FOOD FOUNDERS raises €4 million with a different answer to food-tech’s funding problem

FOOD FOUNDERS Studio has raised €4 million (US$4.7 million) to build its next food-tech companies, with CEO and co-founder Giacomo Cattaneo arguing that some of the sector's recent funding difficulties can be traced back to decisions made when companies were first created.

• FOOD FOUNDERS Studio has closed an oversubscribed €4 million (US$4.7 million) funding round
• The Zurich venture studio plans to build two more companies over the next two years after launching SentiaNova
• CEO Giacomo Cattaneo says foodtech's funding difficulties partly stem from companies being created around technologies before their customers were identified

“The funding problem is partly a symptom,” Cattaneo told Protein Production Technology International. “When capital was cheap, a strong technology and a big market slide were enough to raise. When money got tighter, investors started asking who is buying this and at what price. Too many companies couldn't answer, because few had asked that question when they were founded.”

FOOD FOUNDERS starts with conversations with food and beverage manufacturers about problems they want solved. It then looks for technology that could provide the answer, assesses whether the economics and IP stack up, and recruits a team to build a company around it.

That sounds straightforward. Cattaneo says it is often anything but, not least because researchers can have little visibility of the problems manufacturers are dealing with.

“It takes a lot of efforts to connect and exchange with industry players, identify the problems and fully understand them,” he said. “Manufacturers rarely talk about their problems in public, and most researchers never sit in a room with a plant manager or a procurement team. So the problem side stays invisible, and people fill the gap with assumptions.”

Researchers are also rewarded for novelty, Cattaneo noted, rather than for developing something a factory will eventually buy. When an inventor becomes a founder, the starting point for the business is therefore likely to be what has already been developed in the lab.

“When the problem and the route to market exist on day one, everything else gets easier: what you develop, how you price it, who you hire,” he said. “We built the studio to give every company that starting point.”

The studio has scouted more than 100 technologies, with nine progressing into validation. Its first company, SentiaNova, is developing technology to remove unwanted off-flavors from plant proteins at source rather than masking them in the final formulation.

So what happened to everything else? Some technologies remain on FOOD FOUNDERS' radar, with the studio continuing to support researchers on areas such as IP strategy, business development, industry connections and value proposition. Others simply do not make the cut.

A technology might work but solve a problem manufacturers will not pay enough to fix. It might be too early. FOOD FOUNDERS wants to see a technology working at lab scale with real food materials before committing.

Cost and scale-up questions start immediately. “In the first conversation,” Cattaneo said. “They aren't the less exciting questions for us. They decide whether there's a company at all.”

At that stage, FOOD FOUNDERS wants a rough idea of whether the process will require new equipment or fit into an existing line, what yield losses might do to margins and whether regulatory approval could add years and significant cost. Technologies that progress into validation are subjected to a more detailed cost model, with input from people who have run industrial plants.

SentiaNova's CTO, Roi Wurgaft, spent 26 years building plant protein facilities. Cattaneo said that experience helped shape a process that adds a pre-treatment step rather than requiring manufacturers to build a new plant.

The company has also been testing the economics alongside the technical performance. Manufacturers have seen formulation-cost savings of around 15% for particular applications, according to Cattaneo.

Off-flavor was a problem FOOD FOUNDERS knew well. “Our own experience with plant-based products as consumers,” Cattaneo said. “We suffer from it, as we would love to see better plant-based alternatives in the supermarket. But that was not only an egoist need, we know the pain of the industry when it comes to formulating tasty products with plant ingredients across many applications.”

Other pieces of the business case were already in place. Demand for protein is rising, whey capacity is constrained, Europe is encouraging greater legume cultivation and processing capacity has already been built.

“It was simple, cost-effective and had no regulatory barrier,” Cattaneo said. “You rarely hear all three about an early-stage food technology. That's when we knew there was a company there.”

Manufacturers do more than provide FOOD FOUNDERS with its shopping list of problems. Once the studio has found a technology it can put in front of them, they can help determine what happens next.

“We maintain a continuous open conversation with food and beverage manufacturers about the problems they most need solved and those conversations decide what we look for,” Cattaneo said. “Once we have discovered a promising technology which we can sample, they become our first users shaping what we build from day one: the specification, the price target and the first applications.”

The new funding round, backed by family offices and angel investors, gives FOOD FOUNDERS the capital to repeat the process. Cattaneo said the plan is to build two more companies over the next two years.

Where the technology comes from is changing, too.

Universities and research institutes remain part of the search, but FOOD FOUNDERS is now looking at startups and corporate R&D programs where promising technology may have stalled or been put aside.

Cattaneo thinks there is plenty out there.

“Enough to create a few startups every year!” he said.

The studio has developed its own AI-driven patent discovery platform, which Cattaneo said has already identified IP across a range of food applications that addresses industry problems but is not being commercialized. FOOD FOUNDERS has begun discussions around several opportunities.

“Our bet is that a meaningful share of it only needs the right problem, the right investors and the right team,” he said.

Technology from a startup that has already failed gets a closer examination.

FOOD FOUNDERS first assesses the technology as it would any other. It then looks at what happened to the company behind it. Was the problem demand or supply? Was it targeting the right market? Did the business model work? Were the right investors approached? Did the founding team fall apart?

“A failed startup gives us one thing a university lab doesn't, namely evidence,” Cattaneo said. “If they talked to customers, we want to know what customers said. If the cost of making it never worked at any scale, a new team won't fix that, and we say no. If customers liked it but the company ran out of money before it got there, that's exactly the kind of second chance we're looking for.”

There have also been technologies the team wanted to work but eventually walked away from.

“Usually it comes down to one of two things,” he said. “It would cost more to make at scale than the customer will pay or the IP isn't available on terms a company can be built on.”

Cattaneo is wary of allowing enthusiasm for interesting science to influence that decision.

“What we try never to do is fall in love with the science and then go looking for reasons to say yes,” he said. “Our expert boards help here, because they look at it the way a buyer or a plant manager would, not the way a researcher would.”

Technologies that are rejected receive feedback on how they match up with what manufacturers are looking for. Some remain potential candidates for later.

“For some, that turns a no into a not yet,” Cattaneo said.

FOOD FOUNDERS is now assessing several technologies and founders as it decides what company number two will be. Cattaneo is not ready to reveal which one is leading the pack.

There are things the studio intends to do differently this time.

“The biggest lesson is about focus,” he said. “Raising for the studio while building our first venture was a big stretch for a team our size. With SentiaNova, a lot of the plumbing has now been put in place where our next ventures can greatly benefit from.”

Cattaneo also has some advice for researchers thinking about making the jump themselves. Bring in an experienced co-founder who has built a company before, he said, and make sure that person complements the inventor's skills.

Learning to become a startup CEO can take one or two years. For an early-stage business, Cattaneo believes that can be time it does not have.

His second piece of advice is considerably shorter: “Make sure you’re solving an actual problem - Scale up the demand before the production.”

And fundraising should not become the objective in itself.

For all the technology scouting, expert boards, cost modeling and patent searching involved in FOOD FOUNDERS' approach, Cattaneo said there is one question he would put to a founding team before it raises its first euro.

“Every founding team needs to answer one question before they raise a single euro: who is the customer, and what will they pay for this?” he said. “Not in a market-sizing slide, but as a named manufacturer with a named problem. Most of what went wrong in the last decade comes back to that question being asked too late.”

If you liked this, check these out...

• SentiaNova launches patented pea protein technology to remove off-flavors and cut formulation costs

• Bezos Centre unveils Sustainable Food Accelerator to fast-track foodtech startups from lab to market

• EIF backs Nordic Foodtech VC with €30 million to push agrifood technologies from lab to market