Recession Run: Alt protein to be $200b industry this decade, says Good Startup

The funding winter is here. News of layoffs and troubles in startups have been cropping up. In this Q&A series, we talk to Southeast Asia’s investors to suss out what opportunities they see, what strategies they’re implementing, and what areas of investment they’re looking at in the next few months.

Despite seeing global funding for alternative proteins peak at US$1.7 billion in the first half of 2022, the industry still has a ways to go. Plant-based meat sales have recently flattened in the US and Singapore, while listed industry firms in the segment, such as Oatly and Beyond, lost half their market value last year, signaling a slowdown in the sector.

Good Startup managing partner Jayesh Parekh. / Photo credit: Redhill

However, Jayesh Parekh, managing partner at alt protein-focused VC firm Good Startup, remains unfazed, as he tells Tech in Asia that it is still “very early days” for the vertical.

“What I see in terms of the amount of money going into the sector, with the number of founders who are coming online now, the deal flow is incredible. I believe that the client base for plant-based will take this year and next year to restore,” he says.

Parekh adds that the market for fermentation-based meat will grow over the next three years, while that for cell-based meat will strengthen over the next five.

Since being founded in 2021 and closing its US$34 million first fund in 2022, Good Startup has already invested in 25 startups and deployed half of this fund.

Having run several funds at Jungle Ventures and Aavishkaar Capital, Parekh came out of retirement to co-lead this project, which he says lies at “the intersection of economics, technology, and impact.”

Here are more insights from Parekh on Good Startup’s future plans, the state of the global alt protein industry, and details on when he believes the funding landscape will normalize.

Globally, alt protein sales flattened. Does this worry you as an investor in the space?

Parekh: It’s a bit like the internet of the mid-90s. There were a lot of companies out there, and a mismatch between capital and startups, with relatively limited opportunities.

It’s very early days. Looking at the research and product development that’s being done, and the growth funding, I am not worried. Yes, pricing is high, and because of the recession, people can’t afford as much as before, but this is just a six- to 12-month blip.

In the future, people will start looking at a hybrid of fermentation, cell, and plant-based products, and the taste and price will improve. If you compare it to software, all alt-protein products are at their 1.0 or 2.0 version. I am not worried that it will taper off as an industry.

When you look at all the alt protein categories: seafood, chicken, and especially alt dairy, it’s just incredible. In the US, the adoption of these products is still on track when you look at the overarching sales number.