Fundraising, burn rate, and pricing: What do industry experts say?

Fundraising is one of the biggest challenges the alternative protein industry is currently facing. Amid high global interest rates and market uncertainty, many investors scaled back in 2023, including in the alternative protein space. This reality makes it all the more critical that startups exercise strong control over their burn rate. Additionally, the high prices of alternative meat products—which currently come with a 35 percent premium in Southeast Asia—are keeping mainstream consumers away, further exacerbating fundraising challenges.

To help startups better navigate these choppy waters, we spoke to founders and investors to see how they are responding to these challenges, and hear the advice they have for others finding themselves in a similar boat. Below are some of the key insights and suggestions they offered.

Companies need to adapt to fundraising hurdles

Respond to market expectations

Mihir Pershad, CEO and founder of Umami Bioworks, says: “Don’t delude yourself into thinking the market is in a different place than it is. Respond to what people want to see right now and reformulate your investor materials to prioritise those messages accordingly. The reality is right now, people want to know your strategy for generating revenue within 12 months to de-risk the business. And that’s the story you should be telling even if you would rather focus on your vision for five years from now.”

Demonstrate as much proof as possible for investors 

“Given the current challenging environment, investors are looking for as much proof as possible,” says Andrew D. Ive, founder of Big Idea Ventures. “Is it just an idea, or have you engaged with 100 different potential customers, or already gained one or two customers, or started generating revenue, or got a product in the market that’s being tested? It matters where companies are in proving that their business is real and has significant potential.”

In other words, there’s still plenty of money out there, but companies will need to prove their viability more concretely than they used to before investors are willing to take the risk. 

Focus on investors who are the right fit for your particular area

Ive suggests being a sniper versus spraying and hoping that something hits the target. “Focus on people who have capital and are interested specifically in [your] area instead of taking a blanket numbers approach, where you reach out to 300 people in the next three months and hope that somebody will decide to invest.” 

Mathieu Van Giel, founder of cell culture startup Wasna, concurs. “When seeking VC investment, it’s vital to understand that VCs operate within a specific investment thesis, which outlines the types of businesses and industries they are willing to fund. For startups developing technologies or platforms that serve multiple industries, alignment with a VC’s investment thesis becomes crucial. Many VCs prefer companies to concentrate on a single industry that matches their investment focus, believing this approach enhances the chances of success and aligns with their expertise and network. If your business is designed to accelerate various industries, finding VCs that appreciate and support this multi-industry approach is essential.” 

Explore options beyond VC funds 

“You do not necessarily have to raise funds from venture capital,” Van Giel adds. “There are other options. In fact, the most suitable option is the one we eventually got, which is grant funding.”

Leverage media, social media, search, and AI platforms

Ive suggests using publications like Green Queen, vegconomist, and AgFunder, all of which regularly publish information on who’s just received an investment and who has invested. He also suggests using PitchBook and Crunchbase, which list investments across various categories.

LinkedIn and AI platforms like ChatGPT can also be used to identify relevant investors. “If you ask the latest version of ChatGPT, ‘give me the names of ten venture capital partners at venture capital firms who have made alternative protein investments in the last 24 months,’ it will provide a pretty comprehensive list of the people that you ought to be talking to,” Ive says.

“You’ll be surprised at how helpful meaningful interactions on LinkedIn posts can be for networking,” says Simon Newstead, founding partner of Better Bite Ventures. “When an investor makes a post, having some kind of value-add interaction through that post costs nothing, just a bit of time and attention. It’s a way to build a connection.”

Similarly, stay up to date with industry reports, investor databases, blogs, and podcasts to know who is talking about what and where their current interests are, to get a better indication of whether they could be a potential investor. Nick Cooney, managing partner of Lever VC, also advises startups to be smart about using the attendance lists at relevant conferences, to not only look up attendees and speakers, but also try to pre-arrange meetings with potential collaborators.

Jackfruit gyoza from KARANA

A warm introduction is worth ten cold emails

Newstead says that a key part of a founder’s job is to constantly build relationships, not just when they need the money, but in advance. By allocating 10 percent of their day to building, growing, networking (online and offline), and maintaining relationships, they might be able to open doors that would otherwise be closed. “The best conversations we have with founders, I think, are two-way conversations. It’s not just that the startup is pitching, and the investors are just kind of like a judge assessing. Ask the investor for their opinion, and try to make it interactive and instructive. This also helps in relationship building.”

He also suggests getting to know the connectors and super-connectors (both individuals and organisations) who may not personally invest but are well-known and respected within the industry. An introduction facilitated by them can carry much more weight with a potential investor. 

If you have to resort to cold emails, Blair Crichton, co-founder of jackfruit meat startup KARANA, recommends targeting associates rather than partners, as it’s part of the associates’ jobs to be scouting and looking for new companies to bring in. 

Prepare well, converse well, don’t just pitch

“It is important that companies really understand the investors,” Newstead says. “Who are they? What are they looking for? What have they done before? How do they work? The difference between founders who are well prepared on this and those who go in without preparation is very apparent.”

Prepare your pitch deck well

Gautam Godhwani, managing partner of Good Startup, notes that there is incredible talent in the alternative protein space, which means the bar is high. An effective presentation says: “Here’s the problem. We’re solving it with the following solution. Here’s our pathway to the market and the financials that result from it. This is the team that’s going to do it all.” […] “You would be surprised at the number of companies that don’t put these pieces in place.”

Cooney adds that there should also be a focus on the pitch deck’s design element. “Very often, the deck is the first thing most investors see, and that is where they form an initial impression. There’s a wide divergence in the quality of decks. Many are on the low end of quality, sometimes because the graphic design is simply poor or not great.” That’s a missed opportunity for a great first impression. 

Be aware that fundraising is a time-consuming process

The Mills Fabrica team highlights that they see founders spend a lot of their time fundraising. Time management is key to ensuring ample time to build the business as well. They suggest adopting digital tools to better structure and prioritise fundraising efforts. Having an organised system can allow founders to prioritise and follow up on conversations with investors who are more closely aligned and keep those relationships warm. Additionally, having a regularly updated set of materials well-prepared on top of the pitch deck, such as a list of investor FAQs, can also save time in due diligence processes.

They add that for startups with co-founders, clearly delineating roles and responsibilities between who is doing the fundraising versus managing internal business operations will also ensure efficient use of founders’ already-limited time.

Jackfruit ngoh hiang from KARANA

Control your burn rate in a challenging fundraising environment

Build your business as if the latest round of funds raised was your last

That’s Crichton’s method to control costs and run lean. Too often, companies spend their funds relatively quickly with the confidence that they can always raise more money later. Green Queen founder and editor-in-chief Sonalie Figueiras says she’s seen that mistake over and over. “Hold on to the runway you have and extend it. Become very focused on milestones and profitability to last as long as possible without raising.”

Evaluate early hiring necessities

Hiring too many or too senior people, such as business and sales operations management staff, significantly increases your burn rate. They are helpful, but probably not worth the cost early on, before product-market fit is established.

Newstead adds that “The founder is the one who really engages with external stakeholders, skills that they can help transfer to someone hired later on when needed.” He adds that at other times, startups spend too much money on production teams. Depending on the stage, it might be better to try to outsource to an on-demand partner instead of incurring fixed human and capital costs. Once ready to scale up, that work can be brought in-house if needed.

Marketing is needed, but don’t go overboard before ensuring the fundamentals are in place

Overspending on marketing is unwise when startups are not selling products yet, don’t have their processes streamlined, or have yet to secure their supply chain. Jolene Lum, head of business development at Nurasa, says that “this time and money is better spent on ensuring that your products are within reach when you are ready to go to market. If you don’t think about that early on, all the awareness you built can be destroyed very quickly.”

Utilise shared facilities to reduce ownership costs

Lum adds that in foodtech hubs like Singapore, the Netherlands, and the U.S., there’s no need to overspend on equipment. Startups can share it in co-manufacturing facilities so that they don’t have to purchase expensive equipment that sits on their balance sheet and depreciates fast. Especially at a time when venture money is limited, using funds to build facilities without sufficient technical or commercial validation is needlessly risky. 

Plant-based chicken skewers from TiNDLE

Price is a huge barrier to entry on alternative meat products, especially in Asia

Know what your target consumers are willing to pay. 

Dominique Kull, co-founder and CEO of SGProtein, says it’s very important for startups to know where they play in the market. They can have a mass-market product at a low cost, or have a limited market at a premium price. One product cannot serve both audiences. “Think about where your costs are, and based on that cost, which markets can you actually address?”

Maarten Geraets, former managing director of alternative proteins at Thai Union, says “You need to start with the price point that the consumer is prepared to pay for your product and then work your way back to deliver to that price.” A lot of companies work on a cost-plus model, he says, which means that they determine the cost to manufacture and ship the product, and then add their margin to arrive at the final selling price of the product, which may not fit the customer/consumer. This doesn’t imply that companies can disregard their margins, but in the end, offering an outpriced product to consumers will not work, so one needs to go back and do more work to make the total offering work (including price).

Crichton agrees, “There isn’t enough of a focus on getting fundamentals right early on, especially having a decent gross margin from the beginning. That’s something we have focused on at KARANA in order to build a sustainable business, both financially and impact-wise. Many startups have struggled as they went to market with a poor cost structure and have not been able to crawl out of that, and when the funding environment gets tough, it makes sustenance difficult.”

Optimise your supply chain

One of the ways startups can better manage costs is to optimise their supply chain. This requires working with suppliers to negotiate better rates by providing them with the confidence that even though the current volumes may not be large, as current costs come down, volumes will grow, resulting in efficiencies that will further result in improved margins for both the company and the supplier. Finding the right suppliers can be a challenge, Geraets says, but it’s often well worth your time. “It requires a lot of transparency, a lot of trust, and that is not so easy … you need very strong partnerships that both parties can open up and have these conversations and trust each other. You will not be able to pull this off with every supplier, but you can possibly work with the one or two critical ones and have these conversations.”

Deliver a product that can command the price you’ve pegged it at

“Price is obviously critical in buying food,” says Michael Fox, co-founder of mushroom-meat startup Fable Food. “Depending on the customer segment, it can often be more important than taste and texture. From day one, a key part of our strategy was to have a product that we could price competitively with the meats that we’re replicating and still make a healthy gross margin.” His company decided to go with slow-cooked, pulled-meat formats specifically because such products can command a slightly higher price point than ground beef or chicken.

Then, while exploring various types of mushrooms they could use in their formulation, they mapped out a cost-effective supply chain that would work with shiitake mushrooms. This allowed them to price their product slightly below the cost of conventional pulled beef on a cooked weight basis for restaurants and simultaneously make a healthy gross margin. The ultimate win-win.

Want to take a deeper dive into GFI APAC’s business insights? Check out our latest report on Southeast Asian consumer perceptions, or reach out to our team of experts at APAC@gfi.org.