Funding the Build: financing alternative protein commercialization

The alternative protein sector, similar to many industries, has faced significant funding declines since 2021-2022. Variation in funding is normal, especially for emerging sectors during periods of fluctuating global interest rates. However, the departure of venture capital and shrinking cash runways have created tough conditions for alternative protein startups.

Although funding at all stages is a challenge, scaling to commercial manufacturing poses a specific bottleneck. This is not unique to alternative proteins, but scaling novel foods introduces complexities not faced by industries with established, commoditized markets.

Closing this funding gap is critical for companies to move from early innovation to mainstream adoption. Only then can they fulfill their potential to sustainably, securely, and safely feed a growing global population.

With this in mind, GFI recently published Funding the Build, an open-access financing guide available on the GFI website (a companion webinar is on GFI’s YouTube channel). The report synthesizes insights from an industry working group, research, and more than 30 interviews with capital providers, sector experts, and companies.
It outlines today’s financing environment for building manufacturing facilities and offers a roadmap to unlock further capital.

The question is not if the industry will overcome commercialization challenges, but how long it will take and how effectively we will lay the groundwork for successful companies

Before considering funding options, companies must first decide whether to build a self-owned facility or partner with a co-manufacturer. Investors increasingly favor asset-light expansion models, making this a crucial decision. The report explores the pros and cons of each approach.

For those opting to build their own facility, the report reviews accessible capital sources, such as US government programs like the USDA’s B&I Loan Guarantee Program, sovereign wealth funds, equipment leasing, strategic manufacturing partnerships, and venture capital. It also explains why options such as project finance and long-term offtake contracts may not be viable for the alternative protein sector.

Although equipment leasing and sovereign wealth funds offer partial solutions, accessing large pools of debt from governments and commercial lenders is key to drive scale at an industry level. While these sources are largely unavailable today, the report identifies emerging funding innovations within the industry, such as market shaping, blended finance, institutional purchasing, and new US government opportunities. GFI is actively working to catalyze blended finance for alternative proteins. Foundations, development finance institutions, blended finance intermediaries, investors, and companies interested in collaborating are encouraged to reach out to GFI by emailing corporate@gfi.org.

For early-stage companies not yet ready to scale manufacturing, there are proactive steps that can be taken:

• Recognize that while venture capital has a role in the funding mix, it is not a long-term solution for facility construction. Improvement in the funding landscape
will not change this;

• Develop a clear, defensible roadmap to scale and profitability – every investor will demand this;

• Prioritize commercialization planning early. This helps identify target markets, tackle unit economics, and hire the right talent at the right time;

• Plan for raising to be time-consuming and non-linear.

Although alternative proteins currently account for a small share of the global meat, egg, dairy, and seafood markets, progress across science, policy, and industry is promising. The question is not if the industry will overcome commercialization challenges, but how long it will take and how effectively we will lay the groundwork for successful companies.

Through collaboration, governments, foundations, strategic companies, and investors can secure the necessary funding to unlock the transformative potential of alternative proteins. Now is the time for creativity, collaboration, and strategy to propel the industry forward.

Laine Clark is Senior Corporate Engagement Manager, Innovation at The Good Food Institute, the international nonprofit working to shift the global food system to options that are better for the planet, people, and animals.This article is republished from the Q4 2024 edition of Protein Production Technology International, the industry's leading resource for alternative proteins. To subscribe to all future editions, please click here