CC052: Nick Cooney of Lever VC // investing in alternative protein startups

Nick Cooney 0:00
On the cell based side, as long as you can get an isolated replicating cell line, then you should be able to create cultivated meat from that as well, which obviously means that these technologies open the door for all sorts of products, whether it’s a novel species or species that can’t really be farmed but might taste really good, and for creative blends of those to be produced.

Jay Clouse 0:24
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them, and discuss the upside of investing in them. Welcome to upside. Hello, hello, hello, and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co-host, Mr. First Time Preston’s Customer himself, Eric Hornung.

Eric Hornung 1:04
Mal hyped it up, Jay. She really set the bar high, and it exceeded it. It was a great burger. It’s my type of burger you know.

Jay Clouse 1:11
We are now, what, three weeks into total isolation here in the Jay and Mallory household. And three weeks or four weeks ago, you came and visited, we took you to our favorite burger place, Preston’s. Favorite burger place in Columbus. We both love it. And man, could I use the President’s burger right now. It has been a long time.

Eric Hornung 1:29
It’s great. See, I made burgers at home a few days ago actually. So this is very topical. And I like a really thin burger. I don’t need all the meat. I know the Midwestern burger like is traditionally like, the thicker the meat, the better the burger. No, I’m a I’m a bun-condiments guy. The burgers there for, for support.

Jay Clouse 1:49
I want to revise my nickname to Mr. Thin Burger himself, Eric Hornung.

Eric Hornung 1:57
So Preston’s, thin burger patty. I like that. I like that about Preston’s, because my favorite burger in Cincinnati is the Queen City Whip, which is a traditional 50 style steak burger. And it’s in a old, you know, like the crazy guy who lives out in Nevada, who is like looking for aliens, like that type of mobile unit?

Jay Clouse 2:17
Okay.

Eric Hornung 2:18
Yeah, you know exactly what I’m talking about, like tin?

Jay Clouse 2:20
I’ve seen the documentary.

Eric Hornung 2:22
Yeah. It’s in that. It gets served out of that, and it’s fantastic, great burger.

Jay Clouse 2:27
I like thin burgers because they make it more likely for me to get a double then. I would rather have the same amount of patty divided into two thin burgers and call that a double cheeseburger even if it’s the same amount of patty as a single cheeseburger. So I can just, you know, throw some cheese in between, throw a little onion in between, some pickles. Boy, you look like you’re deep in thought. What are you thinking about?

Eric Hornung 2:48
Yeah, I’m on board with that. I mean, if you’re feeling a burger, you got to go to thin patties, because I think the big thing is–you hit on this–the cheese in between the patties is fantastic. But if they’re thin patties, you don’t feel bad about having two patties. If they’re thick patties, then you’re really just, you’re really just eating meat with like some dressing on top.

Jay Clouse 3:06
I want to revise my nickname to be Eric Thin Patty’s Hornung.

Eric Hornung 3:10
You just revised your name twice in one intro.

Jay Clouse 3:13
Yeah, well, it just keep getting better. Speaking of burgers just keep getting better today our guest is Nick Cooney, the Founder and Managing Director of Lever VC. Lever VC is a venture capital fund investing in early stage companies and the alternative protein sector. Lever VC operates globally with offices in Hong Kong and the US, and staff in the US, Hong Kong, Europe, and Israel. And he’s been working in the alternative protein space for more than 20 years, investing in companies like Beyond Meat, Memphis Meats, and other market leaders worth more than $2 billion.

Eric Hornung 3:45
Do you remember when we had some Beyond Meat patties together?

Jay Clouse 3:47
Yeah. Was it…

Eric Hornung 3:49
Sliders. They’re sliders.

Jay Clouse 3:50
Was it Beyond? Was it the White Castle Beyond Sliders or was it White Castle? Impossibles Sliders.

Eric Hornung 3:55
Oh, no, that’s bad that we don’t know.

Jay Clouse 3:58
It’s an alternative protein-base burger.

Eric Hornung 4:00
All I’ll say is I had a couple of them. They were pretty good.

Jay Clouse 4:02
They’re pretty good. That tasted like a White Castle slider.

Eric Hornung 4:04
Which is what they were going for, I think.

Jay Clouse 4:06
Exactly. Well, we hope that this episode tastes as good as our regular episodes.

Eric Hornung 4:12
Wow, what a bridge.

Jay Clouse 4:13
You can let us know by tweeting at us @upsidefm or emailing us hello@upside.fm. And we’ll get to that interview with Nick right after this.

Eric Hornung 4:22
Jay, would you say you’re more of a operator or an allocator?

Jay Clouse 4:25
Operator, for sure.

Eric Hornung 4:27
You’re definitely an operator? Well, if you were going to hire someone to hire for you, would you want to hire an operator or an allocator?

Jay Clouse 4:37
Eric, I’ll be honest with you. I don’t know the term allocator really means in this context.

Eric Hornung 4:41
All right. Well, let’s pretend it means capital allocator.

Jay Clouse 4:43
Ah, I would want to hire an operator.

Eric Hornung 4:46
All right. Well, that’s great because our friends over at Integrity Power Search are a team comprised of ex-operators of successful high growth startups and tech companies, which allows them to be a true strategic partner. See, Integrity Power Search is the number one, full stack, high growth startup recruiting firm between the coasts. They partner with venture capitalists, private equity groups and CEOs to build amazing teams for the world’s most disruptive companies like upside, Jay. Since 2012, they have successfully executed 600+ searches and are on track for 200 more in 2019. Their clients have successfully raised over 2.5 billion in venture funding, and that is still counting.

Jay Clouse 5:27
Sounds like they know how to operate a recruiting firm.

Eric Hornung 5:30
And they know how to identify great operators for your startup.

Jay Clouse 5:35
Smooth operators. So if you guys want to meet Integrity Power Search and learn what they can do for your high growth startup, go to upside.fm/integrity and get started.

Nick, welcome to the show.

Nick Cooney 5:51
Thanks, Jay. Appreciate you having me on.

Eric Hornung 5:54
On upside, we like to start with a background of the guest. So can you tell us about the history of Nick?

Nick Cooney 5:59
Yeah. Thanks, Eric. So, as we’ll talk about I’m sure, I invest in the alternative protein space. And pretty much my whole professional career is the background is indeed in that space. So been working in and around alternative proteins for close to 20 years at this point. Further back that was on the policy and geoconsulting side of things. So for example, working with some of the more major food groups to add these products to their supply chain and also working on marketing these products to consumers and promoting them. And then began to invest directly into the sector about five years ago. So don’t have a traditional finance background. I didn’t go to business school, really was working in and around the sector. And transitioned from there into investing into companies in the sector.

Eric Hornung 6:44
When was the first time you tasted an alternative protein?

Nick Cooney 6:48
20 years ago. You know, I started eating plant based proteins about 20 years ago. And you know, back then, the quality compared to things today is night and day. You know, no joke, in some of those early years, the best products you could get were canned meat in water. So like a can of vegetarian hotdogs simmering in this water broth with about 900 ingredients that kind of tasted like dog food. So I’m very glad from a personal perspective and of course, you know, glad from a market perspective, things have advanced so much since that time.

Jay Clouse 7:23
What drew you to the space 20 years ago? What was happening around protein that you said, I think we need to start thinking about alternatives?

Nick Cooney 7:30
Yeah, you know, for me, I got interested in the space from a personal perspective and started learning about some of the externalities of animal protein production back then. And it just made sense that, you know, for at least a proportion of consumers and a portion of food, there had to be other good options out there. And alternative proteins, including plant based proteins, were one of those.S o got interested from that perspective, the benefits of these products to the environment, to health, to animal welfare, and so on. And then as the space has continued to grow, and especially in the past four or five years as it’s really started to grow and branch out into other areas, we’re seeing all of these other benefits. So that’s, that personal interest is what keeps me passionate about it and always eager to meet new companies, new entrepreneurs, and see what they’re doing to innovate in this space.

Eric Hornung 8:22
There’s been this kind of awareness that’s grown about plant based meat because of, you know, Beyond Meat IPOing and their stock price skyrocketing, and they were on the front page of it feels like every publication. What are some of the other alternative protein sources that you define as alternative proteins?

Nick Cooney 8:42
Yeah, so for, for us at Lever VC, all we do is alternative protein, looking at alternative protein deals around the world. And for us, there’s a couple main buckets. So like you mentioned, plant based meat and plant based dairy is one of those. From a market perspective, it’s by far, by far the largest. It’s I mean, in the US. alone, plant based meat sales will top 1 million–I’m sorry, 1 billion in retail sales this year. Plant based dairy is already in several million in the US. And when you look globally, of course, the numbers are far bigger. So that’s pretty established, growing, etc. But there are these other categories. So for us, there’s kind of two other larger bucket categories. One is what’s been called cultivated or sometimes cultured, or sometimes clean meat, which is real meat or egg protein or dairy protein produced from cells instead of live animals. So if you think tissue engineering but apply it to food, you take a few pixels, and you feed those cells sugars, and you grow it into a piece of pork. Or you can do the same for other animal products. So that would be one of the other buckets. And then the third bucket would be fermented animal proteins. So if you think about the technology used to to brew beer right now, pretty, pretty straightforward. You take a yeast, you feed that yeast sugars and so on, and the yeast expresses alcohol. We drink the alcohol. Well, that same technology can be used to produce all sorts of things if you modify the yeast. And so there are companies right now, both in the US and abroad, that are modifying the yeast to cause these to express things like real meat protein, real chicken protein, or beef, protein, real egg, protein, real dairy, protein, and so on. And so this is a way to get these animal proteins, you know, in a way that’s more efficient, that removes the externalities, and in a way where you can customize these so they’re more useful for various industries, both food and non-food.

Eric Hornung 10:37
I feel so dumb asking this question, but are you effectively like brewing duck protein?

Nick Cooney 10:44
That that’s exactly right. Some some companies including one of the companies in our portfolio are doing exactly that.

Eric Hornung 10:51
Wow, that’s weird.

Nick Cooney 10:54
Yeah, we go with a lot of a lot of commercial potential. You know that, the company, one of the companies in our portfolio is doing this, it’s a Colorado based company called Bond Pet Foods. So certainly outside of Silicon Valley and their, their main focus is b2b ingredient supply into the pet food market. And so if you think about the Mars Purina and Nestle, etc, producing the pet food brands, like dried dog food, dried cat food, what they want is they want healthy animal protein in the products. If they can get it from a source like this, which is cleaner, higher in food safety, which is expected to be at a lower price point once it’s being produced at scale, there’s a lot of benefits to them. And hey, at the same time animal free, which is a great thing if you’re feeding your animals. So if they can get all those benefits of this high quality animal protein but from a more efficient method, there’s no reason it wouldn’t be of interest. And in fact, companies like Bond have gotten a lot of interest from major companies in this space. So that’s an example of one of the market opportunities for this sort of innovation.

Eric Hornung 11:59
So in like 2015, ’16, ’17, I feel like the Wall Street Journal was obsessed with talking about how millennials were going to be eating bugs as like the future source of protein. It was like roasted crickets and healthy snacks are bugs and all this. Why is bugs or insects not an alternative source of protein that Lever considers?

Nick Cooney 12:21
Yeah, so we looked at that and decided to not include that as part of what we do for a couple of reasons. But I think probably one of those reasons is that there isn’t, does not seem to be significant market interest in that, which isn’t to say there’s not a few companies in the world that are getting enough sales to keep progressing as a company. But it’s not very significant. And at least in the West, there just doesn’t seem to be the consumer appetite for it. Now, you could talk about some other potential downsides to it, but, but that alone right there for us is enough to not pursue companies in that sector.

Jay Clouse 12:57
I want to hear a little bit more about the entire landscape around proteins generally, and what these new protein alternatives mean to that landscape. You know, you said your background was kind of in the GMO type space. I imagine there’s a lot of incumbent interests here, and I just want to get a better sense for that entire tapestry.

Eric Hornung 13:17
Yeah. And just to clarify, like, do you mean, how company, large incumbents in this space are thinking about alternative protein and so on?

Jay Clouse 13:25
Yeah, you know, most of our protein, where does it come from now? If we’re introducing alternative proteins, is it the same manufacturers? Are they heavily against this? Are there a lot of, you know, lobbyists who are fighting against this? I just want to hear kind of the behind the scenes, what does this mean for the industry?

Nick Cooney 13:42
Yeah, that’s, it’s a great question. And there hasn’t been a uniform response. But you can think of two industries. One being the food company is the packaged goods brands, restaurant chains, retail chains, etc., as one body of types of companies, the other being the actual meat protein producers or dairy protein producers themselves. And we’ve seen different reactions from each of those, in most cases. So in the former, things like retail restaurant packaged goods, great interest in the space, it’s, there’s been interest and that interest has continued to increase year over year as consumer interest has increased and as products have gotten better, and there, there has been more variety. From the latter category, the larger meat companies or dairy companies, we see a mixture. We see some like Tyson and Perdue and, and Cargill and Conagra and others really moving into the space, not to the exclusion of their traditional protein businesses, but as an addition to it, because they see where the markets headed. But then you also have a few industry groups like industry lobbyists groups, and so on, that kind of look askance at it and look at it as a threat to their existing products. So we’ve seen kind of both of those. But overall, a lot more of the on the embracing side of things. So if you look at the investors in the space, of course, you have all sorts of traditional VC funds, specialty VC, VC funds, like ours and angels. But you also have a number of large corporate venture capital arms investing significantly in the space, including a few of those names I’ve mentioned, Tyson, Purdue, Cargill, and then on the, on the producer side, and then on the the general food package, good side investments coming from folks like General Mills, Danone, Nestle, as well as a lot of acquisitions in the space. So as you noted earlier, Beyond Meat’ sale generated a lot of press with its big IPO. But the traditional route to exit for a company that in this space up till now has been acquisition, and that has, in most cases, been by one of these major food companies. So there is a lot of interest, I would say the general view is becoming, okay, it’s clear that this is part of the market, it’s a growing part of the market, and so we don’t want to lose market share, we want to capture the, you know, the the consumer interest in market share that’s coming online as this alternative protein pie continues to grow very quickly.

Eric Hornung 16:08
And alternative protein pie.

Nick Cooney 16:11
Sounds pretty good, huh?

Eric Hornung 16:15
So when you think about that, people exiting via acquisition, does that mean like once Tyson buys a alternative chicken protein company, they’re just done, they have their chicken protein company, and maybe they have another, I don’t know what else Tyson does besides chicken, but let’s assume they do bacon and pork or something, then they buy a pork company, and then they’re done? So then each of the big producers essentially is going to buy or create their existing products but with this new company? Is that how you see the industry kind of playing out?

Nick Cooney 16:47
You know, we’ve seen a mix of things. So with companies like beyond and impossible foods, we see companies that are going their own route, going the IPO, the IPO route, and just continuing to build there. brand. We’ve seen acquisitions where it was a one off. So for example, Nestle acquired a plant based meat company called Sweet Earth foods, which does a few different types of plant based meat. And, you know, that’s, that’s their main sort of player in the space in the US. But then they’re also, they’ve developed their own products in New York that they’re selling into the European market. You have companies like, there’s a very large, the largest meat producer in Canada called Maple Leaf foods, they’ve now acquired several companies in this space in addition to launching their own line. And then you have some companies like Tyson that have invested into the space but have not acquired; instead, they’ve just kind of used what they have learned to roll out their own products. So we’re seeing a real mixture of approaches from the corporate side. And I think we will continue to see that mixture just based on where a company feels its strengths are and what the plant based protein companies want to do themselves.

Jay Clouse 17:58
When you go to the grocery store and you see some of these protein alternatives, I often see them next to the real proteins and not in like the vegetarian section. So can you talk to me about, at this stage in the lifecycle of these alternatives, what does the consumer want? Do they just want a cheaper option? Are they looking for something that’s better for the environment? Is it a vegetarian who just misses having burgers? Like what’s the consumer preference that’s driving most of the adoption right now?

Nick Cooney 18:30
Yeah, it’s interesting that you say that when you go into the grocery store, you typically see these alongside the conventional meat, because if you had gone into grocery stores looking for these products just a couple years ago, that would not have been the case. And if we look at plant based dairy, like plant based fluid milk, the thing that moved that product from a very niche product with, you know, 1 or 2% market share to what it is today, and certainly a few different factors, but one of those is when the those products got shifted to the refrigerated dairy section, so now they’re alongside conventional dairy, and a consumer that’s going to that conventional dairy section, which pretty much every grocery store shopper is, now they see these options and they can compare them side by side. And that led many of them to start choosing plant based fluid milks. We’re just starting to see over the past year or two the same thing on the plant based meat side where at least a few brands are starting to be placed alongside conventional meat. And results have not been uniformly in one direction, but in general, most of the anecdotal feedback has been that it significantly increases sales. And I think that’s because it just exposes more consumers to these products. You know, if they’re living in the vegetarian food ghetto section of a supermarket, 90% of shoppers are just not looking there. They think it’s not for them. And so just getting these products in front of consumers so they know what’s out there, they can kind of look at the nutritional labels and the packaging side by side with a conventional meat version, that seems to really boost sales. And so I think that shift in the grocery store setting is helping and will continue to help propel the market share for these products. To your question of what are consumers looking for, so the, there’s been various studies on this done, at least in the US, and the general picture that’s emerged is the average consumer of plant based meat products is somebody who consumes meat, but they’re adding in some of these plant based proteins primarily for health reasons, secondarily, for novelty reasons and give them a try, and then also for some consumers for ethical reasons. So maybe animal welfare, maybe sustainability because these foods have, you know, they’re much, much more sustainable. But the definitely, definitely the predominant motivation is health followed by novelty.

Jay Clouse 20:46
On the health point, there are some other food innovation companies that, like Quest, for example, quest bars, sometimes these companies come out and they have these these claims that, you know, we have zero calories or zero sugar because there’s actually this alternative that we don’t even quite know how to quantify or explain what happens to the body yet. And people get really excited about those claims because like, I don’t want calories, I don’t want sugar. Are there any bad actors in this alternative protein space that are masquerading as a healthy alternative that are actually introducing a bigger trade off that’s worse your health?

Nick Cooney 21:21
So, yes, and no. You know, there’s not in the same sense as a Quest bar in that there’s ingredients that are new, unknown, untested, and may have hidden downsides. Pretty much all the, I mean, maybe you’ll find an exception out there, but 99.9% of the ingredients in any, if you look at all the ingredient labels, I think that are very well known. However, there are one or two ingredients that aren’t, aren’t necessarily healthy and they’re used for functional benefit. Like there has been some pushback over the past year on one or two brands that have a product called methyl cellulose, which is in a lot of food products. It’s a binding agent. It’s been around for a while, but it’s not necessarily healthy. And then you also, there’s also been some pushback from some brands that have high sodium content, can even have more sodium than conventional meat. So those are the one or two health downsides of some of the products. Again, this is not all but some of the products in this space. The upsides are a lot less fats, a lot less saturated fat, no cholesterol, typically higher in fiber, while typically having the same amount of protein. So those are kind of the pluses and minuses. I do imagine that as the industry continues to grow, you’ll have products that are continuing to optimize for taste, and that includes a lot of sodium and so on. But then you also continue to have a number of brands that are cleaner label and healthier at the same time.

Eric Hornung 22:46
I want to get a little technical for a second, and you can feel free to take this as technical as you want. Let’s say that we have, I’m gonna go back to the three buckets you have. So we have three companies, Company A, B, and C. A is a plant based meat, alternative protein producer. B is a lab grown meat producer, alternative meat producer. And C is a fermented meat producer. All three of those companies can make currently pork. How hard would it be for each of the three of them to make tuna?

Nick Cooney 23:20
Yeah, great question. So, in terms of ease of doing that, fermentation, the fermentation approach is easiest to move from one protein to the other. Because nearly everything in the process is the same. You might be shifting a little bit the feed that you’re feeding the yeast, right, the mixture to optimize for it. And you also have to isolate the fish protein or tuna protein or whatever, and use that. But by and large fermentation, it’s going to be easiest to move from one animal protein platform to the other. For plant based and for the cell culture cultivated, it depends what you’re moving to. So for example, on the cell cultured side or on the plant based side, moving from say a beef to a pork, where they’re both of these large mammalian species, with a moderately similar texture and so on, it’s easier than moving from one of those to a fish or chicken. And again, that’s true for both the plant based side and the cell cultivated side. What’s ultimately easier, it’s a little difficult to say. I mean, there’s so cultivated, it takes a lot more research and development dollars than the plant based, so perhaps it’s a bit cheaper to produce a decent plant based version from one product to the other than on the cell cultivated side. But if you want to get something really, really fantastic, a little bit hard to say between those two.

Eric Hornung 24:40
So then my follow up to that is how far does this go? Can we like sequence dinosaurs and recreate dinosaur meat?

Nick Cooney 24:49
Yeah, absolutely. If we have DNA, so of course it depends on what, you know, what the the DNA fragments you have. But if there are muscle to tissue cells of a dinosaur or woolly mammoth, or what have you, then absolutely, you can use that to at least for the fermentation approach to quick fermented dinosaur protein. And on the cell base side, as long as you can get an isolated replicating cell line, then you should be able to create cultivated meat from that as well, which obviously means that these technologies open the door for all sorts of products, whether it’s a novel species or species that can’t really be farmed but might taste really good. And for creative blends of those to be produced. So ultimately down the line as this technology develops, it’s gonna open the door to a lot a lot more textures, options, etc., for consumers.

Eric Hornung 25:44
When you say novels species, you mean essentially creating new animal proteins?

Nick Cooney 25:50
By novel I mean, a species of animal that we don’t eat right now. Like in theory, let’s say penguin meat is is fantastic and really healthy. You know, we’re not farming penguins for meat right now, but this would open the door to do that sort of thing.

Jay Clouse 26:03
Is there any regulatory or like moral headwinds that companies in this space have to fight against with all this like science at their fingertips, creating penguin meat if they want to?

Nick Cooney 26:15
So on the regulatory front, there is a regulatory path that these companies will have to go down. On the plant based side, there’s, there’s no regulatory concerns, right? These are all typical plant based ingredients, no issues. But, and on the fermented side, it’s going to be easier because this is not a novel technology. In fact, if you ate cheese this week, chances are you ate a fermented product, the rennet, 90% of the rennet in cheese these days comes from this process. If you had a vanilla cupcake this week, chances are you had fermented vanillin, which is how most vanilla flavoring is produced these days. So it’s not a novel technology. It’s just applying an existing technology in a novel way. So you know, there will be, there is still a regulatory path but it will be easier. For the sell cultivated meat companies, because that is novel in terms of food ingredients, there is more of a regulatory, longer regulatory pathway. The good news for companies in the US is that the USDA and the FDA have already put together a set of basic standards and a framework for working together to lay out the regulatory pathway for this industry. And the USDA has said very positive things about this, they want this sector to grow, they want the regulatory pathway to be conducive to the US becoming a leader in this technology. But there still will be that pathway to go down. From a moral headwinds or tailwinds perspective, all of the moral, all of that is is tailwinds propelling the space forward. You could have consumer IQ factors around a cultivated meat or fermented meat. That’s something that from a branding and marketing perspective will need to be dealt with by companies in this space. But from an ethical and moral perspective, essentially all of the benefit is from these this novel type of production. I mean, from the sustainability side, whether it’s cultivated or fermented or plant based. The reductions in carbon emissions, depending on the approach are anywhere from 50% to 98%, 99%. Dramatically less land use required, dramatically less water use required, etc. From an animal welfare perspective, of course, you go from all the very bad things going on in industrial farms right now to no animals having to endure that. And from a health perspective, you get to on the cell cultivated and fermented side, you can, because you’re building this from the cellular level, you can optimize that. So for example, you could dial down the saturated fat or cholesterol, you could dial up omega three fatty acids or something like that. So all of those sort of health, environmental, animal welfare, etc, tail winds, those will all be, those, those benefits of alternative protein are all tailwinds that are really helping propel the market forward. Yeah, from that perspective, I think these proteins are really positioned to do well in the decades ahead.

Eric Hornung 29:06
In your opinion, how many years until the majority of meat that Americans eat is from an alternative source?

Nick Cooney 29:15
So a majority greater than 50%? I don’t know, 100 years, 120 years? But others have made much, much more optimistic projections than I, than me, than I have. But, but I think that, you know, that being said, I think that how long untill it takes a nodal, you know, much more significant portion of the market, a lot less longer than that. I mean, if we look at plant based dairy, right, 12, 13 years ago, maybe 1% of the market. Now 13% of fluid milk sales in the US are plant based. If we look at other plant based dairy categories, like yogurt or cheese, those have been growing anywhere from 20-45% year over year. For the past few years. They’ve just blown past 3% market share growing very quickly. Plant based meat just is around 2% of retail market share, but also growing 18-20% year over year. And that’s before cell cultivated and fermented proteins come online. So maybe in the next 10 to 15 years, it definitely wouldn’t surprise me if we’re getting to 7-8% of meat protein being replaced by alternative proteins.

Eric Hornung 30:22
So do you actually eat like traditional meat yourself?

Nick Cooney 30:27
I have stopped. So I don’t eat meat anymore unless I’m doing product comparisons or something along those lines.

Eric Hornung 30:34
And how do those products compare from your taste palate?

Nick Cooney 30:37
Uh, I mean, it definitely varies, right? I mean, there’s, I’d say there’s one or two products now that are pretty close. There actually have been some taste blind taste tests that have shown for at least you know, one of the the big burger brands out there that consumers typically can’t tell the difference in a blind taste test. But for most of the products out there, or at least on the meat side, definitely they’re not there, right, there’s that there’s still a big delta between them and conventional animal proteins, which, you know, if you think about the market potential side of things, it means that if they’re already gaining market share as they are now, as that gap becomes narrower, I think that’s really going to allow for these products to get a lot more market share.

Eric Hornung 31:18
So you don’t have to pick a side here, but I saw that Lever was an investor in both Impossible and Beyond. And in 2018-2019 there was the whole, are you Beyond or are you Impossible, what side, what tastes better? It seemed like there was almost like a little burger war heating up there. Can you talk about what that was like being invested in both and just kind of seeing the behind the scenes in during that– and maybe it’s still going on but less top of mind right now. Just what that’s been like for the two kind of top dogs?

Nick Cooney 31:49
Yeah, and just to clarify, so yes, I invested in Beyond Meats with a previous family office fund I’d been helping run, and my partner invested in Beyond as well as Impossible directly. Lever VC itself is a newer fund. So we’re both raising and deploying capital now. But we as a fund, we’re, yeah, we’re new. So we’re, as a fund haven’t been in those two. But to answer your question, from a personal taste perspective, I had personally enjoyed Beyond Meat more, even though I like both. But with the new version, two version of Impossible, I’m now on the, you know, I’ve tilted a bit to the Impossible side. But hey, I mean, how it’s worked out for them, they’re both they’re both really good products. And I think having two has helped, the sector has helped the pie grow more quickly than if there was just one. It just draws more attention. Of course, you know, there’s, there is values to that. I think that both will continue to be extremely successful.

Jay Clouse 32:43
Can you talk a little bit about your vision of the future? I mean, I’m sure we alluded to a lot of it throughout this conversation, but I’d love to hear what you think the future will look like for alternative proteins, and why Lever, this new fund, exists?

Nick Cooney 32:58
Yeah, so you know, partners have been investing in this space for five years and six years respectively and across a couple several dozen companies. And what we’ve seen is where the market is heading, which is that this is going to take, this sector is going to take a larger and larger piece of that protein pie. We were chatting about my projections earlier. But if you look at the projections of investment banks, so folks like Goldman Sachs, Barclays, Bank of America, UBS, all of these ideas, as well as some market research agencies, are projecting plant based meat to be anywhere from 35 billion to 130 billion market in the next 10 years. And that’s just plant based meat. Then you also have plant based dairy, which is large and growing. We have the self cultivated meat coming online, fermented meat, animal protein coming online. So in terms of where it’s heading, I think it’s, it’s pretty clear that 5, 10, 15 years in the future, that plant base will have much larger share of the market than it does now. So plant based dairy will continue to go up. Maybe it’s the 15 to 20% market share. Plant based meat will go up a lot from where it is now, maybe it’s 5%, 7%, 10%, 12% market share. And then we’re going to start seeing in this next, you know, five year period these other types of product come online: te cultivated meats as well as the fermented. And I think those things are going to be a springboard to really more significant market expansion, because if you think about it, when Taco Bell can buy ground beef either from the conventional sources or they can buy it from from these meat cultivation facilities where it’s completely clean, you don’t have risk of E. coli and salmonella, much more environmentally friendly, no animal welfare externality, is healthier. As long as the price point is more or less the same, there’s no reason for them not to make this switch. So as these technologies get to that price point, then I think–and of course that the taste, that you get the taste and quality you get from being real animal protein instead of just plant based protein made to function and taste like animal protein–then I think you’re going to see a really significant second jump in terms of market share for alternative protein more generally. So in terms of us, Lever VC, you know, it’s pretty clear where the markets heading. Both myself and my partner, Lawrence, have already had exits in the space, you know, really great returns from our previous deals. So what we’re doing with Lever VC is quite simply making early stage investments in the best young companies in the space, companies with really excellent plant based meat and dairy products and companies that are on this cutting edge of the technology for developing cell cultivated or fermented animal protein, both in the US and in other major geographies around the world, including Western Europe and Greater China region.

Eric Hornung 35:45
What is early stage look like in this space? Because Jay and I have been looking for an alternative, alternative meat, alternative protein company for a while, and we try to focus on pre-series A, but it seems like every alternative protein company I find is either like, just emerging from stealth and raising a $10-20 million round, or they’re just raising some massive round off the bat, where they don’t really fit our specific definition of early stage. So it feels a lot like robotics to us in that sense. Is that correct? Or are we just completely missing the mark?

Nick Cooney 36:16
That’s interesting. I think that’s, that’s the perception that the media coverage of the space would certainly lead one to believe. But the reality is, is there’s lots of early stage companies that, that truly fit that more classic early stage mold. And we have a database where we track all the companies in this space, both in the US and globally. There’s 1,000+ companies on there. And we, in terms of our investments, nearly all of our investments–in fact, all of our investments thus far–have been pre-series A, so pre-seed or seed. So yeah, there’s there’s plenty of companies out there that fit that mold; they’re just not necessarily the ones getting media attention. And we often find, you know, as an investor, we often find that those companies that are sort of not yet discovered by the media and the wider world can sometimes be great deals. I mean, there’s certainly great deals to be had among companies that are making a lot of media headlines. And some of our portfolio fits that definition. But there’s also ones that have great team, amazing product, early traction in the market, but they just haven’t focused on getting media or reaching out more broadly. And so for us, getting in as their first investment or in their seed round is an excellent opportunity for us to capture equity when equity is much, much cheaper, and also to provide a lot of value add to those companies to help them through those next stages.

Eric Hornung 37:36
So many parallels between what you just said and the companies we see on upside. Nick, if people want to learn more about you or Lever, where should they go?

Nick Cooney 37:47
Yeah, so our website is LeverVC.com. So you can certainly learn more about the space, what we’re doing, our portfolio companies there, and reach out and get in touch. We love chatting with folks who are interested in investing in this space. Whether it’s angels, funds, corporates, and we chat with a lot of them. So, if that is you, we would be more than happy to chat with you, too.

Eric Hornung 38:08
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All right, Jay. We just spoke with Nick from Lever VC. We finally did it man. We talked alternative proteins on the pod.

Jay Clouse 39:44
We did it. I am, I would love to just do like an alternative protein buffet. Give me the three different ways that this beef was made. Give me some alternative pork, give me some alternative chicken. And you know what, if you want to throw the penguin in, let’s try out the penguin. I didn’t realize how, that there were three different methods by which you can create alternative proteins. Very interesting stuff. And I’m also, you know, I brought the Quest example because I’m a little bit dubious of food science and what it doesn’t disclose as potential bounce downsides, but sounds like Nick, at least, felt pretty comfortable that there weren’t the same downsides in this space as there are in some of the workout protein bar type foods.

Eric Hornung 40:28
I’m thinking back to our interview with Chase from Kush.com–how ’bout that little callback right there–and how their business started with tourism for cannabis. This could be your big calling, Jay. You could do tourism for alternative proteins where you just have an alternative protein buffet.

Jay Clouse 40:47
That’s interesting. Is there a market there? Do you have any information on the market size?

Eric Hornung 40:50
I know that at least one person is interested in it.

Jay Clouse 40:54
35 billion to 130 billion market within the next 10 years, this alternative protein space.

Eric Hornung 41:01
Large, and also a very large range.

Jay Clouse 41:03
Very large range, very large range, but both very large numbers too.

Eric Hornung 41:06
He mentioned Taco Bell, and I think you and I have actually talked about this before. My theory on alternative proteins is that all of the lowest quality protein we currently eat, so the McDonald’s and Taco Bell, the Burger Kings, eventually that will all be non-animal product, because it will become cheaper to produce and manufacture alternative proteins than it will be to raise pigs and hogs, and I guess pigs and hogs are the same thing, and chickens and all of that. So it will be cheaper for these companies to buy it, and if the quality is similar enough, people will get over it.

Jay Clouse 41:44
I’m here for that. Because it doesn’t even really taste like animal product to me anyway. You know, you look at the the pink goo that McDonald’s has in their burgers, like when I eat fast food burger like that, don’t feel good about it. It doesn’t feel nutritious. It doesn’t feel like it’s doing anything for me positive, it just feels like empty calories. So I’m here for an alternative protein world. Like I prefer the health side of things. Whatever we can manufacturer towards health, I’m here for it.

Eric Hornung 42:09
Yeah, I don’t know if it’ll be more healthy or not. But I think from a commercial standpoint, there will be a extreme cachet that comes with eating actual meat, in that you go to a steak house, and it’s actual meat and it’s more expensive, whereas your go to run in the mill meat is just going to be your traditional lab grown or fermented or plant based meat. But that’s my vision of the future.

Jay Clouse 42:32
We’re in a world right now where pretty much all I’m spending money on is groceries because of this epidemic. And it’s changing my behavior towards–I think, actually I’ll be really interesting to see, depending on how long this shelter in place isolation reality exists–will we yo-yo hard into let’s eat out all the time because we haven’t been able to do that for months, or will it be more, Hey, we got used to cooking at home and found a lot of things that are really simple and easy to do, we’re going to eat out even less now that we’re going out. And what does, what do these alternative meats look like for the grocery shopper? You know, we talked about, it’s available now, people are buying it. It’s a little bit more expensive right now as an option. And I don’t know how to cook with it. So does this weird situation that we’re all in accelerate this adoption or decelerate this adoption?

Eric Hornung 43:21
Are you going to buy some alternative proteins when you go grocery shopping next time?

Jay Clouse 43:25
I’m more likely to. But I’m not the cook. I’m not the cook of the household.

Eric Hornung 43:29
Well, we know that.

Jay Clouse 43:30
We presume that. You knew that. The listener might have thought that I was in there cooking it up.

Eric Hornung 43:36
Just whipping it up, producing meals. You are the faux-producer of your household when it comes to meals and design, and pretty much everything.

Jay Clouse 43:45
I’m thinking about picking up baking, though.

Eric Hornung 43:47
I could see you being a baker.

Jay Clouse 43:48
I think I’d like it. Take a nice, tactical, meditative activitie to do. The problem is, you know, I started with the brownie boxes. Really easy to make a brownie box. Almost too easy.

Eric Hornung 44:01
Mmm.

Jay Clouse 44:01
Done in 10 minutes, too easy. Need to find the baking that is dummy proof in the beginning.

Eric Hornung 44:07
Puff pastries. That’s where you need to go.

Jay Clouse 44:09
Puff pastries?

Eric Hornung 44:10
Yeah, that’s the hardest like bakery. Almost as hard as getting a alternative meats alternative protein company on this podcast, which I’m hoping, now that we’ve had Nick on, we’ll be able to do.

Jay Clouse 44:23
So if you dear listener know of an alternative protein company that we should bring on the podcast, please let us know. You can email us Hello@upside.fm or tweet at us @upsidefm. If you have the ideal baking challenge for me to take on, you can tweet at us @upsidefm or Hello@upside.fm, and we’ll talk to you next week.