The future of food production may be on the cusp of a revolution, with the burgeoning cultivated meat industry promising to deliver animal protein without the environmental and ethical concerns associated with traditional livestock farming. However, as the industry prepares to scale up, it faces significant financial hurdles, particularly in constructing commercial-scale facilities. Josh Tetrick’s recent struggles to fund a large-scale cultivated chicken plant underscore the challenge: how to build such facilities without astronomical costs.
The Optimal Size for Cultivated Meat Facilities
Mihir Pershad, the CEO of UMAMI Bioworks, is one of the industry leaders grappling with this issue. In a recent interview with AgFunderNews, he shared insights into the optimal size for a commercial-scale cultivated meat facility. Pershad believes that the first wave of facilities should not necessarily aim for larger reactors, as the risk associated with potential contamination in massive reactors could outweigh the benefits. Instead, UMAMI Bioworks aims to produce profitable production from 2,000-liter reactors for premium species, with plans to eventually scale up to 10,000-liter reactors.
The company’s focus on premium, endangered species like eel and grouper, which fetch high market prices, allows for smaller-scale, more manageable production that can still be profitable. The strategy of using smaller reactors also means less capital expenditure and higher productivity per dollar invested, a crucial consideration when funding is a major obstacle.
Financing the Future of Cultivated Meat
The question of how to finance these ambitious projects looms large. Pershad points out the difficulties in creating a capital structure that leads to a viable exit strategy, especially when large sums are required both pre-revenue and for factory construction. The challenge becomes even more daunting if venture capital funds shy away from capital expenditure projects.
UMAMI Bioworks has taken a multifaceted approach to funding, securing over $2 million in non-dilutive funding, including a grant from the Singapore Israel Industrial R&D Foundation (SIIRD) in collaboration with Steakholder Foods. This, coupled with a mix of backers ranging from Maruha Nichiro to early stage VC investors like Better Bite Ventures, has allowed the company to advance its plans.
Pershad argues that startups should not be in the business of capital expenditures; instead, they should leverage the expertise and capital of existing industry players. By partnering with large food companies, startups can benefit from cash flows that can be turned into capital investments. Moreover, securing offtake agreements or operational agreements with these companies can make it easier to obtain traditional bank debt financing.
UMAMI Bioworks’ Strategy
UMAMI Bioworks is leveraging its technology and industry partnerships to build a more sustainable and ethical supply chain for seafood. By focusing on endangered species that cannot be commercially farmed, the company is positioning itself in a niche market with less competition and potentially higher margins.
The company’s pipeline of cell lines from endangered species is designed for continuous manufacturing, which Pershad believes will allow for smaller reactors with less capital expenditure and significantly improved productivity. This approach is also tied to the company’s goal of creating hybrid products that combine cultivated seafood with plant-based proteins, which may be more feasible to scale in the near term compared to 100% cultivated products.
The New Facility in Malaysia
UMAMI Bioworks, in collaboration with Cell AgriTech, is planning to build a cultivated meat facility in the Kulim Hi-Tech Park in Malaysia. The project will be financed through a combination of government support, private investment, and direct investment from Cell AgriTech. The partnership aims to deliver a “plug and play factory in a box,” where UMAMI provides the hardware, process, and biology, while Cell AgriTech brings operational expertise.
The company is currently working on a tech demonstration in Singapore and expects to have a pilot line operational in Malaysia by early 2025, with a full-scale line following in early 2026. As for regulatory hurdles, UMAMI Bioworks is in discussions with the Malaysian Ministry of Health and is working with Halal processors to ensure compliance with local food laws.
The Path Forward
The cultivated meat industry is at a critical juncture, with technological advancements and environmental imperatives pushing it towards commercial viability. However, the financial challenges of building the necessary infrastructure cannot be understated. As companies like UMAMI Bioworks navigate these waters, their success or failure will have significant implications for the future of food production and sustainability.