Cultivated pork maker New Age Eats closed because the company no longer had enough money to keep operating, founder and CEO Brian Spears announced on LinkedIn.
Founded in 2018, the California-based company formerly known as New Age Meats had made scientific breakthroughs and some progress toward creating viable products that were a hybrid of plant-based ingredients and cultivated meat.
But New Age Eats’ financial problems became insurmountable.
The company had little money, a fair amount of debt, no new investment dollars and no immediate path to product commercialization. Given these realities, Spears said in an interview, there was no choice but to shut down the company and repay creditors.
But Spears said the shuttering of New Age Eats does not reflect problems with the premise of the cultivated meat industry — or alternative proteins in general. Instead, the company’s problems stem from the economics of being a startup in the food-tech space.
“I know that there are a lot of people that want to write a diagnosis on the cultivated meat industry as a result of this,” Spears said. “...I think what happened to us is, again, much more a factor of the capital markets than whether this is going to be viable.”
Sebastien Pascual, director of agri-food investment at Temasek, said at a session at Future Food-Tech earlier this month that it’s unequivocally a difficult time for startup companies in the alternative protein space that rely on investor capital. There have been bankruptcies, acquisitions and shutdowns, and the financial climate has most benefited the largest and best capitalized players.
Promising beginnings to capital crunch
New Age Eats’ demise was slow in coming. In 2020, New Age Eats raised a $2.7 million seed round. Crunchbase reported that the foot-tech startup raised $32 million in its lifetime, including a $25 million Series A round in 2021.
Last summer, the food-tech company rebranded to New Age Eats and announced that it had started creating a product for market. The company was building a 23,000-square-foot pilot facility in Alameda, California, with an opening scheduled for late 2022. At the time, Spears said, the company had about 50 employees.
But problems soon appeared. The facility did not open. In January, Spears posted on LinkedIn that New Age Eats was looking to offload the facility, which was 80% paid for and 90% complete.
“[W]e’re walking away from significant investment because, well, we have to,” Spears said in the LinkedIn post.
He said last week there were still no buyers for the facility.
New Age Eats whittled down its employees and soon there was nothing left to pay its debts.
“We were making progress,” Spears said. “It’s just — what finally stopped us? The money ran out. If we can’t get investors to keep funding the project, then we can't go anywhere.”
When New Age Eats started, there were only a few food-tech startups trying to make cultivated meat. Spears, who previously founded an industrial automation company, was interested in the promise of the sector. However, many of the projections on time, cost, equipment and cell cultivation came from the pharma world.
“There was no place to go look to see if this would work,” Spears said. “There was no blueprint. …When we said, ‘Let's go do this,’ what we promised investors is … essentially, ‘This is how we'll spend your money, we'll take these steps. And this is going to be validating or de-risking whether this can ever be a thing.”
Even though New Age Eats was able to raise investment funding in 2020 and 2021, mainly for the pilot plant, Spears said the science wasn’t quite ready for scaling up to commercial product production. In hindsight, he said, it would have made more sense to have the science set before the company started fundraising for a pilot plant.
However, Spears thought New Age Eats could build the plant while the science caught up. But as the facility got closer to completion, he said, it was apparent that the science wouldn’t be ready.
At first, Spears said, the startup tried to sublease the plant, but New Age Eats couldn’t find another company with the cash to lease.
“When I posted on LinkedIn, I’m like, we really need to unload this thing, or else it’s gonna pull the whole company down.”
As the economy tightened in 2022, investors started holding their funds more tightly. Last year saw a 42% year-over-year decrease of investment dollars for alternative proteins compared to 2021, according to an analysis of Pitchbook data from the Good Food Institute.
The constricted investment funding environment drove home one of the biggest problems in the cultivated meat space, Spears said: There’s no path to revenue right now because cultivated meat is highly regulated — in the United States, no company has received full approval yet. Hence, there aren’t any product sales to buoy a company that is running low on cash. Right now, it’s all 100% investor funding.
‘Night and day’ compared to 2021
New Age Eats had been trying since July to raise enough money to stay afloat. There were a lot of good initial conversations, Spears said, but almost no follow-ups.
“If I compare the capital raising market to previous [ones], when we raised our Series A and before, it was night and day,” Spears said. “I mean night and day. Like an order of magnitude less interest.”
With no new investors on the horizon, Spears said the company’s next option was acquisition.
Several companies were interested in New Age Eats, its facilities and its intellectual property — especially its Sensonomics Platform, which informed the company as it put together plant-based and cultivated meat ingredients to make an end product with sensory similarities to pork sausage.
But the problem with an acquisition was the food-tech startup’s liabilities — both its debt and its pilot facility.
“The feedback that we got from many [other companies] is, you know, ‘Hey, this is an unfortunate position, but your liabilities make this very difficult for us, so we’ll explore acquiring your assets in liquidation,’” Spears said.
As New Age Eats’ assets go up for sale, Spears recommended that other companies in the cultivated meat space take a close look at their burn — the rate at which they are spending money.
But, Spears said, this is the opposite advice that was given to startups a couple of years ago; they were encouraged to spend money to hit milestones and move forward.
With investment capital flowing so freely a couple of years ago, a lot of new cultivated meat companies came on the scene.
“When the capital dries up, a lot of those companies just aren't gonna be able to get the capital to keep going,” Spears said. “It’s no surprise. It’s the boom-and-bust cycle.