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Alternative protein startups pivot to B2B ingredients amid funding shift

Alt protein startups are pivoting from consumer meat analogues to high-value B2B ingredients, driven by stronger investor interest, better margins, and clearer commercial pathways.

Although global investment in alternative proteins has slowed significantly since its peak in 2021, companies active in the functional ingredient space, and particularly those using precision fermentation and fungal biomass, say investor appetite could be recovering.

But the money is no longer flowing to alternative meat. Instead, funding is shifting toward B2B platforms that supply clean-label, high-functionality ingredients.

At the Future of Protein Production event, held in Amsterdam in October, founders and investors shared their experiences and strategies for survival in a difficult funding environment.

Low margins and investor fatigue push startups out of meat analogues

“Alternative meat ingredients are low margin… you're replacing soy protein, which is a very cheap ingredient. That’s just not a really VC-bankable case,” said Roderick Bronkhorst, head of corporate venturing at plant-based ingredients company Cosun. “It makes a lot of sense to focus on higher-value, more functional ingredients.”

Startups are increasingly concluding that plant-based meat, once the flagship of alternative protein, currently lacks the necessary profitability or scalability to attract further capital. Investors are also wary of earlier failures in the category.

“There’s been quite a few companies before us… especially in fermentation, that haven’t really lived up to the hype,” said Daniel Bisley, chief financial officer at Vivici, a startup that has developed its own precision fermentation-derived protein.

“Some of them have been cracking at this for the past decade and they’re still not quite there.”

Alt proteins: To B2C or not to B2C?

One startup that pivoted is Berlin-based company Formo, originally a recombinant casein producer that later launched plant-based cheese products. It is now reallocating resources to focus on B2B ingredient supply.

“We moved into cream cheese, a B2C category that is already very full, where plant-based products are doing a good job,” said Christian Poppe, senior director at Formo. “Ultimately, we went back to the drawing board… and made huge strides in recombinant casein. That’s where we’re settling down now.”

Thijs Bosch, CEO of The Protein Brewery, another plant-based food ingredients startup, found that staying focused on B2B from the beginning helped the company scale more efficiently. The company’s novel protein ingredient, called Fermotein, contains proteins, fibres, and essential amino acids, vitamins, and minerals.

“We made a very clear choice for B2B,” he said. “Trying to do both B2C and B2B is very difficult. It's really about solving a consumer problem. For us, that's offering a clean-label, whole food ingredient.”

How to scale under pressure

Founders said corporate strategic investors, public co-financing, and creative approaches are all vital to scaling without building expensive production lines from scratch.

Modular, capital-light scale-up models are an example of how to keep costs down in the early stages.

“One of our portfolio companies built their fermenters inside the four walls of an existing sugar factory, using its utilities,” said Bronkhorst. “That lowers CapEx by three or four times.”

Bisley from Vivici also noted the importance of scaling carefully and strategically.

“We’ve seen competitors or other companies scale more aggressively when they weren’t yet ready to do so, and that cost them a lot of money. We’ve seen peers take the direct-to-consumer route, which is very expensive to build a consumer brand and requires a very different skill set,” he said.

“So we’re being very focused on what we want to do. We know where we’re heading, and it really comes down to being thoughtful about where we spend money in the future. Anything outside of that core focus is not our priority right now.”