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Nadav Berger, founding general partner, PeakBridge
Nadav Berger, founding general partner, PeakBridge. Image credit: PeakBridge

Peakbridge closes $187m Growth Fund II, homes in on disruptive potential of AI

May 15, 2024

  • Agrifoodtech investor PeakBridge has closed its Growth Fund II at $187 million in partnership with Edmond de Rothschild Private Equity, bringing its total AUM (assets under management) to more than $250 million.
  • The fund targets series A and B stage startups in the US, Europe and Israel in five categories: ingredients innovation, alt protein technologies, digitalization and food systems 4.0, nutrition & health, and alternate farming systems. Investors include Grupo Bimbo, Royal Cosun, and Arancia; along with financial institutions such as Builder’s Initiative.
  • Portfolio companies in Growth Fund II include Australian cultivated meat startup Vow; UK-based cocoa-free chocolate maker Win-Win; Austrian startup Kern Tec, which upcycles fruit pits into higher-value products; and personalized nutrition co InsideTracker.

An ‘incredibly disciplined investment thesis’

While it is a challenging time to raise money, founding general partner Nadav Berger told AgFunderNews that PeakBridge has “always been incredibly disciplined in our investment thesis. We invest in b2b, scalable, protected technologies. We never got into the b2c plant-based hype, but if we can invest in technologies that will make meat and dairy alternatives cleaner, tastier, or with better texture, this is where we want to play.”

Peakbridge remains focused on the five ‘pillar’ categories listed above, said Berger, “But we see a shift in the proportions within those five pillars, and the one attracting more and more investment is digitalization and the intersection of AI and food. Yes it’s trendy, but it’s happening. We have at least six companies that are heavily supported by AI now.”

AI in food and ag

AI has the potential to transform every aspect of the food industry, from driving supply chain efficiency to speeding up the R&D process, noted Berger. But it also aligns well with VC funding models and timelines, which some commentators have argued are not inherently well-suited to the agrifood industry, which deals with unpredictable biological systems, requires costly physical infrastructure and distribution networks, and operates in a complex regulatory environment, he noted.

“All of us in the foodtech space, we need success stories and exits that we can share. And this is why this fundraise is exciting, because even with investors that are more cautious and less excited about foodtech, they can see the potential [of AI in food] and they can see investment models to compare this with.

“So if a company of ours reaches X million ARR [annual recurring revenue] then it could be compared to software companies where there are known and accepted multiples.”

One AI-powered portfolio company PeakBridge is excited about is Tastewise, an online platform helping food and beverage companies from PepsiCo to Nestlé scour data from restaurant and delivery menus, online recipes, and social media posts.

This helps clients develop actionable insights on emerging trends at the click of a button, and create products more in line with what consumers want, claimed Berger, who noted that the failure rate of new CPG products remains shockingly high, in part because existing market research tools tell you what’s in the rear view mirror, rather than how to meet consumers’ future, unmet needs.

“Consumers are changing faster than the industry is developing new solutions, so you want those real-time insights,” he said. “But AI is also enabling us to look at a far larger dataset, not a report based on what a few hundred people think. We’re talking about looking at billions of data points in real time all the time.”

‘We try to understand the pain points in specific areas and look for solutions’

Asked about exits, he said: “In each of the five pillars that we have, we might face different exit models. So in the ingredient space, we look for solutions that we know that the big ingredients players will look for.

“For example, we know we have to solve the issue of vanilla supply [demand for real vanilla far outstrips supply], and we think that Vanilla Vida [which has an indoor growing platform for vanilla plants with significantly higher yields of vanillin and a dramatically reduced curing time] is addressing a pain point and presenting a solution.”

Another example is UK-based Win Win, which uses carob and barley to make chocolate alternatives that address the mismatch between supply and demand for cocoa, said Berger. “When we invested two years ago, we didn’t have a crystal ball, and we never thought cacao prices would go up 280%, but we could see that this was an industry that needed to be disrupted.”

In the alternative protein space, he said, “It’s the same thing. We try to understand the pain points in specific areas and look for solutions. We talk to dairies and they are looking for alternatives [to complement their animal-based ingredients], so we have Imagindairy (whey proteins) and Standing Ovation (casein proteins) in our portfolio. For meat alternatives, we understand that the challenge is all about taste and texture, so we invested in Mediterranean Food Lab [which uses solid state fermentation to create flavor ingredients it claims can transform the sensory experience of eating plant-based foods].”

Another portfolio company PeakBridge is excited about is personalized nutrition firm InsideTracker, which integrates biomarker data from blood, DNA, activity trackers, and user-generated demographic information to create science-backed recommendations to optimize health.

While customer retention can be a challenge with personalized nutrition offerings, InsideTracker has built a robust and loyal customer base with very little churn, said Berger. And while early adopters may be the more affluent or engaged few, the beauty of the technology is that it can scale to reach a wider audience such that down the road it might move the needle on public health, he claimed.

‘This is the perfect time to invest’

So where are we in the current downcycle, and how has the agrifoodtech investment landscape evolved since the heady days of 2021 and early 2022?

According to Berger, non-specialist investors who poured into sectors such as alternative proteins and vertical farming and drove up valuations only to get their fingers burned have now left the space, and valuations have dropped accordingly. “So we saw these generalist investors who thought foodtech was sexy pay a premium price and then realize that you need to manufacture and sell [physical] products and deal with a complex regulatory environment [if you are to succeed in the agrifood industry].

“We’re now seeing good companies come back to us that we saw a couple of years ago with about 50% of the valuation that they asked for then. But if you have the means, this is the perfect time to invest because we’re back to a normal world where valuations are based on multiples and sales and profitability.”

He added: “At the end of the day, we remain positive as foodtech is here to stay because the problems we’re trying to solve haven’t gone away. At Peakbridge, we’re no smarter than anyone else but we think we can really add value [to portfolio companies] because we have decades of operational hands-on management experience as well as that experience in venturing and foodtech, plus we have big strategic food industry partners.”

Further reading:

Khosla, Friedberg strike positive note amid agrifoodtech funding winter: ‘Exceptional founders have nothing to worry about’

‘Incremental’ innovation, a warning on the push for profitability and investors ‘scared shitless’ about portfolios: overheard at World Agri-Tech

🎥 Germin8 Ventures on a ‘bruising’ year in venture capital, and new opportunities in ‘frontier science and computation’

Bytes to Bites part one: Digitizing consumption insights. Leveraging AI in food product development

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