Israeli startups rank second after US in alternative protein investments in 2022

Israel ranked second after the US in alternative protein investments in 2022, with local startups in the field raising some $454 million in capital, according to a report published Sunday by the Good Food Institute (GFI) Israel, a nonprofit organization that seeks to promote research and innovation in food tech.

The institute estimated that the $454 million in investments in alternative protein, a segment of the vibrant Israeli food tech industry, last year accounted for about 15% of the global capital raised for the sector worldwide, and was second only to the US. In third place came France, drawing $184 million in investments, followed by Singapore with $170 million. It was, however, down from the some $623 million in investments drawn by local startups in the field in 2021.

Last year, 60% of all investments in Israeli food tech companies went to alternative protein startups, GFI Israel said.

The alternative protein sector includes plant-based substitutes for meat, dairy, and egg, cultivated dairy, meat and seafood made from cells, and various fermentation processes and products. Cultivated protein startups and fermentation tech startups often overlap.

“What we have seen in 2022, is that the sector is becoming a global arms race, so to speak — a global protein race,” GFI Israel CEO Nir Goldstein told The Times of Israel.

“We have seen large countries follow along with President Biden in the US, who ordered to put together a strategy to bolster biotech, including alternative proteins. China has a five-year strategy, and smaller countries like the UK and Denmark have made significant investments, and this raises the question of what is the future of Israel after we got an edge now as a startup nation? Can we become a scaleup nation?

“We believe that food needs to be manufactured as close as possible to where it is consumed for sustainability and economic reasons but Israel can definitely become a center for both R&D and industrial manufacturing.”

Nir Goldstein, CEO of the Good Food Institute (GFI) Israel, a nonprofit organization that seeks to promote research and innovation in food tech. (Courtesy)

In fermented proteins, which use microorganisms such as bacteria and fungi, Israel is also second place to the US, taking 18% of global investment in this field with $147 million in investments in 2022, according to the report. In the cultivated meat subsector, Israeli companies drew just over $105 million in investments, accounting for about 12% of total investments in the space worldwide in 2022, and also second to the US.

In the plant-based alternative proteins sector, Israeli startups attracted $200 million in capital or 16% of investments globally.

During the course of last year, 12 local startups were founded or newly entered the alternative protein space, four of them in the cultivated area, four plant-based, and four fermentation-derived.

Over the past two years, alternative protein startups raised more than $1 billion in funds from venture capital firms.

In the report, it was noted food tech investments in Israel were impacted the least by the market slowdown compared to other tech sectors. While private investments in the tech sector in Israel dropped by 42% year-on-year, investments by venture capital firms in alternative protein startups declined by 20%, from $553 million in 2021 to $445 million in 2022. The amount of capital raised by alternative protein startups via the stock market slumped 88% from $68 million to $9 million during the same period.

“During 2021 and most of 2022 the issue of national food security has become more and more dominant in the field of food tech, due to the crisis that we have seen in Ukraine, and everything that has to do with the pandemic, and swine flu, etc.,” said Goldstein. “We have seen governments and, following that, investors thinking about how we can prepare ourselves for the future where price rises in global food supply will be more and more rapid and harsh.”

“Governments and investors are looking for more resilient and more efficient ways to produce proteins,” he added.

Israeli startup Remilk uses a yeast-based fermentation process to produce animal-free milk proteins that, the company says, are indistinguishable in taste and function from cow milk proteins, but free of lactose, cholesterol, and growth hormones. (Victor Levi)

The most notable deal in the Israeli plant-based protein sector in 2022 was the $135 million investment in Redefine Meat, a maker of 3D-printed plant-based meat products, to fund production lines in Israel and the Netherlands, as well as expand its partnerships with restaurants and eateries.

The company’s products include animal-free lamb and beef cuts, burgers, sausages, lamb kebabs, and ground beef, and are sold in some 200 restaurants and establishments in Israel and Europe.

The second-largest investment raised by an Israeli food tech startup was $124 million for Remilk, a developer of animal-free milk and dairy. The company uses a yeast-based fermentation process to produce milk proteins that, the company says, are indistinguishable in taste and function from cow milk proteins, but free of lactose, cholesterol, and growth hormones.

As the downturn in financial markets drove declines in total investments in the Israeli tech sector during 2022, the biggest positive trend was experienced by early-stage or seed startups, which saw an increase in investments. A similar trend was also observed for seed investments in alternative protein startups, which grew 130% in 2022 from the previous year, GFI Israel said.

Many of the technologies being used in the food tech sector are firmly based on academic research. The technologies behind two leading Israeli cultivated meat companies, Aleph Farms and Future Meat, are founded on bioengineering research developed by their respective co-founders, Prof. Shulamit Levenberg of the Technion – Israel Institute of Technology and Prof. Yaakov Nahmias of the Hebrew University of Jerusalem. Both are prominent academics in the tissue engineering sector.

In 2022, the Israeli government declared food tech among the top five new national priorities for significant investment over the next five years. Earlier this year, the Israel Innovation Authority announced a plan budgeted at up to NIS 50 million to build an R&D hub for cutting-edge fermentation technology of microorganisms, such as yeast or fungi, to eventually produce alternative proteins on a larger scale and uphold the country’s edge in the field.

Last year, the Israel Innovation Authority granted $18 million for what it dubbed the “world’s largest” consortium for cultivated meat development, made up of 14 companies including leading Israeli food tech startups, and 10 universities and research institutions.

Over the past decade, the Israel Innovation Authority has allocated NIS 230 million in grants for the food tech industry, with over NIS 140 million spent on alternative proteins.

Moving forward, Goldstein suggested that an updated national policy plan for food tech and alternative proteins is needed, like the Israeli government has done, for example, for renewable energy.

“In order to stay competitive as large global governments invest a lot of money to try to get Israeli startups to open manufacturing sites overseas, we need to move quickly and make sure that we have plans for the academic and startup sector that is experiencing difficulties given macroeconomic conditions, and that we have a plan for industrial incentives and regulation,” Goldstein said. “Those are the four pillars of that the government must address in the coming months.”

Goldstein proposed that the Israeli government could offer state-backed loans to allow startups in the sector to invest the needed “hundreds of millions of dollars” in capital expenditure to build factories.

“That would allow the startups to overcome the relative shortage in venture capital-backed investments in today’s market conditions,” he said.

Although Israeli companies in the field continue to scale up, a majority move abroad, according to the GFI Israel report. Already looking elsewhere, Remilk in April announced plans to open the “world’s largest” facility for the production of cow-free milk in Denmark.

“R&D in the field of food tech, and alternative proteins in particular, is continuously growing in Israel,” said IAA CEO Dror Bin. “Going forward, the greatest opportunity is to develop scale-up technologies to production plants and expand our reach to consumers in the global market.“