Surviving and thriving in times of corona

Corona is a test for the whole economy – and even more so for startups. In this post, we look at how innovative plant-based and cellular-agriculture food startups can tackle the current crisis – and how ProVeg Incubator is supporting them during this unprecedented challenge.

The corona crisis is a global phenomenon – it affects countries on all continents and is hitting health systems, financial markets, the economy, and global society as a whole. The International Monetary Fund is forecasting the “worst economic downturn since the Great Depression.” The Covid-19 pandemic carries immense uncertainty and threat for businesses. It is tough to predict what the world will look like when the storm is over. How will food startups working on plant-based and cultured innovations fare during this crisis?

Startups need partners in the food industry who will believe in them and accompany them on their entrepreneurial journey. They also need partners that provide sustainable funding. Furthermore, they need to have a sound strategy when it comes to commercialisation and scaling. It has to be solid and flexible in equal measure, especially in times of crisis – like now.

Corona is a test for startups in all of these regards.

Let’s have a look, for example, at the industry partners and networks that startups rely on. The out-of-home market has basically collapsed. Foodservice is stalled, with restaurants, cafes, schools, and canteens closed in many countries. Even when the shutdown loosens, it will take a long time for the industry to recover.

Food delivery has benefitted from this gap in the market but is not strong enough to make up for the losses. Retail, meanwhile, is booming, as customers stock up on staples and non-perishable food. However, supermarkets are tending to focus on big brands and essentials in the current crisis. Against this background, startup innovations are getting less attention.

Kathi Ohens and Csaba Hetényi, the founders of plant-based deli meat company Plantcraft

Funding rounds at risk

On the financial side, startups are also facing challenges. Yes, there is still a lot of money in the market – However, ongoing funding rounds may be endangered, stalled, or even postponed. Many venture capitalists, family trusts, and other investors will now prioritise their existing portfolios and take their time to assess the situation. They will wait and sit out the crisis. The risk of valuations going down is very real when there are fewer active investors around.

It is great news that companies such as Impossible Foods are thriving even in times of corona, having recently raised huge rounds of fresh funding. Remarkably, plant-based-chicken startup Rebellyous Foods just successfully raised a Series-A round of funding. But, chances are, that many investors will now tend to stick with the bigger fish, while early-stage startups may be stalled on their growth path.

So these are the threats, and they are real.

Now, what are the opportunities?

Some impact investors focusing on plant-based and cellular-agriculture startups have confirmed to us that they are still feeling bullish. They have reason to believe that, both now and after the crisis, innovative, impact-driven startups will thrive even more.

Consumer behaviour may tend to be more savings-oriented for a longer time. Yet, health and the environment will be more in focus in the wake of corona. Diet considerations and diet change will also become even more important over the next few years.

Startups working on healthy plant-based and cultured alternatives have a chance to stand out in the coming times. Alternative proteins that are sustainable, clean, and high in wholesome and functional ingredients will be in high demand in the long run, especially among millennials and future generations. Consumer scepticism about food tech might yield to more openness, with tech-driven food startups benefitting from such a situation.

Show stamina, rethink strategy

In the meantime, cutting fixed costs to a minimum and preserving cash flow is essential to survival. One promising path may be government-support programmes that include loans, down payments, and short-time-work benefits. Unfortunately, such programmes often only address established companies and are not applicable to early-stage startups.

In the meantime, startups will need to be adaptive, creative, and patient – and prove that they have stamina. This is the time to reconsider your go-to-market strategy, work on your forecasts, and strengthen your network, for example, your ties with suppliers and co-manufacturers. Think about new ways of commercialisation and scale-up. Consider building your food-delivery business and work on your DTC channels. Or think about entering new markets that you may have neglected until now.

Take Plantcraft, a ProVeg Incubator startup that makes plant-based deli products. They are now pushing to bring their pate and pepperoni to European markets quicker than planned. This way they can address increasing demand in this food category in Europe and compensate for the high uncertainty in the US market due to corona.

Sander Sieuwerts of Incubator alumni startup Brannatura. Photo credit: Cadenza Zhao

Support from accelerators

As for new funding, think beyond venture capital. Now may be the right time for young startups to plan and launch a crowdfunding campaign. Brannatura, another startup that participated in the ProVeg Incubator programme, has prioritised setting up this type of campaign in the face of the corona crisis. Another great way to get support and access to funding are incubators and accelerators such as the ProVeg Incubator. Their resources and networks have proven to be invaluable for startups – especially in times of crisis.

At the ProVeg Incubator, we help startups in many different ways. Together with founders, we analyse strengths and weaknesses and set goals for the upcoming months. During our three-month programme – which we offer twice a year and for now completely online –  our mentors and team coach startups in topics such as food law, branding, and fundraising.

Mentoring, matchmaking, and connections to food-industry experts are now more important than ever. Additionally, we offer funding of up to €250,000 including €50,000 of in-kind services. We stand up for mission-driven food startups – so they can not only survive this crisis but thrive once it is over.

You might also like: