Mihir Pershad of Umami Bioworks

On this episode Alex Shirazi discusses the state of growth within the Cultivated Meat and Seafood industry, how to get to Factory #1, and the current state of the investment cycle in novel protein.

Purchase Cultivated Abundance by Mihir Pershad on Amazon here.

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 Thanks for joining us on the future food show. This is your host, Alex Shirazi, and I’m really excited to have Mihir Prashad of Umami Bioworks on the show. Mihir, welcome to the show.

Thanks for having me. Glad to be here. Mihir, tell us a little bit about your background. Sure. So I was born and raised in the U S and grew up between Texas and North Carolina, studied biochemistry in university.

And I think like many people who grew up interested in science, thought that I wanted to be a physician because that was. One of a handful of careers that I knew would allow me to do science for a living, but when I was in university, I spent quite a few years in an academic lab and realized the pace of the pace and the heavy structure around traditional called the biomedical industries from research to medicine didn’t align with Me, I’m an impatient person in general, and so felt like that sort of slowness of getting systems to move and evolve was going to be frustrating and fell into an opportunity to start a nonprofit with some friends when I was in school.

And it started out as a side project, and then we had to build a business around it because we were working with schools and basically creating a lending library for Equipment from the universities to help do hands on education for students in our local school systems. And you can’t really go into middle schools and high schools without having a proper business and a formal structure.

And that kind of opened my eyes to how much faster and to me more fun doing things in a startup is because you really have control over your own pace and your own destiny in so many more ways than working within a big incumbent. Institution. So after that, I spent about four years working at a venture studio up in Baltimore, uh, called early charm ventures and had the opportunity to help build a whole sector focus that’s now blue bioeconomy for them.

But at the time was really aquaculture tech. So I was working on. spinning out tech from universities and helping to build the first commercial businesses around it. What I think now people mostly call a venture builder concept. I was doing that mostly for like diseases and diagnostic tools for fish farms.

So I got to know the supply side of the seafood industry pretty intimately working with a lot of the farmers and producers helped me to really understand fishing and seafood production was not nearly as sustainable as I’ve been led to believe. And when you work on disease management, you realize how precarious the situation is for a lot of these farms.

I think the whole world has seen this now with COVID, but you can develop vaccines, you can develop all of these tools, and all it takes is getting it slightly wrong to have very little impact and to see a massive outbreak. And that sort of motivated me to want to work on this problem of making our food system more sustainable and taking a bit more of a radical approach than Just trying to improve incrementally the farming at early charm ventures.

Was that focused on, on seafood or was that just maybe one thing that you touched? It’s an eclectic group overall. So they have a couple of different pillars actually started with doing some projects with DOD on different materials, science, sorts of technologies, optics. And aquaculture tech was one pillar that grew up because Baltimore, Maryland is home to the National Aquarium.

And so there’s been quite a good center of research in the Maryland, Northern Virginia area on aquaculture and on seafood biology purely because of the aquarium’s center of gravity. So we had, I think, by proximity, access to technologies that were quite interesting in this field. The big challenge that I found, I helped build this pillar up from scratch was that all the customers are overseas because the U.

S. doesn’t really have much of an aquaculture infrastructure. Interesting. Okay. And so I want to, so you mentioned COVID and I want to get, build a timeline here because Umami Bioworks actually was founded in January of 2020. Is that right? February formally, but yeah, we started the work in January. So January, February, and then the impact of the pandemic actually hit in March or so, it was right along that time.

What was that experience starting a company literally right before the whole world is about to get shut down? I think I also had the benefit, I should say, of deciding that I wanted to move closer to our customer base. And so I had moved myself from the U S to Singapore to set up Umami and. So I was in a new country for about, I don’t know, four or five weeks before we had our first lockdowns, which was an experience because I still barely knew the place at that time.

So that was tricky. I think as anybody starting a business from scratch knows, there’s a lot of moving pieces to get aligned so you can start to get some momentum in the early days. And Singapore, because we had multiple direct flights a day to and from Wuhan, ended up with fairly early And aggressive lockdowns around COVID.

And we were so early that we didn’t even have established primary cell lines or anything else that would have allowed us to get the biotech company exemptions that many companies, I think in most countries received to go in and keep their biology alive. We didn’t even have a cell line to justify that to the government.

So it was really challenging. We had just gotten lab space and found a bench. Most of our materials ended up on multi month back order because naturally the COVID researchers took priority in the queue when the supply chain started to break. So we spent several months really running a biotech company without access to a lab fundamentally, which is quite a difficult thing to do.

I want to go back to your move to Singapore and maybe before I do, and I’ll ask you for the intro to Umami Bioworks and the types of products that you guys are working on in just a second. But at one point, did you say, Hey, I want to start this company and B it needs to be in Singapore. And I think you mentioned something about customers, but what was that thought process like?

Yeah, so I had the advantage, I think, of being in the broader seafood ecosystem and industry. And so I picked up on a few things when I was at Early Charm. One of which was Proximity to customers is everything, and it makes it so much faster if you can engage your customers more efficiently, and that was a big challenge.

I lived trying to develop technology tools for fish farmers, and then the fish farmers were in Thailand and Indonesia and India that we were trying to target and work with. And that time zone alone, you lose momentum versus being nearby. So I had started building an inkling that I wanted to work in this space.

And actually, I came in very skeptical. I met Michael from Finless at a conference. It must have been early 2018 or late 2017, really early, even in their history. And I’d heard about the concept of Cultivated, was pretty skeptical, did some back of the envelope math and really scratched my head thinking about how this could even work.

But after spending more time and thinking about it, started to see avenues for tech improvement that could help make it pragmatic. So my thinking was. Proximity to customers is going to be very important and our competitors were basically all in the Bay Area for the most part and had a head start of a few years and several million dollars.

So to me, it was clear that building a company like this. We had to know what our edge could be. And I felt, given my background in the industry, our edge could be understanding the customers and trying to solve the problem for the industry incumbents more directly. And that meant we had to double down on proximity to them.

And that precipitated saying, okay, Asia is going to be where we need to move because 70 percent of the seafood industry, both consumption and production is based in Asia. And if you’re an American or European moving to Asia, I think Hong Kong and Singapore tend to be the cities you talk about moving to.

And they tend to be very easy relative to other places to get set up in. Uh, but Singapore had already started talking about the Singapore food story and wanting to bet on food tech as part of the national strategy for food security. And they were very early to that conversation. I think now you see it in other countries like in UAE and a few others.

Uh, but at the time, I think Singapore was, was early to that discussion. And so that signal helped me make the commitment and say, we think Singapore is the best bet for where we want to be located. It has a pretty good talent pool for biologists. And there’s a lot of food tech, not really food tech, food companies that have offices and R& D teams in Singapore.

So we’ll have good proximity to our customer base. That makes sense. And so you’ve been in Singapore, are you in Singapore right now? Yes, currently. And so you’ve lived in Singapore for quite some time now. How is it there? It just from a, from just like a living and working standpoint, had you ever visited before you moved?

So I had visited a couple of times because especially coming into the region, Singapore is naturally, I think it becomes a bit of a hub for companies that are looking to set up. And so when I was working. With early charm, we had actually started exploring potentially setting up a sales office or a regional office for our aquaculture teams in Singapore.

And COVID threw a wrench into those works a little bit, but strategically it made sense. So I had spent some time here with the government as well, with enterprise Singapore and some of the other economic development organizations, really understanding their vision for what Singapore could be and where the strengths were.

And I think. The country has a pretty good understanding of where it has the right to win and where it’s disadvantaged relative to its neighbors. And they really play to those strengths. And I think Singapore is unfortunately, like many tech hubs, quite expensive. And it’s particularly for the region.

Singapore is, I think, now topping some of the global lists for cost of living. So that makes some things challenging, but There’s a really good foundational research base in Singapore for cell biologists and for food scientists in particular, and you can recruit quite well from local talent in those areas.

Anything manufacturing, process engineering related tends to be weaker, but that’s just because Singapore is I, I call it Manhattan in Asia, but fundamentally it’s not a place people put a lot of manufacturing. And so it’s just harder to find those kinds of talent in a country. But the real benefit I think Singapore has had for us is that the government has started seeding this industry with some early capital.

So we were able to get some grants in collaboration with local institutions of higher learning universities and polytechnics and build some of the foundational research base around fish. Which really doesn’t exist compared to beef and pork and poultry. And we had to do some of this fundamental work on just basic media and basic cell line R and D.

And those government grants were a lifeline in the early days. Tell us a little bit about cultivated abundance. So it’s a book essentially about, I’ll let you describe it, but it 2020. So maybe potentially a pandemic project as well. Tell us a little bit about the book and where that comes into play. Yeah, it started actually before the pandemic as a, as an exercise for me to convince myself that I wasn’t doing something crazy, leaving a job that I really enjoyed to go start a company.

And also to make sure that I tried to really be deliberate and thinking through. what a company should look like if it was going to succeed in this sort of highly regulated, deep tech sort of space, but in industries that touch every human being on the planet and food. And so it was almost, it started as a thought exercise.

And then I realized if I was interviewing a number of operators and founders and investors and doing this much kind of digging, maybe I should think about trying to formalize it into a book that would hopefully help other people on a similar journey. And so I started, I think, June or july 2019 and basically through october november was really building my own way of thinking, but the book itself cultivated abundance is really.

more about how do you make structural change in these entrenched critical industries where traditional startup approaches could cause real damage. So if you think about something like a food system or an energy system, move fast and break things, puts people’s lives at risk, right? If you break the food system or you break people’s source of energy or clean water, and these industries tend to be heavily regulated, there’s a lot of human safety implications.

And there’s really deep, structurally entrenched sort of path dependence. If we build roads, for example, then you don’t have infrastructure. If you want to launch electric trains, you have to build all that from scratch. And same in the food system. You’ve got a lot of distribution networks and infrastructure built.

And so conceptually, I went on an exploratory exercise of what I think a number of investors I think started with Mike Maples out in the valley called like the IDMAs and thinking through what sort of approaches actually would make sense for this sort of company. Um, and try to consolidate those thoughts into a framework for thinking about building these companies from the ground up.

And I would say it’s really helped me. I think a lot of those things are still very well holding today after four years of experience, trying to put them into practice and we’ll link the book. To the show notes. So take a look at that as well. You mentioned idea maze. I have to shout out actually a podcast by the same name by Rob go of next view, who takes that philosophy and breaks it down with a couple of different founders of key companies.

So we’ll link that as well. I’m really fascinated so far. We’ve talked a lot about Umami, but I wanted to. Officially ask you, what is the main products that Umami is creating? Is it B2B, D2C? And how big is the team and how much have you raised so far? Sure. So our focus at Umami is making manufacturing systems that can be sold as a product for incumbents to basically adopt cultivated as a new production solution to make a seafood instead of farming it, or instead of catching it to cultivate it.

And so what that functionally means is that we act like a systems architect and an integrator figuring out what the overall system design should look like, how we can create a standard modular production line, and then sourcing all of the key inputs and the suppliers to make sure that we can deliver these factories on time, on budget, and to spec anywhere in the world.

So in a lot of ways, it’s the way ASML Builds these super high tech machines to make chips and then sells the TSMC and Intel and they make the specific design and product they want to make, but the core technology is. How do I X chips at five nanometer or two nanometer scale? And so today we are approaching 20 people and in total, we’ve raised less than 4 million in equity plus a couple of million in grants that we’ve been able to bring in as well.

Been very lean as a team and as an operating operating enterprise so far. Very cool. And you’re definitely making waves. No pun intended, but I should have taken credit for that one. No, no pun intended. You’re definitely making waves. We’ve definitely seen Umami across the conference circuit and elsewhere.

In fact, it was, I think a conference that we were both at in San Francisco, one of the industrials. Lysing cell based meats events. And, and Sandhya was at that event with a very candid story about their production systems and scaling. This was a couple years ago, and there was some recent news with your team and Shiok meats.

Tell us about that and, and what it entails. Yeah, I think a lot of the industry is going through a reflective moment, and not just now, but probably for the last 12 months, which is, are the assumptions we made when we started our companies holding, or has the world changed around us and we need to adjust course to build differently?

We had the benefit, I think, as Umami of coming in, starting in 2020, we’d seen three, three and a half years, maybe, of some of the first companies making some progress and where they were getting stuck. And so I think we had the benefit of being able to leverage that knowledge to think a little bit differently about what might be a better approach to solving some of these problems, going B2B versus B2C, for example.

With Shook, I think, We ended up having some conversations through our mutual networks and realized that they were exploring some opportunities for M& A. And since we’re, I think, quite literally 15 minutes apart driving, we figured we should at least have a couple of conversations and see if there was anything strategic there.

And our feeling was that, especially as a company trying to basically sell manufacturing tech as a platform, there was strong overlap in our thesis around The species in seafood and particularly lobster and crab, for example, that are increasingly at risk endangered. We’ve now seen two years with the Alaskan crab fishery for snow crab has returned little to nothing.

And we still don’t know exactly why that is other than the animals have gone somewhere or they’ve died. And I think being able to bring that broader pipeline to our overall platform strategy also helps us to make a much stronger case to industry incumbents. And say, yeah, you’re making a bet early right now on an industry that you don’t have a ton of proof will scale to be a significant revenue driver.

But if this works, you’ll be early to a dozen species. It’s not just one or two. And that to us was really compelling because I think it’s hard to convince incumbents to make bets if the market size and the opportunity doesn’t seem big enough. So bringing more species together helped lay groundwork for that more compelling opportunity for our customer base.

And there’s a lot of synergies in terms of things we’re doing, not just species, but also some of the R& D approaches that Chuck was taking for broader valorization of the assets, which I can’t talk too much about right now because it’s not publicly announced. But conceptually, there’s some really interesting things we thought we could leverage across our platform.

And so the opportunity came up, we had the conversations. And ended up deciding to basically do a merger and bring those assets into the business to scale it right now using the B2B approach and then we’ll obviously continue to assess how the market changes and whether there’s a rational basis for us to view a B2C approach in the future.

But we think right now getting incumbents on board and leveraging their. Distribution and their assets is going to be critical to this first phase. Thank you for that. And I want to talk about the current state of the industry. We’re actually in a pretty unique time where we see Australian company vow.

I believe just recently received regulatory approval in Singapore. There was or ongoing, I believe it’s even potential litigation with a commercial facility in Singapore with good meat. Tell us about the state of the industry. Not just in Singapore, but in general, and maybe I want to be even more specific to say, do you feel like there will be more mergers across maybe some of the other types of cultivated meat companies?

I’ll answer the first, the second first. It was definitely a loaded question. I realized that there is so much going on in Singapore specifically around this time too. No, totally. I think it is almost inevitable because the market isn’t going to support 150 companies doing largely similar things with a similar approach.

So it’s inevitable that there will be some consolidation. And I think this is probably the window where we’ll see the first set of this. And then the second set will probably be when the first few companies start really scaling commercially and look to acquire new revenue channels via growth. So we’re likely in the M& A by necessity phase right now to make sure we can get to commercial, but there’ll likely be a second phase of we’re doing revenue and we’re scaling and how do we grow that as fast as possible via more kind of inorganic acquisitions or mergers.

But I think the challenge right now is also A lot of the approaches that were taken early on are not necessarily, they don’t necessarily have a clear path to get viable without more capital coming in, and if the capital allocators are still quite reluctant to invest before they see commercial proof, you have a bit of a Chicken and egg dilemma of how you actually get to proof if it takes tens of millions more, but we’ve seen I think most of just announced that they’ve raised and I’m sure there’ll be a few other announcements like that coming.

There may still be a window, a narrow window for a few of the market leaders to raise enough to get to revenue, but the tricky thing is. When you get to revenue, whenever you hit the milestone shifts, right? And so we have to be really clear eyed about what proof looks like. And in our view, proof is scalable revenue that de risks the business enough that investors come back in and say, now we want to help you scale this as opposed to I’ve gotten a single product into a restaurant and sold 10 customers a week, which may have been the old benchmark, probably doesn’t get you all the way to being able to raise significant capital going forward to grow anymore, because I think that.

way of thinking has shifted. Investors realize selling 10 people doesn’t really de risk the commercial roadmap for me. It doesn’t really de risk go to market. And it leaves quite a number of questions about capital efficiency and how big you have to get before the math starts to look favorable at a unit economic level.

So I think long way of saying M& A may be the right path for some, but it may also not actually help accelerate the path in other cases. And so it’s hard to figure out. Whether it makes sense or whether it’s sort of accruing tech together, but it’s not moving you closer to market. We talked about revenue quite a bit, I think, and you mentioned unit economics really get there at scale, but how important do you think for this next phase of investment?

Do you think it would, it’s good enough for revenue to come from side streams versus that core competency for investors, or do they really want to see? Do you think they want to see revenue from the core business? And I know for you guys, it’s a little bit different, but generally speaking for the industry.

Sure. The tongue in cheek answer is any port in a storm, right? And I think investors are also struggling with portfolio construction right now. And many of the companies still being below valuations that may have raised that in the current market conditions, being able to show the company can make some money and extend its runway and get to some path where it can survive.

Until it can prove its core thesis. I don’t think anybody would look at that and say it’s a bad thing at the moment, given where the world is, because we don’t really know when markets will turn around, we’re seeing some positive signals, but. We’ve seen these before and then things still remain really cold for a year, maybe longer.

So being able to deliver something of value to a customer that they’re willing to pay for is non trivial. It should be rewarded in market. It depends on how much you’re generating and how much you’re spending to generate that income. But in our case, as a B2B company, We have leaned heavily and have been doing this for the past year or so, and maybe a little bit longer on basically development contracts, because we’re engaging a smaller number of incumbents and investing quite a lot of time and effort with them to build a clear path to a commercial license or a factory with them.

And we said, okay, then we should be charging for the services, the developmental work that’s going into that. And in our case, it’s basically just part of the funnel where it’s a paid part of the funnel, but the goal is to really make sure we get to the bottom, which is a full license or full, full commercial facility.

And that’s worked reasonably well because it kills two birds with one stone proves interest in getting to that large stale, but it also gives us confidence that we’re working with partners that are bought in. So I think companies will have to find their way through this. I don’t think there’s a single right answer to sidestream versus mainline revenue other than.

If mainline revenue isn’t pragmatic, or if it’s going to be negative margin, then it adds probably significantly less value if it’s increasing your burn to deliver revenue. Yeah, good point. Even traditional software and tech companies have a professional services arm at times. Okay. Thank you for that answer.

I want to go back to talking about commercial scale. We’ve heard a lot of inflated numbers over the last A couple of years, if you were to look at the next five, 10, 15 year horizon, where do you think commercial scale will be at in terms of perhaps usually the industry uses leaders, but I’ll let you choose the unit.

Can you give us, it doesn’t have to be umami, but rough estimates, five, 10, 15 year horizon. My favorite part of my job is being a prophet because I know that no matter what I say, I will be wrong enough that it will, I will look back at it and scratch my head. I think our view as umami is we need to unlock roughly on the order of a trillion in capital into the food system to meaningfully shift production to these more sustainable solutions.

And whether that’s just cultivated and whether it includes fermentation, we’re a little bit agnostic on that, but the fundamental reality is there’s a few trillion dollars in assets, capital sunk into the built environment that supports our existing food system. And we’re not going to materially trillion with a T trillion with a T.

And I forget the exact number, but I think it’s on the order of three to 6 trillion in sunk assets in the food system. Today, what we’re talking about is reinventing a system that requires a new asset base. We can’t take a farmhouse that’s growing cows and rearing dairy cows and convert that infrastructure.

We might be able to save the building, but we’re not going to convert the milking infrastructure to produce cultivated. We’ve got to make those investments. That number is obviously irrational for private equity when it’s considered risk venture. It’s a big lift, even just for private markets by themselves.

So there’s some combination of government, public money, private money, and startup capital needed to get there. And seafood by itself, we know this market better is roughly 100 million ton order of magnitude kind of market annual production. And I think if you ask most companies rationally what they can produce in the next 12 months or 24 months in factories, at most, we’re probably talking about kilotons.

So 1000 ton scale, which is a fraction of a fraction. So our view is the next two years really need to be about the industry proving that factories can get built, can run without catastrophic loss events like contamination being a major issue, and can demonstrate a clear path to positive unit economics.

If we can do those first thing, those three things in the first factory, and you work with financers early, then you can help create the financing shell. That says, this is how we finance these factories going forward. And from there on, it becomes debt. It becomes a traditional bankable asset class for N equals two onward.

But those first of a kind facilities are really important and it’s not enough to prove that they run. They’ve got to prove that they run in a way that scales and where the risks are well understood. Uh, and if we do that and we can’t, that will help incumbents and it will help the finance industry enable us to get to, we think it’s probably five or 6 percent of total capacity production capacity in the next 10 years.

If we do really well and we show great margins, then that number probably looks like double or triple because. The oceans are in significant trouble right now with climate change and other pressures. And existing supply is at significant risk. And the industry is not blind to this risk. So if we can show a way to make better margins.

With technology, I think we’ll see massive adoption in industry, but the if is if factory number one proves that case, I think you also make a good point that as cultivated seafood production increases traditional supply, as we have seen is decreasing there. I don’t want to say it’s favorable, but it.

Makes the numbers work out a little bit better. We have a few advantages in seafood, right? One of them is higher average price points for most seafood compared to terrestrial. And the other is it’s actually a supply constraint industry in that we catch a lot of things out of the wild and. The IPCC report that was put out last year has some really dire predictions about the sustainability of fisheries in the ocean today and what those might look like by 2050, and it’s looking at in the neighborhood of between 25 and 40 percent reduction in total fisheries biomass in the oceans, just purely based on climate change.

Environmental changes. So that’s a different problem than terrestrial meats have to solve, which is this is a subsidized major business that the supply is not going away. It’s just getting worse and worse for our planet to keep producing this way. That’s a harder argument to convince the consumer on, I think.

And there’s more work to be done there than this product disappearing. We have a way to help preserve it. And yeah, it’ll look a little bit different, but it will help preserve this for generations to come. Very well spoken. I want to shift gears a little bit. There’s the recent Korean series, Blood Free.

Have you taken a look at that? I have not had a chance to see it yet. It is on my watch list for the next time I’m sitting on a flight somewhere. It is quite interesting to see that the cultivated meat industry is Bleeding into entertainment as well. Cool. As we begin to close up, I really wanted to one, thank you.

And to ask you if you have any last insights or announcements for our listeners out there. Or the only, only big thing would be that we’re going to be growing our team quite a bit this year, especially looking at engineering and food science and moving towards building first factory. And so would love for anybody who’s interested to reach out my email or LinkedIn.

We can, I can pass and put in the show notes. And we’d love to talk to anybody who’s interested in helping us make this space commercially viable and ready to scale. Mihir, thank you so much for being a guest on the Future Food Show. Thanks for having me. This is your host Alex and we’ll see you on the next episode.