FWP Investment Note: BlueNalu

Flat World Partners
10 min readJan 26, 2021

FWP is happy to announce our investment in BlueNalu, a cell-based seafood company on a mission to revolutionize how humans consume seafood by producing seafood directly from cells. California-based BlueNalu is supported by a number of financial and strategic investors. Rage Capital led the round, and FWP co-invested alongside Agronomics, Lewis & Clark AgriFood, KBW Ventures, and Siddhi Capital, among others.

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Currently, one of the largest transformational shifts is taking place in the way the world consumes animal-based protein. This food revolution has the potential to significantly disrupt the $1.4 trillion global meat, poultry, and seafood market. Cell-based, lab-grown, clean, or cultured meat is a technology that makes it possible to produce animal meat without requiring an animal.

The thought of meat grown in a lab seems unimaginable, however there are currently over 100 companies worldwide tirelessly working to get this “clean meat” on your plate — and investors have poured hundreds of millions of dollars to make it happen. Late last year, US-based Eat Just received regulatory approval to start selling its cell-cultured chicken bites in Singapore. This was a key milestone for the emerging industry, so expect many more to follow suit in 2021 and beyond.

Example of cell-based companies and product focus

Source: GFI custom Pitchbook analysis of cell-based meat companies

Before diving into BlueNalu and why FWP is so excited to be a part of the company’s journey, it is worth taking the time to explain exactly what cellular agriculture is, the paramount problem it solves from a meat and seafood perspective, why food poses one of the biggest threats to the planet, and why cellular agriculture can create a more sustainable food system.

Market Overview

In 1931 Winston Churchill wrote in an article titled ‘Fifty Years Hence’:

“[w]e shall escape the absurdity of growing a whole chicken in order to eat the breast or wing, by growing these parts separately under a suitable medium”. The future that Churchill envisioned almost a century ago has taken longer than anticipated, but is fast approaching.

The technology that underpins this concept is cellular agriculture, and to be more specific — cell culture. Cell culture ultimately provides a far more efficient and sustainable way to produce meat. Instead of having to raise a cow from birth and sending it to a slaughterhouse, lab-grown meat is created by taking the cells from an animal and growing them outside of the animal’s body — i.e. in vitro.

Not only is the finished product the same in terms of sensory and nutritional profile as conventional meat, but it is also able to preclude animal-borne illnesses and the bacteria people eat in meat today, which are a by-product of the unnatural practices used in industrial agriculture. In a 2017 Science article, MIT PhD Giorgia Guglielmi indicated that, “almost 80% of all antibiotics in the United States aren’t taken by people”, instead, “they’re given to cows, pigs, and chickens to make them grow more quickly or as a cheap alternative to keeping them healthy”.

To paint a simplified version of how cell culture technology works, the process involves:

1. Taking cells from the animal of interest.

2. Isolating those cells.

3. Placing the cells in a bioreactor with a growth medium for the cells to multiply. Growth medium is a liquid containing all essential nutrients like carbohydrates, fats, amino acids, etc. — essentially think of it as the replacement for blood. As the growth media diffuses into the cell, the cell will grow and divide. The cell line will then proliferate and become meat.

4. Through various technologies, companies end up shaping an entire cut of meat or fish into their desired product.

Mission Barns, a leading cell-based company, depicts the cell culture process and juxtaposes it to the life of a conventional pig in the diagram below.

Source: Mission Barns website

At first thought, this process may seem like it belongs in a different galaxy, however many of the products you eat today leverage the same technology. As strange as it may sound, yogurt, kombucha, alcohol, and milk all follow a similar process. Although this is still classified under the ‘cellular agriculture’ bucket, this technology is referred to as ‘fermentation’ (or acellular agriculture), and is something humans have been using for thousands of years, primarily in the form of fermented beverages.

Sustainability Overview

By 2050, the planet will have approximately ten billion human mouths to feed and under current circumstances it remains unclear how this will be achieved. As the population continues to grow, so does the amount of land required to feed people. Population growth, coupled with rising income levels in emerging economies, especially China and India, is driving an increased demand for animal-based protein. This poses many problems. While the climate issues elicited by animal agriculture are not widely understood, we do know that the sector is among the greatest contributors to global warming, emitting more greenhouse gases (GHG) that all our cars, trucks, trains, and planes combined.

To feed these mouths, the global food system must improve its resource efficiency to ensure sustainable food production in the future. Livestock is the largest land-use sector on earth, and agricultural expansion comes largely at the expense of forests — valuable ecosystems that are integral to protecting biodiversity and climate change — to make way for crops and pasture. Seventy percent of global crop production is used to feed livestock; this is an extremely inefficient use of plant-protein that could otherwise be consumed by humans. Additionally, over half of the world’s most important natural resource, water, is used for global agriculture, and studies show that the amount of water use per kilogram of beef produced ranges from 27 to 200,000L. Runoff from fertilizers and manure also majorly disrupt lakes, rivers, and coastal ecosystems.

Moving more specifically to the seafood industry, the global appetite for seafood is greatly outpacing the ability of fish to reproduce. According to the United Nations Food and Agriculture Organization (UN FAO), consumption of seafood over the past 50 years has doubled and continues to rise, as incomes increase and consumers transition from meat to seafood diets for health reasons. In developed countries like the United States, seafood is largely imported (>90%) and the GHG emissions associated with transportation of seafood are significant. Not to mention, most of the fish consumed today contains mercury and microplastics which end up in our stomachs.

The UN FAO predicts that over 60% of the world’s fish stocks are fully fished, while 30% are overfished. This harmful level of overfishing also creates issues around bycatch, of which 20–25% of all sea creatures are victims, finding themselves discarded overboard, dead or dying. The large shipping vessels used to catch these fish often trawl the bottom of oceans and damage coral reefs. Although farmed fish account for half of the fish consumed by humans, wild fish stocks are still declining, and fish farms pose enormous environmental impacts and hazards to consumers’ health. It is predicted that a trillion fish are caught and killed every year, and after accounting for bycatch, nearly 500 wild sea animals are killed every year to feed one American.

Solution

While it would be lovely if the world could shift to a vegan or plant-based diet, it is easier said than done. History has proven public policy and education ineffective in influencing consumer diets. Consumers want to see a more sustainable solution but don’t want to compromise on taste or texture.

Impossible Foods and Beyond Meat introduced a new way to tackle the problem through a more subversive solution: creating products that compete successfully in the marketplace against conventional animal products in order to drive systemic change. Both these companies have been pioneers in the alternative protein sector, becoming multi-billion-dollar enterprises. However, the special texture of what makes meat meat is hard to replicate, and a truly identical made from plant-based ingredients has not been achieved.

Hence why cell-cultivation technology holds such promise, as it is actually real meat. It bypasses the slaughtering part while allowing consumers to eat in a more sustainable manner, without forcing compromise on taste and nutritional benefits. High marbled beef for dinner, free from antibiotics? Easy. Premium bluefin tuna fillet, mercury-free? Consider it done.

Given the enormous upside of this technology, you may be wondering why cell-based meat, poultry, and seafood products haven’t already made it into your local restaurant or supermarket. The first lab-grown beef burger was produced in 2013 and came with a price tag of $330,000. Cell cultivation technology has been around for almost thirty years; however, two factors not allowed it to penetrate the market:

1. Growth media remains astronomically expensive.

2. Producing meat and seafood at scale in industrial sized bioreactors has not been achieved.

Most of the R&D work has been completed in sub-scale bioreactors (<1,000L tanks) and the aim is to scale this to 250,000L tanks to produce animal-based protein at scale. After 30 years of trying to crack the code, the stars are now finally aligning, as companies are dropping prices of growth media precipitously and validating their technology in larger bioreactors.

Enter BlueNalu

BlueNalu is a leader in the cell-based sector and has made terrific progress since being established in 2018. Unlike meat cells, cells from fish were not routinely cultured in research labs. Protocols for these cell types were not readily available, thereby requiring significant levels of upfront capital to complete basic R&D. Today, BlueNalu has developed over 100 stable finfish muscle cell lines without the use of genetic engineering, which is a significant scientific feat. The company demonstrated the complexity of its product in December 2019, when investors and global partners were invited for a culinary experience to test BlueNalu’s Yellowtail Amberjack. The whole muscle fillet performed the same way as a conventional fish fillet in all cooking applications. It also proved itself to be a dynamic product, which can be cooked via direct heat, steaming, acidification, or frying.

Founders, Lou Cooperhouse (CEO) and Chris Dammann (CTO), have a combined 50 years’ experience in the sector and bring a wealth of knowledge in building companies, product strategy, cell and tissue culture, and molecular biology. Given their unique experience, they have managed to assemble a world-class team that brings extensive domain expertise across multiple sectors, hiring industry leaders in their respective categories. This is epitomized through the robust regulatory strategy BlueNalu is pursuing. The company is setting the standard for the cell-based sector in the US, working closely with the Food and Drug Administration (FDA) to ensure full transparency.

BlueNalu possesses high levels of intellectual property and trade secrets, surrounding growth media, cryopreservation methods, production processes, cell cultures, and other technical areas that will serve as strong competitive moats. The company’s global approach has seen it set up joint venture partnerships within key markets where it will operate, which will be invaluable to distribution, supply chain procurement, go-to market, and navigating regulatory pathways. BlueNalu was one of the few companies FWP witnessed creating such strong partnerships.

Additionally, cell-based seafood exhibits several advantages over mammalian or avian cell culture. Cells grown in-vitro perform best when growing conditions mimic the natural environment conditions for that animal. In contrast to mammalian cell culture — typically conducted at 37 degrees Celsius — fish cell culture can be performed at appreciably lower temperatures — 4–24 degrees Celsius for saltwater species — resulting in lower-energy related costs. Fish naturally have a thin, sheet-like texture compared to terrestrial animals, which tend to form a more complex structure and marbling. Which makes it simpler to recreate a cell-based fish fillet through extrusion and layering methods. BlueNalu is initially targeting premium species, such as Bluefin tuna, which sells for over $35 per pound and presents an easier pathway to price parity than the products sold by other companies focusing on mammalian cell culture, which can be as low as $3–5 per pound.

The $60 million raised by BlueNalu will be used to open a pilot facility at almost 40,000-square-feet in San Diego, complete an FDA review, and release its first product to market — Mahi Mahi — in iconic restaurants throughout the US by year end, in limited supply.

Cell cultivation is a nascent sector and has many hurdles to overcome before companies can cultivate meat and seafood at industrial scale. Even once cultivated products have entered the market, consumer adoption will take time. After all, the car took 13 years to become mainstream over the horse. Cell culture most likely will not cut out the need for the traditional meat industry. Instead, FWP sees a future where traditional meat, plant-based meat, and cell-based meat compete against each other. The world has reached a pivotal moment where we face unprecedented challenges to food security and the preservation of our environment, and cell culture holds the keys to dramatically reducing our environmental footprint and feeding the planet sustainably.

If the industry continues to move forward at the same trajectory, you may see BlueNalu’s lab-grown tuna on your plate sooner than you think.

Investment Analyst, Hamish Baillieu

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