Dao Foods and NCC also invested in Chinese foodtech company Starfield Food, producer of China’s first and only ground beef analog, which since then has already partnered with six restaurant chains, including Papa John’s, to sell its vegan meat in Chinese foodservice.
What is the current focus of Dao Foods?
The mission of Dao Foods is to help entrepreneurs introduce exciting new plant-based and alternative protein products in China to reduce the consumer demand for animal agriculture. China is the largest consumer market in the world with rapidly rising incomes and increasing meat and dairy consumption, which if left unaddressed will lead to growing negative environmental, food safety, and health impact.
Dao Foods believes that supporting talented entrepreneurs who are targeting the 400m millennials in China with new, exciting, and delicious plant based proteins is a huge business opportunity with massive social impact.
We recently launched the Dao Foods Incubator, which will provide startup capital and mentorship to five plant-based and/or alternative protein food companies every six months. Our plan through the incubator is to help launch 30 exciting companies over the next three years, which we believe will inspire even more talented entrepreneurs into the plant-based sector so we can build the industry together in China. It takes a village!
How do you assess the market for plant-based and alternative protein sources in China?
It is still early days in China. When you go to restaurants or order online, there is no such thing as a “plant-based” category like there is now in North America and Europe. That said, things move fast in China, and we are excited with the recent entry of international companies like Beyond Meat into the Chinese market. We have invested in and been working with Starfield Food and Science Technology for the last year and are excited about their recent product launches at six restaurant chains across China covering hundreds of restaurants. In fact, it is our work with Starfield that partially inspired us to start the Incubator, seeing how our networks and guidance could help an early stage company grow. We believe entrepreneurs are the key to innovation and change and want to support them as much as we can with all our resources and the combined expertise of our network both in China and abroad.
In your opinion, why should the investment community continue to acknowledge veganism?
We believe that investors are becoming more and more aware of the macro risks related to industrial animal agriculture. Whether it’s the African Swine Flu, Shrimp disease (Div1), or recent supply chain challenges, smart investors are beginning to understand that industrial animal agriculture is a very inefficient way to satisfy the growing global demand for protein. It only makes economic sense that the world should diversify its sources of protein and innovate to create more resource-efficient alternative protein products.
Despite the success of companies like Impossible and Beyond Meat, the alternative protein industry is still in the early stages of science and product development, and the products will only get better at conquering the taste buds of mainstream consumers. Brave entrepreneurs are leading the charge, and with the world’s largest meat and seafood market in China, we believe that smart investors are beginning to recognize the untapped opportunity. Our conversations about China with investors now are radically different from the conversations we were having two to three years ago.
What is Dao Foods planning to achieve in the short term and in the long term?
Our current focus is on the incubator. As much as the macro environment discussed above should make the market potential obvious, we believe the best way to show the opportunity is to prove it, through successful and innovative companies. By supporting and launching five alternative protein food companies every six months, we believe these companies will prove there is market demand and potential in this sector.
Another area of current focus is to engage a small group of forward-looking strategic investors who comprehend this theory of change and who want to engage and get involved in funding these companies earlier on. The goal of the incubator is to create a collaborative ecosystem of entrepreneurs, investors, and food industry experts who want to learn together and be pioneers in changing the food system.
Why is sustainable food the key to investing in China?
The current food system in China is unsustainable, particularly given projected demand for protein in the coming decades. Industrial animal agriculture is a very inefficient protein source, and we believe fortunes will be made by those who create more efficient and tasty alternatives to present to consumers.
We know that Dao Foods has recently partnered with VC firm New Crop Capital, was this partnership specifically to launch and support the incubator project? Please tell us more about the partnership and its purpose.
Our partners New Crop Capital have been pioneers in the alternative protein sector, funding over 30 companies. We were mission aligned from the start and believed strongly in their investment thesis and mandate, which Dao Foods is now applying in China. In our 2+ year partnership with NCC, we have learned a great deal from their experiences, and are combining it with our knowledge and networks in China. The incubator is just one example of how we will apply the experience, scientific knowledge and networks of our combined team to accelerate plant-based and alternative protein in China.
Can you tell us about the vegan startups in your portfolio?
In addition to our investment in Starfield, we have been developing a strong pipeline of companies ranging from soy protein ingredient companies to plant-based chicken, seafood, yogurt, meat snacks, and many other categories. We are truly excited about the future for plant-based food in China.
Why should startups apply to your incubator program?
Dao Foods is laser-focused on China and laser-focused on plant-based and alternative protein. While an argument could be made to have a broader geographical mandate (e.g. Asia), we believe that China is unique from the rest of Asia and large enough of a market by itself. An argument could also be made to have a broader set of sectors (e.g. food tech), but we believe that a narrow focus on plant-based food allows us to bring the right resources and networks that have true value for the entrepreneurs.
In short, we don’t want to be distracted by the challenges in other sectors and other geographies. Plant-based food in China is big enough! Dao Foods can only be successful in our mission if we are able to support and help companies grow. We are excited to partner with five talented companies every six months who see value in the Dao Foods network joining their team.
For information about applying to the incubator please see Dao Foods’ call for entrepreneurs
