Challenges & Opportunities

Challenges and Opportunities

Our interviews revealed two opposing extremes in views of the alternative protein (alt protein) industry. This polarization hampers efforts to improve its contributions to the common good.

While interviewees generally agreed that alt proteins are not a complete solution for global agri-food challenges, many expressed overly optimistic claims about their benefits. Alt proteins are often portrayed as a “quadruple win”—saving animals, combating climate change, improving health, and reducing environmental impacts. This idealized view casts alt proteins as inherently positive and beyond criticism.19

Conversely, detractors often described the industry quite harshly, pointing to less than ideal nutrition, inadequate worker protections, environmentally damaging sourcing, and inherent misalignment with the goals of food sovereignty.20,23 Some alt protein opposition seems unnecessarily closed to the potential for allyship.24 While offering valid critiques,21,22 the most critical positions often echo the language and narratives used by the animal industry to discredit alt proteins,25 causing harm by increasing division among potential allies in the fight for food system change.

The opposition of extreme opinions that we witnessed in our interviews creates an ineffectively polarized discourse about the industry in which moderate, substantive critiques risk being drowned out. Highly virtuous depictions can entrench critique and invite refutation, while intensely negative critiques may become persistent ideological opposition.

Many investors and entrepreneurs whom we interviewed depicted alternative protein companies as an investment class that strains under the expectations of the standard VC investment model. Investment funds typically follow a ten-year life cycle during which VC funds seek at least three times return on investment across their full portfolio. Because not every investment in a fund will generate a return, VC investors typically seek to ten times return over a five-year period,27 and hope that a fraction of their fund’s investments will generate exceptionally high returns.

This investment model has worked well for industries in which companies can quickly scale large returns on investment with comparatively low up-front costs, like the technology sector (e.g., Microsoft and Amazon).28

As products of a technology-driven industry, alternative proteins appear fit for VC investment. However, as food companies, they raise additional cultural considerations, take longer to scale up, and require higher up-front capital expenditures.

Alternative Proteins Are Food

For many technology products, consumer adoption may be assumed if a product fills a demand and competes economically. However, alternative proteins are not simply technology but food, which carries powerful social and cultural attachments.29,30 As a result, the market success of alternative proteins depends on significant culture change and not solely on economic conditions.

I still hear people say, “Once taste, price, and convenience are there, the game is over.” I just think that that’s completely missing out on understanding the anthropology and sociology of food. These attachments matter; food is not just like any other industry. It’s quite unique because of the social and cultural attachments that people have to food.

Garrett Broad, Rowan University Professor and Plant Based Foods Institute Board Chair

Agri-Food Value Chains Require Time and Investment

Supply chain experts we interviewed noted that alternative proteins require higher up-front investments and longer timelines to create new value chains, from transitioning farm fields to building processing facilities, which are not a natural fit with VC funding timelines.

Quarterly growth means inherently short-term thinking, which harms the industry. For example, moving processing centers to the US would shorten supply chains, making things cheaper for plant-based companies. We can grow almost anything you want in the US, and farm transitions can help make that possible. We have the ability to produce a lot of these goods domestically. But if you take a quarter-to-quarter view, it’s a loss to build up your domestic supply chain rather than importing from abroad.

Tyler Whitley, Director of Transfarmation Project, Mercy For Animals

Benefits of Mission-Driven Venture Capital

Mission-driven VC has significantly boosted the growth and success of alt protein companies, enabling entrepreneurs to align business goals with social and environmental impact. Founders reported that mission-aligned funding fosters trust and reduces friction with investors, while also encouraging the creation of more alternative protein companies and advancing the sector.

Mission-aligned VCs often invest in early-stage companies, which helps integrate impact goals from the start. However, their influence may diminish as companies raise subsequent funding. Additionally, some common-good priorities, like sustainable sourcing and fair labor practices, only become relevant as companies scale, making them harder to address in early stages.

What do mission-driven alt protein investors
look for in potential investments?

Animal replacement potential

Environmental benefit potential

Health benefit potential

Scalability

Strength of founding team

IP or Trade secrets

Diversity of team

Cost structure

Growth potential

A unique and exceptional solution

Limitations of Venture Capital

While VC—especially mission-driven VC—has been critical for the alt protein sector, its short-term profit focus can limit the realization of broader social and environmental benefits. Many interviewees emphasized the need for diverse funding sources and public support to ensure alt proteins succeed both financially and as drivers of food system transformation.

Venture capital comes with certain expectations related to growth, scale, profitability, and more. In order to continue to raise venture rounds, start-ups need to prioritize certain metrics that are rewarded by venture funds. Those metrics are—unsurprisingly—about ‘business fundamentals’ as opposed to any common good.

Max Elder, former Founder and CEO of Nowadays

Historically, VC is looking for relatively quick returns. When they make their investment, they’re already designing their exit strategy. That’s not really appropriate for creating sustainable, viable food systems. Food systems take time to develop and then require loving care to maintain. Oftentimes, that isn’t so congruent with the strategy of VC, particularly the private equity side of VC.

Carl Jorgensen, Agriculture Consultant, The Plant Based Foods Institute

Intellectual Property

A key challenge is intellectual property (IP). While essential for protecting investments and entrepreneurs, IP is often viewed by movement leaders as a barrier to making alt proteins work for the common good. This tension highlights the need for balancing investor interests with broader societal goals.

Investor perspective: We look for innovations that are differentiated from those in the market already, and where there’s a white space. The protectability element needs to be there. There needs to be some sort of IP moat around it, whether it’s patent, trade secrets, etc.—some way that the company can protect that differentiated angle.

Rosie Wardle, Co-founder and Partner, Synthesis Capital

Analyst perspective: Tight control of IP is conducive to VC investment and market valuation but contributes to slower growth of the industry as a whole compared to open sharing of innovations, for example, Volvo with seatbelts [open-source technology]. The benefits of alt proteins are such that this industry should consider following the seatbelt model.

Chris Bryant, Director, Bryant Research

Entrepreneur perspective: It’s very easy to talk about open source with one simple idea [like seatbelts]. But when you’re talking about alternative proteins developed over many years with ten to twenty patents, you’re talking about incredibly complex ideas and incredibly complex processing information. If that information is not owned by a company, guaranteeing them the opportunity to exclusively develop it, you end up with an inequity problem that muzzles innovation. Without patents, we could easily be scooped by another company who decided they wanted to do this, even if they don’t execute on the idea. They just have to say they’re doing it better than us, and that suddenly pushes away funding for smaller, more nimble start-ups. Patents protect the people who are willing to do the hard work. If somebody else takes our IP for fundraising and then doesn’t do anything with it to make an impact, then we lose out, our investors lose out, and nobody actually benefits from that technology. Even animals don’t win.

Christie Lagally, Founder and CEO, Rebellyous Foods

Food system transformation expert perspective: Anything that takes the IP and access to technology to produce food further away from people and keeps it behind walls of intellectual rights is concerning. That’s true across sectors too. This relates to the “right to repair” conflicts [with some agricultural equipment manufacturers], for example. People should have the right to have access to the means to feed themselves and their communities, and when that’s copyrighted and controlled, I do see that as breaking a natural cycle.

Pete Huff, Co-Director, Wallace Center at Winrock International

Entrepreneurs and investors in our sample highlighted several challenges related to measuring and understanding the impacts that alternative proteins have—and could have—on the common good.

Venture Capitalists Inconsistently Value Common-Good Impact Assessment

Social and environmental impact data collection by VC investors we spoke with differed widely from firm to firm and from one investment to the next, an unintended consequence of a customized diligence process that responds to each start-up’s unique product or entry point.

The investors we spoke with agreed that positive impacts to the common good were valuable and closely connected to their overall investment thesis. However, common-good impacts were not given the same weight as growth potential in the form of a strong founding team or valuable IP, and proof of positive impacts was not required for a deal to progress.

Several investors also noted a catch-22: Until investors ask consistently for impact data and make impact a key part of investment decisions, companies will not prioritize gathering impact data. However, until companies gather impact data and can readily provide them, investors cannot systematically request these data and include impact metrics in investment decisions.

We look at KPIs [key performance indicators] across ESG that cover the relevant material impacts – environment (including emissions, land use, water use), workers’ rights, and broader community impact. These KPIs often start off fairly basic because of the early stage of the companies, but at least it gets these priorities on companies’ agendas, and into governance as well. It’s foundation-setting for the company. Often, during the due diligence process, we find potential pressure points in the supply chain. For example, reliance on a particular ingredient that has sourcing issues (e.g., palm oil). Those are issues to think about as the company scales so that we know where to engage as the company grows. We’ve got to adapt that for every single company. In every case, we take a tailored approach.

Rosie Wardle, Co-founder and Partner, Synthesis Capital

High-Quality, Specific Impact Data Are Expensive

The investment diligence process in its current form is often time-consuming and ungainly for both investors and early-stage companies. Impact data can be difficult and expensive for companies to gather, as well as onerous for investment teams to review and understand with limited time. Thus, many investors and entrepreneurs we interviewed felt it would be a challenge to demand more impact data.

The most important factor will be whether other investors are prioritizing these questions. There’s a nonzero cost associated with tracking these metrics, and there’s a relationship being built in each diligence process. Even when we ask for demographic info, we don’t always get it. We have to be flexible about how hard we push for some of this information. The more investors ask for it, the better. We generally start to do some of these things as others also start to do it. The questions for us are what’s a practice norm for VC, what constitutes a sufficient answer to each question, and how to ask?

Investor

Environmental benefits of plant-based alternatives are very clear when measured against e.g. beef. However, the benefits are often smaller when compared to lower-impact animal foods like fish and chicken. Moreover, there can be environmental tradeoffs where a plant-based alternative generally has lower impacts, but may have a higher impact in one or more categories like land use, as could occur for fish alternatives, for example.

Dan Blaustein-Rejto, Director of Food and Agriculture, The Breakthrough Institute

Difficulties of Definition, Prioritization, and Benchmarking Persist

One of the largest challenges lies in defining how benefits to the common good should be measured and prioritized. Deciding what potential impact parameters to measure or value can be inherently subjective.31 Investors and entrepreneurs in our sample agreed that they are often uncertain which impacts need to be measured for a specific product or ingredient, how best to measure, and how to interpret the data. Additionally, social and economic impacts are less well understood than environmental benefits.32,33

To further understand impact standardization and prioritization challenges, we spoke with the FAIRR Initiative about the Alt Protein Environmental and Social Governance (ESG) risk reporting frameworks they developed in partnership with the Good Food Institute (GFI).34 Producing FAIRR and GFI’s ESG risk assessment framework took a dedicated team more than a year in close collaboration with investors and the food industry.

We conducted materiality assessments and stakeholder consultations to assess the metrics and themes that were material to the industry. Alongside a literature review, we spoke with companies about how feasible reporting was, including what information they have access to. We needed a comprehensive framework to assess environmental risk, having found that LCAs aren’t enough for our purposes, as they are too product specific. Investors also wanted to know about the sustainability of the business, and to assess the potential sustainability of companies that haven’t had a product come to market yet.

The feedback we got from stakeholder conversations was that we’re not close to being able to benchmark the companies yet, as companies are lacking the data and aren’t quite ready to be reporting. Quite a few of them said, “We just don’t collect data on this.” More progressive companies said they could answer at least 60 percent of the metrics. Companies are hesitant to report unless they’re sure they have accurate data that they’re willing to receive pushback on. The reception has been very positive from investors, though. They really want to have access to these data.

Abby Herd, Senior ESG Analyst, FAIRR Initiative

Impact Assessment Is a Priority Area for Industry Development

The alt protein industry is young and rapidly evolving, having grown 44 percent from 2019 to 2022.35 Despite recent innovation and attention, the industry is still building out critical infrastructure and supply chains and establishing new practice norms. Robust impact assessment depends on widely accepted metrics and replicable results that take time to develop and improve. An industry so new lacks enough production cases or years of impact data. A useful consensus on the more difficult and subjective angles of common-good impacts—particularly social and economic impacts—may take years to develop.

This relatively young and disruptive industry faces an uphill battle to accurately represent the benefits of introducing and increasing production of alt proteins to achieve significant rates of replacement of animal products. In this context, the attention given to impact assessment and the scrutiny of impacts can be particularly—and unduly—intense.

Nevertheless, the alt protein industry’s future development would do well to include an emphasis on investing in better tools and norms for understanding—and then working to improve—alt proteins’ full social and environmental impacts, potentially improving allyship with adjacent advocacy movements.

What role can traditional investors like VCs and angels play in moving the industry toward greater common good?

Shift financial assets away from incumbent animal products

Normalize for companies the practice of requesting impact data

Normalize within VC community a higher prioritization of common-good benefits

Demand performance on an increasing number of benefits

Encourage beneficial competition on impact

The Focus on Price Parity

Many alt protein investors and entrepreneurs we interviewed considered important for alt proteins to be the same price or less than the animal products they seek to replace, echoing the common hypothesis of “taste, price, convenience,”40 which posits that meeting these three criteria will lead to animal product displacement by alternatives. But many disagree, citing the many additional sociocultural attachments of food42 that complicate animal product replacement.

Many movement experts and analysts also highlight that the artificially low prices of industrial animal products create unrealistic expectations for plant-based protein companies. Industrial animal agriculture in the United States benefits financially from direct public subsidies, including insurance payouts and indirect subsidies, and a favorable regulatory environment that allows for many significant costs—from compliance with the same animal cruelty laws that apply to non-agricultural animals, to water pollution avoidance and remediation—to be externalized.43,44 The animal product industry has also built significant production efficiencies and economies of scale that plant-based products cannot yet match.

Expecting early-stage plant-based products to compete price-wise with a vertically integrated and highly subsidized industrial animal agriculture system may incentivize alt protein companies to trade public benefits for cost efficiency, running directly counter to the idea of increasing common good benefits from the sector.

The issue of price parity highlights the government’s critical role in building and shaping markets. It’s not something that can be accomplished purely endogenously, whether through firm-level or technological innovation.

Aaron Rimmler-Cohen, Senior Director of Advocacy, Farm Sanctuary

Given the massive public subsidization of meat production, targeting price parity with subsidized meat is a problematic goal that leads to the continuation of large-scale industrial farming. Rather than race them to the bottom, let’s focus on leveling the playing field and constructing supply chains that bring benefits.

Jessica Culpepper, Co-founder and Executive Director, FarmSTAND

Plant-based food companies are under such tremendous pressure to reach price parity or at least reduce that price gap between plant-based products and their animal-based counterparts. The prices of animal products are already artificially low. If plant-based food companies get on a shelf, they have to meet a certain velocity to stay on the shelf. Even a few cents of additional cost per item make it that much more difficult to compete. I have definitely seen companies who want to do it the right way, but it poses additional challenges for their business, and there are very real pricing and economic considerations at play.

Rachel Dreskin, CEO, Plant Based Foods Association and Plant Based Foods Institute

Most food system transformation experts view meat industry investment in plant-based alt protein companies as highly problematic. They worry that meat companies prioritize profits over ethical and environmental benefits, potentially undermining worker well-being and sustainable sourcing. Many respondents doubted these investments would reduce industrial animal production, suspecting meat companies aim to maintain dominance and might even acquire alt protein brands to weaken them. Experts also noted that such acquisitions contribute to industry consolidation, increasing power imbalances and food system fragility.

In contrast, many investors and industry experts saw potential benefits in meat company involvement. They acknowledged risks to ethical and environmental commitments but viewed investment as inevitable and potentially beneficial. Meat companies bring infrastructure, capital, and expertise in scaling, processing, and distribution, which could accelerate alt protein growth. Entrepreneurs highlighted the need for funding, while investors noted that meat industry buy-in signals profit potential to others. Additionally, these investments could align meat companies with alt protein advocacy, encouraging supportive policies and regulations.

On one hand, no one’s distribution networks or supply chain capabilities compare to the big meat companies. On the other hand, there is the risk that the culture of the meat company is pushed onto the alt protein company after acquisition and the buyer turns it to a pure profitability focus. There are not very many examples to point to in the space right now, but at this stage of the plant-based industry, I think the benefits outweigh the costs. It provides investors another example of an acquisition via exit, provides unmatched distribution and supply chain knowledge, and shows that the traditional protein companies find value in the plant-based space.

Steve Molino, Principal, Clear Current Capital

The healthfulness of plant-based meat analogs is a frequent concern, even among advocates for plant-forward diets and reduced reliance on industrial animal agriculture. Critics, including some allies, often echo narratives from the traditional meat industry. In our research, all interviewee groups raised or referenced health concerns, which can shift moderate support into outright opposition.

Proponents of food system transformation—focused on reducing meat consumption, animal suffering, and environmental impacts—may oppose alternative proteins due to perceived health issues, such as long ingredient lists or less-than-ideal nutritional profiles. Despite these concerns, animal meat often presents greater evidence-backed health risks. Holding plant-based products to higher standards creates friction between the alt protein industry and nonprofit allies, even though their goals often align. Some respondents also noted that rapid commercialization by brands like Beyond Meat and Impossible Foods has led to less healthful products prioritized for taste and convenience.

As much as there is concern and consideration for animal welfare and environmental welfare, a lot of consumers at least initially are eating plant-based for nutritional purposes. When you have a seventeen-ingredient stack compared to a one-ingredient stack on the animal-based side, and not a lot of difference in the macros, you’re essentially asking more money for something that isn’t necessarily as good, or as good for you.

Investor

The current state of innovation and the rush to establish the industry has led some to use less-than-healthful ingredients. The result has been well-justified bad press directed at certain plant-based companies because of unhealthy ingredients, and that has cast a shadow over the entire industry. Swaps for these problematic ingredients are not always readily available or present in sufficient volume from ethical supply chains with high environmental standards.

Entrepreneur

Start-ups, by their nature, are trying to use as little capital as possible to create as much value as possible. Running a startup that isn’t yet profitable is a grand balancing act between risk and reward. You want to go as fast as you can without tripping over yourself; you want to cut as many corners as possible without cutting the wrong corners. So one can imagine the plethora of hard tradeoffs that emerge throughout this process of scaling.

Max Elder, former Founder and CEO of Nowadays

Connect with Us: Fill out the Form

Have Questions about this Research?

Use this form to get in touch