“In the nutrition and agriculture space it is not very easy to find really interesting innovative projects with a solid scientific base,” says Robert Schier, venture partner at Seventure Partners, a French venture capital firm focused on life sciences.
“There are many opportunities with very little scientific background and lots of marketing and branding activities in the business plan. In addition there are often a lot of ‘me-too’ startups around and very few will be able to reach revenues beyond $1 million pointing to a unscalable business. But with MycoTechnology, this is different. They have a technology that is based on solid science, and it is protected with patents and lots of know-how. There are several interesting commercial opportunities to develop the company and a team in place that knows a lot about commercialization and production.”
Schier is talking about MycoTechnology, the Denver, Colorado-based startup, which is using mushrooms and fungi to remove the bitterness from everyday food and drinks such as coffee, chocolate and green tea.
Providing an alternative to the wide range of sweeteners on the market — and even helping to remove the bitter aftertaste from Stevia, a natural sweetener that hit the market in recent years — MycoTech is on course to disrupt the sugar and sweetener industry and make a big impact on the food and drink industry globally.
But despite this game-changing potential, MycoTech’s recent Series A round — a respectable $9.2 million — attracted a relatively small number of investors compared to other fields in the life science industry.
“There aren’t many active VCs in this space,” says Schier. “In Europe and in the U.S. more then 95 percent of all life sciences VCs only do pharmaceuticals and medical devices; that’s it. Then maybe there are a few others, including Seventure Partners, who has developped a leadership position in Europe in the nutrition and ag field, in addition to its investing in other fields of lifesciences. Really that’s just a handful, which makes it difficult for companies like MycoTech to find good institutional investors or venture capital firms.”
Angel investors might be another source of capital, who have strong interest in nutrition and agriculture investments, but usually they have limitations on the amount of capital they can deploy. Corporate venture capital firms are another alternative, but often they have a strong corporate identity and strong own business interest that might make it difficult to align with other investors and shareholders, adds Schier.
“If the corporate interest is too strong, it could hinder the development of the startup,” says Schier. MycoTech did in fact decide against strategic, corporate investment, its chief executive Alan Hahn recently told AgFunderNews. The company prefers to keep them as potential customers of MycoTech products, rather than investors.
Seventure therefore syndicated with two other VC firms — Middleland Capital and S2G Ventures.
It was through the nutrition network of Isabelle De Cremoux, president and chief executive of Seventure Partners, that Seventure came across MycoTech and first met with the company in San Francisco in January. Seventure was immediately interested in the startup as an investment for its €120 million Health For Life Capital fund.
“We are convinced that the food and pharmaceutical industries are converging,” says Isabelle De Cremoux. “And where they overlap, there are very interesting opportunities for startups to grow. With regards to MycoTech, we’re interested in any different ways of eating food that can improve health; MycoTech indirectly decreases the use of sugar and therefore presents a health benefit to consumers.”
The Health for Life Fund is still fundraising and has commitments not just from the financial world, but also from the food and nutrition sector such as Danone, the French food company, and Tereos, the world’s third largest sugar company and many others. These strategic investors, and the firm’s belief in using nutrition for health benefits, makes a large portion of food tech startups of interest to the investor.
“Some people call it nutrition, others call it healthy food; it can take different forms,” adds De Cremoux. “Recent developments and breakthrough innovations in the microbiome present a significant game changer in both pharma and food and ag and that’s one of our drivers for investment. Different ways to process, manufacture, preserve and package food are also very interesting as well as protein alternatives.”
Image courtesy of Highland Chocolatier using naturally sweet ingredients
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