UPDATE: Future Meat Technologies raises $14m Series A as Memphis Meats eyes jumbo Series B

**UPDATED: Oct. 14, 2019, ET: 10:26. Adds interview with CEO Rom Kshuk.**

Israel’s alternative meat startup Future Meat Technologies has closed a $14 million Series A round led by S2G Ventures and Swiss VC Emerald Technology Ventures. This is the second-largest round for a cultivated meat startup after Memphis Meat’s $17 million Series A. (If you include seafood in your definition of meat — jury out over here at AgFunder! — BlueNalu raised the largest with a $20 million Series A recently.)

The CEO of major meat alternative producer Monde Nissin, Henry Soesanto, also invested alongside Chinese agri-foodtech VC Bits x Bites, Tyson Ventures, and Manta Ray Ventures, a UK-based venture capital firm.

Future Meat is the latest in a small but growing list of startups tackling the conventional meat industry with cellular agriculture, the process of growing animal products with cell cultures instead of animals. Memphis Meats, cofounded by cardiologist Uma Valeti, is one of the industry’s pioneers and is expected to announce a very large Series B deal in the coming weeks, according to several industry sources. Sources say SoftBank is one of the investors negotiating the round with an expected close of around $250 million. Memphis Meats did not respond to requests for comment.

Future Meat says the funding will be used to build the world’s first cultivated meat pilot production facility and that the facility will be operational in 2020, South of Tel Aviv.

One of the core challenges ahead for Future Meat, Memphis Meats and others in the space is getting the cost of production down; it’s currently around $150 per pound of chicken and $200 per pound of beef, for example. Future Meat focuses on cultivating animal fat, however, and plans to use that to create hybrid meat products will plant-based ingredients “that create the distinct aroma and flavor of meat.” Rom Kshuk, CEO of Future Meat, says these hybrids will be cost-competitive with existing meat products in 2021. It will later launch a second line of 100% cultivated meat products for less than $10 a pound in 2022.

For Matthew Walker, managing director at S2G Ventures, this relatively quick route to market was a major draw.

“These guys have moved squarely into the development phase of R&D. We looked at several companies in the space and Future Meat is different because they have the research completed and an actual plan and path forward to commercial viability,” he told AFN.

Asked whether he was concerned about valuations getting too high, especially in light of the rumored Series B for Memphis Meats, Walker said that Beyond Meat had validated the market in the eyes of investors, increasing investor interest in it and creating some “healthy valuations.” He added that he hopes investors will be “surgical” in their approach to picking real winners with “a lot of substance and father along in the space.” If they do, and the path to commercialization is clearer, that could lead to a narrowing in startup funding targets for the next wave of startups.

However, he added that the industry still needs more investors and is underinvested compared to other asset classes like healthcare and IT.

Regulation and consumer acceptance are other challenges facing Future Meat and others, according to Walker, who emphasized the importance of educating the consumer on what they’re eating and how it was made: “It would be naive to assume it’s a done deal, but we love the consumer interest in the market right now around animal health, conscious consumerism and nutrition.”

Discussing some of these challenges and opportunities in greater detail during a phone interview on Sunday, Kshuk told AFN that his team at Future Meat were “working with the meat industry, not against them; we want to be the company that is the gortex for the Cargills, the Tysons of the world.”  Kshuk sees this is the best path to regulatory green lights, wide distribution channels, commercial viability, and consumer acceptance.

Setting his company apart from competitors, Kshuk reckons, are a focus on his product being non-GMO — another aspect that could make life easier on the consumer acceptance front.  He downplayed the technological novelty of tissue creation itself, saying this has been actively pursued in the healthcare sector for some years as transplant technology, including by his co founder and CSO Prof. Yaakov “Koby” Nahmias — a bioengineer and founding director of the Grass Center for Bioengineering at the Hebrew University of Jerusalem. “What we’re trying to say here,” said Kshuk, “is this is not innovative biology. We’ve been culturing cells for many years. The biggest shift is from pharma into the food space.”

Fatty focus

The innovative and tricky part now, explained Kshuk, is to adapt a technology designed for tight pharma regulations, micro-scale and high healthcare margins, into something that can be distributed and consumed quickly, widely and affordably. To do this, his company has focused on connective tissue, rather than stem cells. Then, it is about finding the right diet of glucose, water and fatty acids for them to grow and ferment — the so-called “nutrient media.” The morbid problem is, these cells will slowly kill themselves, ultimately drowning in toxic byproducts like ammonia. In the pharmaceutical industry, this was solved by flushing out the nutrient media and the cells’ byproducts every now and then, before introducing new and fresh nutrients; yet this is too costly and wasteful for food production; Future Meat claim to be the only company who have a patented means of “recycling” their nutrient media — it consists of their own synthetic dialysis system that mimics what liver and kidneys would do for a growing cow.

For manufacturing, the company want a “distributed approach,” and their focus on fat is explained by Ksuk largely because “you don’t need such high volumes. Think of this as an additive and an enhancer to create a hybrid product … The taste and smell of meat comes from fat,” he said. Plant based products all struggle with finding that fatty deliciousness, and his product, he said, could help get them something “much meatier.”

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Richard Martyn-Hemphill contributed reporting from London and Tel Aviv.