Finistere Ventures is part of the country’s rapidly growing foodtech/agritech scene, inspired in part by the success of America’s Beyond Meat
Amitai Ziv | Oct. 17, 2019 | 1:47 PM

Here’s a story any high-tech entrepreneurs can sink their teeth into: Beyond Meat, a U.S. company that has developed a product that looks and tastes like real meat using plant-based substitutes, went public in May at $25 a share. On its first day of trading the stock soared 163%, the biggest one-day gain for a share since the era. Today it trades at about $122, giving it’s a $7.5 billion market cap.

Beyond Meat’s product explains only part of the company’s success. Good timing and a good story are the other ingredients. At a time when doctors and nutritionists are warning people off red meat and the meat business stands accused of contributing to climate change, Beyond Meat lets carnivores have the burger and eat it, too, with a clear conscience.

Beyond Meat sells its ersatz burgers all around the world to leading chains like KFC and Subway and Israeli restaurants. McDonald’s has put it on its menu at some locations on a trial basis. The company’s biggest competition, Impossible Meat, has an agreement with Burger King.

Beyond Meat is one of the heist profile examples of how the world’s high-tech industry is finding its way into the world’s refrigerators and pantries. Investment is growing in agrictech, which focuses on technology to help growers, and foodtech, which is aimed at food processing.

Arama Kukutai, a partner in the U.S. agritech investment fund Finistere Ventures who was in Israel recently for the AgriFood Week conference, says that the food revolution inevitably brings the two segments together.

For example, Beyond Meat’s success has made industry giants, like Nestle and Tesco, take a closer look at protein substitutes. Those substitutes are derived to a large extent from peas, which means demand for the pea is rising. Farmers are setting aside more land to grow peas but harvests can’t keep pace with the demand.

So, explains Kukutai, agritech companies are going to have develop ways to improve the yields, to improve the quality of peas and adjust its nutritional values – all while minimizing damage to the environment. “We want to feed the world without burning it,” he says.

For investors the business is big and the competition to get into deals is still small, says Kukutai. The world food market is worth $5 trillion but the last two years just $3 billion in venture capital has been invested in agritech. That compares with $50 billion put into financial technology.

The agritech/foodtech scene is also taking off in Israel. There are some 350 startups in both fields, engaged in developing technology for everything from field logistics and packaging, waste prevention and sugar and protein substitutes.

Startup Nation Central, an NGO tracking and encouraging Israeli tech, says that 124 companies were formed in 2016-19, more than in the previous six years. SNC says the industry is still in its early stages — 30% of Israeli startups are in the “bootstrap” stage, meaning they have no external financing. Only seven percent have conducted a second round of financing, signaling them as relatively mature startups But valuations are rising, it adds.

In the first half of 2019 alone, there were 50 investment rounds in agritech/foodtech totaling $100 million, the same value as in all of 2018. Compared with 2015, the number of rounds has doubled and quadruped in money terms. On Tuesday Israel Chemicals said it planned to invest $20 million to expand its manufacturing capacity and research and development support for its Rovitaris alternative protein technology.

Developed by ICL, Rovitaris is a technology that supports the production of allergen-free plant-based food. The product can be adapted to virtually any meat, poultry or seafood substitute application to improve taste and texture, the company said.

Small fund

Finistere was founded in 2005 in San Diego to focus on agriculture, One of its two founders, Kukutai was born in new Zealand to a Scottish woman and a Maori man. He has degrees in agronomics and law and lives in the United States.

Finistere is a small fund – it raised $30 million for its first fund and four years ago $130 million for a second one – but its investment spans the globes, including Israel. Since 2015 it has had two local venture partners — Eyal Rosenthal and Gil Meron.

Meron notes that Kukutai’s history with Israeli agritech predates Finistere, “He was here in the 1990s and saw the advanced technology developed by Afimilk of Kibbitz Afikim,” Meron says. “Later he wanted to invest in a New Zealand company and found out the entrepreneur behind it was an Israeli. With success stories like Netafim in drip irrigation, Zeraim Gedera, which was bought by Syngenta, and others, no one had to explain to him that Israel was a leader in the area.”

Rosenthal and Meron first met Kuktai in 2015 after the two Israelis had worked on an agritech project for the World Bank’s investment arm that involved mapping all the major players in the global industry.

Since then, the fund has made three investments in Israel, two in startups. One is in CropX, which has developed a sensor the is put into the ground to receive information on irrigation status, quality of fertilizer and other parameters. The startup has raised $24 million.

The second is Taranis, one of Israel’s leading agritech startups which uses field imagery from satellite images, planes and drones and processes it with artificial intelligence technology to identify crop health issues. The company has raised $30 million.

The third investment is on another scale: In June Finsetere was part of the Sparks consortium led by the Israeli food company Tnuva and including Tempo Beverages and the Jerusalem-based equity crowdfunding company OurCrowd, that won a government tender to develop an incubator for food-tech startups at an estimated cost of $100 million.

Israeli companies represent 16% of Fininstere’s portfolio of 12 companies but that number is expected to grow.

“It’s like with General Motors, which has operations in Israel but doesn’t expect to find its next growth engine here because that will happen in Germany, Japan or Detroit. The same goes for agriculture,” says Meron. “We don’t have the resources or the land and the amount of water is limited, but something special will happen here.”

As he explains it: “Someone coming from the [Israel Defense forces technology unit] 8200 is no better than a fellow from [the U.S. intelligence agency] NSA. A scientist from the Weizmann Institute of Science is no better than one from MIT and an engineer from Israel Aerospace Industries is no better than one from Boeing, but in the U.S. they never meet. They stay in their own circles. Here, they’re either cousins or from the same neighborhood and they get together—which leads to innovation.”