Infrastructure loan fund

The shortage of alternative protein processing and production capacity is one of the most limiting factors holding back the growth of the alternative protein industry. The success of early-days products has demonstrated strong consumer interest, but investment is needed to enable alternative protein supply chain companies to build out the infrastructure needed to capitalize on this opportunity. In particular, there is a need for debt-based financing that can be structured to support large infrastructure projects.

Current challenge

For most infrastructure projects, such as building processing or manufacturing plants, debt is the cheapest way to finance the high capital expenditures. Venture capital firms invest in portfolios of high-risk startups with the hope of making a 10x return on one or two of their investments. The VC model makes sense for many tech investments with high potential upside, but is less suited to investments in capital-intensive fixed assets like processing and production facilities, which have longer payback periods and expected returns of less than 10% yearly. Consequently, most infrastructure project financing is done via debt (loans) instead of equity (trading ownership in return for investment). Banks and other debt financing providers have different risk/return expectations from venture capital firms, and typically do not make loans to high-risk startups or companies with limited credit or sales history.

Proposed solution

Encourage the creation and expansion of infrastructure loan funds focused on alt protein by conducting coordinated investor outreach and education, persuading corporate strategic investment arms to prioritize alt protein infrastructure, and lobbying governments to provide loan guarantees and help de-risk alt protein infrastructure projects.

Support infrastructure lending enablers by: lobbying for carbon credits or tax offsets for alternative protein production; developing technical due diligence consulting specifically for the alternative protein industry; creating matching and support mechanisms including consultants, brokers, directories, events, and other platforms to connect debt financing providers with alt protein manufacturers; and sharing insights from the growth investment stages of other innovative industries with high infrastructure costs, including the Internet and information technology, automobiles, steelmaking, etc.

Anticipated impact

Expanding processing and production capacity is one of the most pressing needs in the alternative protein industry. Creating and promoting funds that can provide the forms of capital tailored to alternative protein infrastructure investment will help supply keep up with demand and unlock additional economies of scale. The need for infrastructure financing is especially pronounced for pioneer plants utilizing new technologies. The success or failure of the first pioneer plant for a given ingredient, product, or technology is of disproportionately high importance. If the first plant is successful, financing future plants utilizing similar processes—even by other companies than the one responsible for the first plant—becomes much easier by virtue of this de-risking event.

Related efforts

• Siddhi Capital has launched an infrastructure-focused fund and has plans for additional future funding mechanisms. Advanced market commitments or guaranteed offtake agreements may further reduce market risk.

• Carlota Perez and James Utterback have written extensively about the growth capital phases of innovative heavy industries.

GFI resources

Investment

Connect with startups who are fundraising. Learn about the market and technical landscape for plant-based meat, cultivated meat, and fermentation.

Startup manual

This guide lays out the steps involved in starting an alternative protein company, from securing funding and developing your product to scaling up and expanding distribution.