SPACs are "fundamentally flawed", says Jim Mellon

InterviewAlternative proteinVertical / Indoor Farming

In the interview, Jim Mellon, executive director, Agronomics, also mounted a defence of the cultivated meat industry amid recent criticism; reasserted his claim that the dairy industry will be dead in 10 years; and said Agronomics would be busy with new investments next year.

SPACs are “fundamentally flawed” according to Jim Mellon, the entrepreneur and largest shareholder of a VC fund focused on alternative proteins, who says FoodTech firms should avoid SPACs and go public by the traditional means.

Mellon, executive director, Agronomics, spoke in a video interview with FutureFoodFinance co-founder David Stevenson.

In the interview, Mellon also mounted a defence of the cultivated meat industry amid recent criticism; reasserted his claim that the dairy industry will be dead in 10 years; and said Agronomics would be busy with new investments next year.

SPACs are “fundamentally flawed”

On the SPAC (special purpose acquisition company) market, which has seen a slowdown of late, Mellon said: “The SPACs are fundamentally flawed as vehicles for raising money.

“The investors have basically the pull option. They can ask for their money back if they don’t like the look of a deal."

Mellon said this led to SPACs being “denuded of cash and “effectively worthless”.

Recent examples of SPACs in the FoodTech sector include Benson Hill, which uses artificial intelligence, data and a variety of breeding techniques to create food and ingredient products, and prior to that indoor farming operator AppHarvest.

But there has been a marked slowdown of SPACs since March this year, although there has been a bit of a rally in September, and speculation about potential FoodTech SPACs has also thawed.

Mellon said the benefits of going public via a  SPAC- less due diligence and a quicker path to market- were great in a “hot market” but the market was currently “a bit off the boil” negating these benefits.

“When some of these companies go public, my view is that probably now, given the SPAC situation, they should just go public in the traditional way," he said.

Talking more broadly about investment into cultivated meats and precision fermentation, the focus of the Agronomics’ portfolio, Mellon said: “I would say there is no shortage of capital.

“I mean every single round for all these companies is highly oversubscribed, at least with the companies we are involved in.”

Addressing recent criticism of cultivated meat

Mellon also addressed some of the recent criticism of the cultivated meat industry, including a highly critical article about the sector in The Counter, which questioned its ability to scale up and suggested it might be heading for a billion-dollar crash course with reality.

Mellon hit out at the negative reports, saying “they are wrong”.

He added: “The trajectory of price and volume is very much in line that within five years the cellag producers will be producing at a lower price, or lower than griddle parity than that conventional food producers.”

Asked specifically if he recognised the figure of $450 million, quoted in The Counter as how much each pharma-grade factory for meat alternatives might cost, Mellon said he didn’t.

Agronomics, he said, works with independent scientific advisors.

He said: “The best estimate is it will cost a $150m to build a plant that will feed 100,000 people for 20 years and will produce an IRR of 30 per cent over those 20 years for initial investors.”

Mellon also said the alternative protein industry would be aided by the likely introduction of carbon taxes hitting the conventional food producers as “big polluters and emitters” while the alternative protein industry would also benefit from carbon credits.

He accepted the cultivated industry faced challenges, such as technical challenges and patent challenges, but said it was “unstoppable”.

Agronomics

On Agronomics' own portfolio, which includes investments in BlueNalu, the cell-based seafood producer, Formo, the precision fermentation firrm, and VitroLabs, a startup developing lab-grown leather Mellon said “over the next year Agronomics would be particularly busy in terms of new investments”.

Areas of investment focus would continue to be cultured meat and precision fermentation, as well as cultured fats and enabling cell-based technologies including growth factors, he said.

He referenced a recent visit to the San Diego headquarters of BlueNalu, which Agronomics invests in.

He said “What is really interesting about BlueNalu is they can make any form of fish at all. You name it? From a goldfish to a shark they could make it.”

He added he thought BlueNalu’s bluefin tuna would be on the market by as early 2023.

“I tasted the fish, it was fabulous," he said.

Mellon also offered a withering assessment of the shelf life of the conventional dairy industry.

“It’s no secret that I think that the dairy industry is going to be a goner whiting 10 years, at least in terms of the large herds,” he said.