Venture Bytes #97: New Technologies and Innovations Keep FoodTech in Focus

New Technologies and Innovations Keep FoodTech in Focus

The food industry is a major contributor to the nation’s gross domestic product, at around $1.26 trillion as of 2021, according to the US Department of Agriculture (USDA). The vast scale and economic importance of the industry offers compelling growth opportunities for tech innovators aiming to enhance the food value chain.

Accordingly, VC investment in the food tech space saw a remarkable 36x jump from merely $1.3 billion in 2013 to $46.8 billion in 2021. While the recent pace of funding has slowed, in step with a broader funding softness, the food tech landscape continues to hold immense promise.

Alternative meat producers are well-positioned to benefit from the innovations and new technologies in the food industry. While incumbents like Impossible Foods and Beyond Meat are pioneering plant-based meat products, there are bright spots appearing in cultivated meat space too. In a critical moment for the alternative meat sector, the USDA granted approval to California-based Upside Foods and Good Meat to commercially sell lab-grown meat to the public. Upside Foods, which raised $400 million in a Series C funding round last year, also expects to get European approval soon.

In addition to the regulatory tailwind, the sector has also seen some novel developments. Australia-based cultivated meat provide Vow recently unveiled a mammoth meatball made from cultivated woolly mammoth cells, highlighting advancements in cellular agriculture. The company uses cell-based technology that creates meat from the cells of animals instead of the animals themselves, providing a more sustainable method of food production.

“Shifting away from animal proteins and toward alternative proteins will be necessary for governments to address climate impacts and to reach their net-zero targets” - Rosie Wardle, co-founder and partner at food tech VC firm Synthesis Capital.

Analysis from Boston Consulting Group and Blue Horizon reveals that the market for alternative proteins will grow from 13 million metric tons a year in 2021 to 97 million metric tons by 2035, making up 11% of the overall protein market. Assuming average revenues of $3 per kilogram, this amounts to a market of nearly $290 billion. Within the broader alternative proteins industry, cultivated meat alone could represent a market of $17 billion.

Goal of Price Parity by 2026

New age start-ups in cultivated meat are also addressing and overcoming the longstanding hurdle of price parity, which has impeded the widespread acceptance of cultivated meat. San Francisco-based Orbillion projects reaching price parity with conventional meat by 2026. Impressively, the company has developed four different meats in just four months, surpassing the pace of progress observed in other cultivated meat companies by a significant margin. Additionally, Israel-headquartered 

AI is upending industries, and food is no exception. While traditional AI technologies were already being used in upstream and midstream operations to digitize and optimize several farm functions, generative AI is opening new opportunities for food tech Believer Meats recently achieved a groundbreaking milestone in manufacturing efficiency. A study by the company revealed that cells grown spontaneously in a suspended state can reach densities exceeding 100 billion cells per liter, leading to a manufacturing process that is 17 times more efficient than the current industry standards. Independent estimates suggest that the projected production costs for these cells would range from $1.8 to $4.5 per pound.

Generative AI Opening New Opportunities

AI is upending industries, and food is no exception. While traditional AI technologies were already being used in upstream and midstream operations to digitize and optimize several farm functions, generative AI is opening new opportunities for food tech start-ups in downstream operations, primarily distribution. Start-ups can use generative AI to personalize recipe recommendations, improve and automate customer service, as well as improve restaurants’ operational efficiency.

The Sustainability Question

With the global population projected to reach 8.5 billion by 2030, the odds of facing food scarcity in the near future are increasing. The depletion of agricultural soil, climate change, crop failure possibilities, pest-attacks, and one-third of arable land being degraded pose serious challenges to meeting the growing demand for food, necessitating the adoption of data-driven and precision farming techniques. Moreover, with the food sector alone accounting for consumption of 70% of global water resources, a proactive and focused approach is imperative to boost food yields sustainably. Accordingly, companies in autonomous farming, precision farming, and bioengineering hold the potential to assist key stakeholders in the food industry in addressing this pressing issue. Additionally, companies in food waste and traceability as well as sustainable packaging are likely to play a crucial role in food security and sustainability.**

Generative AI Reshaping the GamingLandscape

Generative Artificial Intelligence (AI) is rapidly changing the gaming industry. In addition to increasing efficiency in game development and improving accessibility, the biggest impact of generative AI is likely to be on in-game content.

Games are complex and a huge entertainment market. Roughly 3.2 billion players generated $184.4 billion in annual revenue in 2022, according to Newzoo, a leader in video games and gamer data. Given the size, the gaming market is ripe for disruption by generative AI.

The cost of creating games is a major limiting factor. Roughly 40% of the total cost goes toward creating art assets, underscoring the significance of leveraging generative AI tools and services. Particularly, the remarkable capability of the technology to assimilate patterns, structure data, and swiftly generate fresh 3D content, all while significantly reducing costs. According to PwC, the value of integrating generative AI into gaming could be worth up to $321 billion by 2026.

Drawing parallels with prominent online platforms such as Spotify (audio), Instagram (photos), and YouTube (videos) allows us to envision the impending revolution in in-game content production due to generative AI. Just as these platforms revolutionized their respective industries by allowing users to generate content, generative AI promises to do the same within the gaming landscape. Comparing Red Dead Redemption 2, one of the most detailed games, with Microsoft Flight Simulator offers an idea of how generative AI has transformed gaming. The former costs $500 million and took almost eight years to build, while the latter – a far more detailed and enormous game – was built by training an AI model to create a 3D version of the earth from 2D satellite images., Microsoft’s partner for the game, used its AI technology to display the entire 197 million square miles of Earth’s surface in 3D – with over 1.5 billion photorealistic buildings – giving users an unprecedented immersive 3D flight experience and the largest open world in the history of video games.

In addition to game studios, the potential transformation of the gaming ecosystem by generative AI opens opportunities for generative AI start-ups as well. Respeecher, for instance, specializes in AI voice augmentation technology. Developers can use Respeecher’s Voice Marketplace to create custom voice content that fits the tone and style of their game, resulting in a more immersive and engaging experience for players. Expanding beyond voice augmentation, start-ups like Stability AI have harnessed generative AI to expedite the creation of visually stunning images. Traditionally, developing high-quality graphics for games was a time-consuming process that could take weeks or even months. However, with Stability AI’s generative algorithms, game developers can generate captivating images within minutes or hours. Another noteworthy start-up in this space is California-based Scenario. Recognizing that each game possesses a distinct visual aesthetic, Scenario offers game developers the ability to create their own image generators specifically tailored to their game’s unique style. Similarly, Rosebud AI also offers AI-generated game assets for game development.

A generative AI-enabled drop in time and cost of the in-game user-generated content is another factor propelling the adoption of generative AI. According to ARK Invest, text-to-3D model costs have plummeted by almost 99% in the past year. Some developers have even witnessed a 120:1 reduction in their time to generate concept art for a single image within a game.

However, the current models still produce single, unified outputs, requiring manual fragmentation by game artists and developers to create dynamic game assets. In the near future, game engines are expected to integrate with text-to-3D models, enabling creators and developers to generate and edit assets seamlessly within their ecosystem. These advancements in text-to-3D generative AI mark a crucial turning point for the gaming industry, hastening the widespread adoption of generative AI in gaming.

Unity, a leading software company used by 70% of mobile games, is strategically integrating generative AI into games. According to Unity CEO John Riccitiello, it has the potential to drive 10X growth in the gaming industry. Looking ahead, we expect generative AI to permeate multiple aspects of game development and not just in-game content. By doing so, generative AI start-ups can transform game development and expand the frontier.**

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