and the planet in a safe, responsible and sustainable way while exceeding the expectations of our customers,” said John Keating, president of Cargill’s Wichita-based protein business operations and supply chain at the time. “We have great positive growth momentum and are confident it will continue to accelerate as we continue to help our customers’ and suppliers’ businesses, communities and colleagues thrive.”

Further reflecting Cargill’s strategic move toward alternative protein occurred less than two months ago, when the company announced it had entered into a strategic partnership with Delacon – pioneering global leader in phytogenic (plant-based) feed additives – through an unspecified minority equity investment.

“…the growing ranks of novel protein sources and potential replacements appeal to the everyday consumer foreshadowing a profoundly changed marketplace in which what was formerly ‘alternative’ could take over the mainstream,” states the Global Food and Drink Trends Report 2016 issued by Mintel. And top meat companies are taking note.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.