US approval of lab-grown meat to unleash ‘stifled’ sector

For years, startups developing lab-grown meat have dealt with a constant roadblock: It wasn’t approved for sale in US grocery stores or restaurants.

That rule was finally changed last week when the USDA cleared the sale of cultivated meat by Upside Foods and Good Meat. Both companies previously received clearance from the FDA.

The regulator’s decision is a huge get for startups and their backers, which include foodtech and climate tech investors like CPT Capital and SOSV. And it comes in the midst of a treacherous dealmaking environment in foodtech.

“Funding of cultivated meat companies has been stifled, in part due to regulatory roadblocks,” PitchBook analyst Alex Frederick said. Lab-grown meat startups have raised $416 million across 18 deals globally this year as of June 23, compared to more than $1 billion in the first half of 2022.

Across the board, foodtech companies have been faring poorly in the slower dealmaking environment. In Q1, they hit their lowest funding levels since 2017, according to PitchBook’s Q1 2022 Foodtech Report.

After Singapore, the US is the second country to approve the sale of cultivated meat, and it’s expected to pave the way for other nations to follow, according to Frederick. A major part of lab-grown meat’s value proposition is that it should reduce the immense carbon footprint of the traditional animal meat industry. Plant-based meat alternative companies like Beyond Meat and Impossible Foods have a similar raison d’etre.

Despite a long road to profitability, lab-grown meat companies have still managed to clinch major deals: Upside Foods’ $400 million Series C, led by Temasek and the Abu Dhabi Growth Fund, propelled the company to unicorn status last year. Upside, along with Eat Just and Believer, have announced restaurant partnerships in anticipation of the USDA’s decision. Eat Just has partnered with celebrity chef Jose Andres, who has agreed to sell cultivated chicken in one of his restaurants.

Even with regulatory approval, growing to commercial scale may not be smooth sailing. Two years after Singapore approved lab-grown meat for human consumption, mass production has yet to start.

The R&D and laboratory facilities aren’t cheap, and large agricultural companies have a vested interest to prevent lab-grown meat companies from displacing the traditional meat industry. Some insiders even fear a full-blown PR smear campaign by entrenched players.

Featured image courtesy of Upside Foods