• 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 focuses on Series A and B stage startups in five categories in the US, Europe and Israel: ingredient innovation, alternative protein technologies, digitalization and food systems 4.0, nutrition and health, and alternative agricultural 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 cultured meat startup Vow; UK-based cocoa-free chocolate maker Win-Win; Austrian startup Kern Tec, which upcycles fruit seeds into higher value products; and personalized nutrition co InsideTracker.

An ‘incredibly disciplined investment thesis’

Although it is a challenging time to raise money, founder and general partner Nadav Berger shared AgFunderNews that PeakBridge “has always been incredibly disciplined in our investment thesis. We invest in B2B, scalable, proprietary technologies. We have never bought into the plant-based B2C hype, but if we can invest in technologies that will make meat and dairy alternatives cleaner, tastier or with better texture, then this is what we want to capitalize on.”

Peakbridge remains focused on the five pillar categories mentioned above, says Berger: “But we are seeing a shift in the relationships within these five pillars, and the pillar that is increasingly attracting investment is digitalization and the intersection of AI and food. Yes, it’s trendy, but it happens. We now have at least six companies that are heavily supported by AI.”

AI in food and agriculture

AI has the potential to transform every aspect of the food industry, from driving supply chain efficiency to accelerating the R&D process, Berger said. But it also fits well with venture capital financing models and timelines, which some commentators argue are not inherently well suited to the agri-food sector, which deals with unpredictable biological systems, requires costly physical infrastructure and distribution networks, and operates in a complex regulatory environment. , he noticed.

“All of us in the food tech world need success stories and exits that we can share. And that’s why this fundraising is exciting, because even investors who are more cautious and less enthusiastic about food tech can see the potential (of AI in food) and see investment models to compare it to.

“So if a company of ours reaches X million ARR (annual recurring revenue), it can 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 that helps food and beverage companies from PepsiCo to Nestlé mine data from restaurant and delivery menus, online recipes and social media posts.

This helps customers develop actionable insights about emerging trends at the click of a button, and create products that better align with what consumers want, said Berger, who noted that the failure rate of new CPG products remains alarmingly high, in part because existing market research Tools tell you what’s in the rearview mirror, rather than how to meet future, unmet consumer needs.

“Consumers are changing faster than the industry is developing new solutions, so you want those real-time insights,” he said. “But AI also allows us to look at a much larger data set, and not a report based on what a few hundred people think. We are talking about continuously viewing billions of data points in real time.”

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

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

“For example, we know we need to solve the vanilla supply problem (the demand for real vanilla far exceeds the supply), and we think Vanilla Vida (which has an indoor growing platform for vanilla plants with significantly higher yields of vanillin and a dramatic yield ) shorter curing time) addresses a pain point and presents a solution.”

Another example is Britain’s Win Win, which uses carob and barley to make chocolate alternatives that address the mismatch between supply and demand for cocoa, Berger said. “When we invested two years ago, we didn’t have a crystal ball and we never imagined that cocoa prices would rise by 280%, but we could see that this was a sector 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 dairy companies and they are looking for alternatives (to supplement their animal ingredients). That is why 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 the Mediterranean Food Lab (which uses solid-state fermentation to create flavor ingredients that claim to enhance the sensory experience of eating plant-based foods) transform).

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

While customer retention can be a challenge with personalized nutritional offers, InsideTracker has built a robust and loyal customer base with very little churn, Berger said. And while the early adopters may be the more affluent and engaged few, the beauty of the technology is that it can be scaled to reach a broader audience, so it could eventually impact public health, he asserted.

‘This is the perfect time to invest’

So where are we in the current down cycle, and how has the agri-food tech investment landscape evolved since the heady days of 2021 and early 2022?

According to Berger, non-specialist investors who jumped into sectors like alternative proteins and vertical farming and pushed up valuations just to burn their fingers have now left the space, and valuations have fallen accordingly. “So we saw that these generalist investors, who thought food tech was sexy, paid a premium price and then realized that you have to produce and sell (physical) products and deal with a complex regulatory environment (if you want to succeed in the agri-food industry) .

“We are now seeing good companies coming back to us that we saw a few years ago, with about 50% of the valuation they asked for at the time. But if you have the resources, now is the perfect time to invest because we are back to a normal world where valuations are based on multiples, revenue and profitability.”

He added: “Ultimately, we remain positive as foodtech is here to stay as the problems we are trying to solve have not gone away. At Peakbridge we’re not smarter than anyone else, but we think we can add real value (to portfolio companies) because we have decades of operational, hands-on management experience, as well as that experience in venturing and food tech, plus we have major strategic Partners from the food industry.”

Read further:

Khosla and Friedberg strike a positive tone during agrifoodtech financing winter: ‘Exceptional founders have nothing to worry about’

‘Incremental’ innovation, a warning about the drive for profitability and investors ‘afraid’ of portfolios: heard at World Agri-Tech

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