A look into the bottlenecks - How we make the second food revolution fundable

'Never again hunger'. That was the credo after the war and led to the development of intensive agriculture and a food system where quantity was paramount. 'But now we are reaching the limits of that system,' says Michiel Strijland, business development manager in the Agrifood team at Invest-NL. 'We are now also demanding other qualities. For example, in health, sustainability, and fairness.'

Fastlane programme

That is why we are advocating for a food transition: the shift to a sustainable system of agriculture and food production. 'This means healthier food, less CO2 emissions, more biodiversity, healthier soil, and improvements in animal welfare,' says Michiel. 'But while there has been much progress in the energy transition, the food transition is still very slow.'

This is mainly due to scaling issues faced by agrifood companies active in key pillars of the food transition: regenerative agriculture and the production of alternative proteins. The shift to regenerative agriculture faces many challenges, and innovative startups find it difficult to reach the mass needed to make an impact.

Market Barriers 

The core of the problem is that it is difficult for agrifood businesses to attract investor interest or secure funding through banks. "In regenerative agriculture, for example, this relates to the cycles within which farmers operate," says Nina. "You have one growing season to cultivate and harvest a new food product or to apply a new technology. If you want to improve or change something, you have to wait until the next season before you can bring a ‘second version’ to market. Everything first has to grow, literally, in the field. Startups working with alternative proteins have long lead times and high development costs, which make it difficult to attract investors to scale up."

There are more market barriers. "A large food producer can take as much as 3 years for a protein substitute procurement process," says Michiel. "Additionally, launching a new ingredient on the market is complex, expensive, and time-consuming. It quickly costs 5 years and €1 million to get a new food product approved, if it’s successful at all. But startups don’t have that much time."

Once a new product is on the shelves, the producer’s competitiveness is often limited. Nina: "Agrifood products and alternative proteins often only compete on price. With raw foods like vegetables and fruit, there isn’t much margin, and it’s difficult to really differentiate yourself from other products. Outwardly, a tomato is just a tomato."

Improving Financing 

Invest-NL works in various ways to find solutions to break through this market failure and support agrifood startups. Firstly, by investing directly itself; for an investment need of more than 10 million euros, Invest-NL can provide up to 50 percent of the required capital.

For example, Invest-NL has invested in cultivated meat, an algae producer, and an insect farm to stimulate the protein transition. 

The business development division, where Nina and Michiel work, helps develop the market, removes financial bottlenecks, attracts capital, and thus makes innovative companies fundable.

In this way, Invest-NL functions as a ‘knowledge partner’ for both startups and investors, explains Michiel. "We are currently exploring options for scaling up companies originating from the Wageningen University & Research network that are working on propositions in the field of alternative dairy. We have set up a framework that allows investors to assess new technologies, thereby lowering the barrier to investing in such companies."

Beyond these activities, Invest-NL has also worked on, for example, a design standard for North Sea Farmers, which cultivates seaweed in wind farm parks. This has allowed them to attract funding from Amazon, and the first offshore seaweed farm is now operational. Invest-NL has also developed the Fastlane programme. "This is a tailor-made process where companies, within 9 months, work with a multidisciplinary team of experts to discover how to best scale up and attract investors. The programme has been handed over to Foodvalley, and a fifth generation of companies has already gone through it."

Opportunities for the Netherlands 

Although Invest-NL focuses on the bottlenecks for agrifood pioneers, Nina and Michiel both emphasize that this market also offers enormous opportunities for the Netherlands.  

"The Netherlands is the second-largest agricultural exporter in the world," says Michiel. "Even when talking about intensive farming; it shows that we have a huge knowledge advantage and good infrastructure. The food transition could become the new revenue model for the Netherlands. The current sector of alternative proteins is worth a few hundred million euros, but this could easily grow to 10 billion euros. It’s a huge economic opportunity."

Nina adds: "This can create many new jobs and give an economic boost to many regions in the Netherlands. Ultimately, the food transition is about a paradigm shift in our systems of agriculture and food production. That won’t happen without a fight."

"Food is emotion," says Michiel. "It’s linked to cultural values, to national identity. That change is bigger than just scaling up startups. It’s no longer just about producing as much food as possible, but also about healthy eating habits, biodiversity, fair wealth distribution along the chain."

Precisely, the Netherlands can play a leading role in this food transition. "We led the first food revolution when 'no more hunger' was the motto for agriculture," says Nina. "Now it’s about regenerative farming and alternative proteins, but the Netherlands can also spearhead this second food revolution."