Nestled among Internet startups in the bustling South of Market neighborhood of San Francisco is an innovator of another sort. The year-old Hampton Creek Foods’ 2,400-square-foot office is home to a state-of-the-art lab, with a stainless-steel triple-shaft mixer, restaurant-grade dishwashers, and 17 employees milling around in white lab coats. They’re developing a plant-based substitute for the hen-born egg that’s indistinguishable in taste and price from the real thing.
That, it turns out, is hard work. “We definitely have a new respect for eggs,” says Megan Clements, a research scientist, as she watches a fellow food scientist squeeze oil into a vat of company-made eggless mayonnaise. “Every day we are challenged to get better to make up for what is not there.”
Hampton Creek is one of several venture capital-backed startups trying to engineer dietary alternatives that are better for the planet and healthier for people—not to mention animals. The so-called clean-food movement follows in the wake of the high-tech industry’s disastrous bet on clean energy, which resulted in a crop of solar, wind, and fuel-cell companies whose fortunes fell dramatically amid the proliferation of cheap natural gas and low-cost competition from the Chinese.
Over the last year, two of the most esteemed VC firms on Sand Hill Road, Kleiner Perkins Caufield & Byers and Khosla Ventures, have backed nearly a dozen startups trying to engineer healthier and cheaper alternatives to eggs, chicken, cheese, salt, and candy. The companies, whose creations are subject to FDA regulation, “are trying to replicate the sensory experience of proteins that we have all eaten,” says Amol Deshpande, a general partner at Kleiner Perkins who joined the firm from the agriculture giant Cargill. “It’s not just fake meat. The goal is to have a no-compromise solution.”
At a Khosla Ventures conference for investors late last year, Josh Tetrick, the 32-year-old CEO of Hampton Creek, gave Bill Gates and Tony Blair a blind taste test. He pitted muffins made with real eggs against those made with his egg replacement, called Beyond Eggs. Neither could tell the difference (nor could this reporter in a later test). The ingredients in the faux egg mix include peas, sunflower lecithin, canola, and natural gums extracted from tree sap.
The company’s food engineers laboriously test combinations of their ingredients, trying to match the egg’s taste and its functions as a thickening agent and emulsifier in baked goods while also making the substitute healthier and with a longer shelf life. Tetrick says he’s talking to a Fortune 500 company that he won’t name about using plant-based eggs for its sauces and dressings.
Beyond Meat, a two-year-old company based in Los Angeles, is making soy-based chicken strips based on formulations developed by two professors at the University of Missouri. Unlike previous soy-based substitutes, Beyond Meat’s come remarkably close to replicating the taste and texture of the genuine article. Last summer, the company received an undisclosed investment from Kleiner Perkins and Obvious Corp., an investment vehicle started by two of Twitter’s founders, and the meatless strips went on sale at Whole Foods Market (WFM) outlets in Northern California.
Another target of the venture capital-backed foodies is salt, a culprit in cardiovascular disease. Minneapolis-based Nu-Tek Salt, a Khosla-backed startup founded by two veterans of packaged foods giant ConAgra (CAG), has devised a formula that uses a mixture of sodium chloride (aka salt) and healthier potassium chloride, another naturally occurring mineral. The salt substitute is about 10 times more expensive per pound than pure sodium chloride, and it can taste metallic, but Nu-Tek is trying to ride the wave of publicly announced salt-reduction efforts by food companies like Unilever (UL), Sara Lee (HSH), and Kraft Foods (KRFT). The startup, which declined to comment on whether it has deals to supply any of those companies, just built a factory in Fargo, N.D., and CEO Tom Manuel predicts $10 million in sales this year.
A few of these companies have ambitious plans to change more than one aspect of our diet. Unreal, a startup based in Boston, entered the $30 billion-a-year candy market with Unjunked Candy, a line of low-sugar alternatives to popular confections like M&M’s. The rival brand is now being sold in some Walgreens (WAG), CVS Pharmacy (CVS), and Target (TGT) stores. Unreal, which has received funding from Khosla, plans to move into snacks, soda, and breakfast cereal soon as well. The founder of a startup called Sand Hill Foods, Patrick Brown, told NPR last year that his company wants to “produce stuff that will compete by being substantially cheaper and every bit as good and essentially indistinguishable to a consumer who loves meat or dairy.”
The venture capitalists behind these startups believe that climate change and the planet’s dwindling natural resources will put more pressure on the food chain and that the food industry will require sustainable alternatives. It sounds reasonable, but venture investors placed similar bets on failed cleantech plays Solyndra and Fisker Automotive. The clean-food startups will face a different set of challenges, including the reluctance of consumers to give up familiar dietary fare.
Speaking about his company from the Mayo Clinic, where his father is recuperating from a heart operation, John Burns, CEO of Unreal, says consumers will be forced to reconsider what they put into their bodies. “I’m acutely aware right now of the need to move to better and healthier eating, both from a business standpoint and personally,” he says. “This is a macro trend that doesn’t change.”
The bottom line: Venture capital firms are funding eco-friendly food startups in the hope that they’ll fare better than their greentech investments.
