170 Pete Oberle on how to invest in lab grown regenerative meat

Pete Oberle, managing partner of Trailhead Capital, shares about his journey into investing and the latest investments they have made. Among them there is a regenerative cultivated lab-grown meat company.
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Transcript

SPEAKER_00: 0:00

A check-in interview with Pete Oberle, the managing partner of Trailhead Capital, on his journey into the food and egg space and the latest investments made by the fund. Among them, a regenerative cultivated lab-grown meat company, which should help regenerative farmers 20 or even 100 eggs their protein output. Does that make you cringe or very interested? We unpack it all in this interview. This is the Investing in Regenerative Agriculture and Food podcast, investing as if the planet mattered, where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, wear and consume. and it's time that we as investors big and small and consumers start paying much more attention to the dirt slash soil underneath our feet to make it easy for fans to support our work we launched our membership community and so many of you have joined us as a member thank you if our work created value for you and if you have the means and only if you have the means consider joining us find out more on gumroad.com slash investing in regen ag that is gumroad.com slash investing in regen ag or find the below welcome to another interview today with the managing partner of trailhead capital welcome pete

SPEAKER_01: 1:35

coon thank you great to be here

SPEAKER_00: 1:38

and thank you so much for joining us on this late or early hour depending on how you look at it but i'm very interested we've interviewed your two of your other co-founders and managing partners which obviously will link below in the interviews but as As a fund, as a first-time fund in this space, and one of the few funds in the space, obviously, there's a lot to discuss because you've been making investments. But we'll get to that in a minute. I would love to start with the personal question we always start with. How did you end up in this space and focusing so much on soil regeneration and then ending up setting up one of the first VC funds in the space here?

SPEAKER_01: 2:13

Yeah, great question. Really, I got into it from a human health perspective. of my background, I was trying to play football for far too long. You know, in the process, it motivated me to optimize human performance but it also led to a lot of injuries and too many surgeries.

SPEAKER_00: 2:33

Just American football, soccer, what are we talking about here? Yeah, American football. Global level. American football, okay. Which I think gets more injuries almost than soccer or not? I think it does. It's quite a top sport, right?

SPEAKER_01: 2:45

Both fairly injury prone, but a few more contact injuries in

SPEAKER_00: 2:50

American football. And how did you discover food then? I wouldn't say as a medicine because let's not go there yet, but is that a thing? in American football that food, what you're eating, and is that important? And then how would you describe, let's say, the current thinking or the current general thinking in American football around food?

SPEAKER_01: 3:12

Yeah, no, that's a great question. I probably am a little out of date in terms of how American football specifically is thinking about it. But at the time, and I mean, of course, this was the eye opener. You know, I mean, this is going back to the 80s and 90s when I was playing. And really, we were taught lot to focus on macro nutrients and essentially cut fats out of our diet. So at the time, there was very little known or consideration given to that food. But really, the evolution for me was, you know, I had gotten, well, I mean, background there was going from those surgeries. I basically got out of college, got into investment banking. I went into the life sciences group because I was focused on regenerative cartilage. I got exposed to ag biocompanies at the time. Ultimately, went back to business school, joined a private equity fund. But along the way, where diet came back into the picture and a better understanding of the importance of the quality food was, I was introduced to the paleo diet. This was about 2011. Which

SPEAKER_00: 4:21

is quite a shift from not including fats to paleo. Just as a background, paleo, what is paleo? The diet, just for people that are thinking, yeah, I heard about it, but they don't really know what it is. How would you describe it?

SPEAKER_01: 4:35

Yeah, broadly, it is you Well, they would tell you no grains, no dairy, no legumes, and avoid processed foods while focusing on good, healthy fats, including animal fats, nuts, etc. But, you know, of course, the more you look into that, you understand some of the nuances to those grains and to that dairy. So when you get into the ancient grains, I mean, basically the premise for paleo is avoiding the inflammation and leaky gut, that some of those inflammatory foods can cause so if you get to ancient grains that are a little bit more historically agreeable with the human digestive system then you can avoid some of the ramifications of that so um

SPEAKER_00: 5:20

it's basically taking us back to what we think which is very debatable and for many sides what we used to eat before we started agriculture or before started agriculture before we we stopped being mostly hunter getter etc but did you still remember how because you when you first hear that and you've always been taught that fat is bad etc like did it hit you immediately like oh this is interesting or was there resistance first like do you still remember when the first time you i wouldn't say saw paleo but the first time you took it seriously what was your response there

SPEAKER_01: 5:53

yeah uh total skepticism it didn't make any sense to me it was like you know okay everything you're telling me is pretty much the opposite of what i've been taught my entire life but truthfully at the time i was working for a private equity fund in japan the Fukushima meltdown and earthquake and tsunami had just happened. And so I think we were in a space where we were willing to explore and just searching for answers and things to kind of take our mind off of what just happened there. But, you know, so yeah, I doubted it very, very strongly. But, you know, as a result, I had to try it and turned into a little bit of a biohacker in the process. So basically, you know, to prove it out with getting essentially monthly blood tests to track my biomarkers and you know not surprisingly basically everything improved significantly

SPEAKER_00: 6:47

so um you remember that first time when you saw those biomarkers and you were like you were sure well no maybe maybe you already felt better but that you were sure this was not gonna work did you feel better the first time you you did the blood test because then maybe you had a hunch like okay this might be a bit not what i expected or like how how was that process

SPEAKER_01: 7:06

you know actually that's a great question i going back to how did I feel like you know thinking about the process it took a few weeks for the body to adapt well in even the taste buds you know taking out some of those sugary foods but you know within a matter of weeks it kind of felt like my mouth was reprogrammed and otherwise bitter or plain foods were you know so much richer so I've had some hopes but still some skepticism but when I started getting those results back it was hard to argue with I was wasn't in a terrible condition, but it was noticeable enough to be able to attribute it directly to dietary changes. So yeah, I mean, that was what really opened up the rabbit hole for me. So I started paying attention to ingredients and foods, realized how hard it was at the time, and of course, this is just 11 years ago, to really understand the quality of the ingredients. I basically had to start at just a level where there wasn't bad stuff in there. There wasn't stuff I did not understand. But necessarily, you know, I was still operating at that private equity fund, but decided to start angel investing in the space. That started with some high end CPG companies, but really wanted to start getting closer and closer to the source. So started investing in human gut microbiome companies and gave me a better idea of the causes and ramifications of inflation, inflammation, and ultimately took that back to the source and started looking directly at the opportunities, both in land and tech. So really, I continued doing that, left private equity, took a year off, really wanted to give some thought to how I could better contribute to the world, and in the process, saw firsthand how badly the environment needed so much help um you know unfortunately at the time i was exposed to regenerative agriculture and i mean it just became so blatantly obvious about the importance of soil health in improving um human and planetary health so that

SPEAKER_00: 9:13

because that's an interesting it's an interesting step beyond let's go back to our ancient diet and of course we can discuss like what we used to eat 20 30 40 000 years ago it's not the same meat it's not the same grain it's not the same etc But I've also seen many people simply saying paleo, okay, I need to eat a lot of animal protein, no legumes, no this, that, but not going the step beyond thinking, okay, how does this meat was grown? Like what did this cow ate or et cetera, et cetera. So do you remember, because it's not so obvious that this turns into a rabbit hole, it could be simply stopping there. Like, okay, I don't do processed food anymore. I don't do grains. I do a lot of animal protein and I feel a lot better regardless of where this comes from. And that's okay. And that's it. And, but no, you took it a few steps further and actually way further than that. Do you remember, was it just simply you being curious or were you already aware like, Ooh, this could be quite a, an energy intensive way of eating if we feeding it grain and corn and soy, or was it an environmental question? Like, like why, why did you keep digging into, um, at the end into the soil?

SPEAKER_01: 10:20

Yeah, you know, it was a combination of things looking back on it. Um, There was, well, there was the trigger that was set off in just that, I mean, what I mentioned before, when you basically turn the information you've been schooled in on its head and have better outcomes through it. So it just, yeah, that definitely triggered in me a desire to explore and understand more and really start to question everything. But, yeah, I think in terms of environment, it also... Well, it raised somewhat of an inherent conflict in me just trying to understand. So, okay, well, first I'll qualify. I certainly appreciate paleo diet. There are a million diets out there for a reason. I mean, there's a lot of different heritages and evolutions, populations over time. So it doesn't necessarily work for everybody. But that said, assuming this approach works for a variety of people, like, is that really telling us that we need to ramp up production and consumption of meat? And can this world really sustain that? So yeah, it triggered in me the desire to look into meat production, better understand that. And, you know, of course, It's crazy when you start to dive down that rabbit hole, right? How little we know, how disconnected we are from the food system. So really starting to learn what a GAFO operation is really like. Obviously, it's eye-opening and disheartening. Do

SPEAKER_00: 11:56

you still want to eat that, even if it's better than whatever factory bread you were eating or etc.? Yeah, that's an interesting question. I mean, yeah, we try to often not to see that or prefer not to see that, but Unless, no, the moment you see it, you cannot unsee it anymore. And then you have to act. Otherwise, yeah, it would just be a very, very big conflict in your head.

SPEAKER_01: 12:18

Well, and I'm sure you know all too well, there's a very conscious effort to hide that from, you know, the public facing aspect. And,

SPEAKER_00: 12:27

you know, most of those packaging, there is a happy cow in the pasture somewhere. Yeah. On the packaging.

SPEAKER_01: 12:33

Yeah, that's right. So, yeah, it was, I mean, a large part of it was trying to understand, okay, This approach is clearly working for me. And if this is what the vast or, you know, a significant portion of the population historically followed, then, you know, how does that possibly work? Because it did inherently make sense to me that, you know, relying on the intelligence of nature is the right thing to do. And

SPEAKER_00: 13:02

that production piece, like feeding the world is something that people are like, yeah, but how we're going to feed the world? than this like you've done the analysis you've looked into this what is your normal response like at a dinner party i don't know if you only have friends that are into region ag and food but let's say you meet somebody that isn't or like yeah that's all sounds great pete but how we're gonna feed the world like what is your response i'm not looking for the answer here because it's extremely complex um but how do you respond to that normally without scaring away like all the dinner party guests with a with a two-hour deep dive into production numbers and and complexifying agroforestry silver pasture etc like what's your I'm looking for, I'm asking for a friend, like I'm looking for a few sentences here or an interesting story that can trigger an interesting conversation around feeding the world. What's your natural response there?

SPEAKER_01: 13:51

My natural response these days, I mean, of course, there are a lot of questions and nuances to scaling regenerative agriculture, but, you know, also qualify. When you consider Trailhead and our focus, we focus on on-farm opportunities, supply chain opportunities, and consumer-related opportunities. I happen to focus on the supply chain. So when that question is posed that you suggested, you know, how do we feed the world? I say, you know, feeding the world is not the problem. 800 million people go to bed hungry every night. That's 10% of the population. We waste 30 to 40% of the food that we produce. So really, I think first and foremost, that is where we need to focus a lot of our attention in terms of just improving the efficiency and reducing the waste in our system.

SPEAKER_00: 14:43

I think it's a good one. Plus, I think that 2 billion people are overweight or are, let's say, consuming more calories than they have to. And so it seems mostly a distribution problem. If we purely look at calories and not at the quality of calories, which we definitely should look at, but it's not that we don't produce enough food now and we're still not feeding the world because yeah, like 10% goes to about hungry and 20% goes to about overeating, which in many different ways, I'm not saying it's their fault, but it's the food system we created is not feeding us. And so we better figure out a solution there. So how did you then end up saying, you started making angel investments you mentioned. Yeah. Some people set up a fund at some point, some people don't. What was the step there to say, okay, we need a bigger organization and an institute basically to start doing these kinds of investments at a larger scale in the region ag and food space. And it's not enough if I'm investing my own money into a number of angel deals a year. When did you see that opportunity? Like what was there like, oh, this is actually more than a side thing. This could be the main thing.

SPEAKER_01: 15:52

You know, it... kind of came knocking on my door. Um, I had left private equity, made the decision to focus on angel investing in this space full time. Um, but luckily reconnected with trip, who's actually a longtime friend. Um, and we started comparing notes and this is in 2019. And he was at the time specifically looking for a couple partners to raise and launch a regenerative agriculture fund with him and Bobby, our fourth partner, who I don't think you've spoken to yet. So, um, We appreciate that. So the more we talked about it, while of course angel investing was intriguing to me, I also came to appreciate the challenges of adding value and the need for a broader scale approach, just better understanding the complexity of the food and ag system. The more I talked about it with Tripp and started to discuss it with the other partners, we were able to piece together a vision that was comprehensive and connective. some of the disparate pieces in that mission to improve some of the challenges in the current food and ag system. So, yeah, the stars aligned in that regard. And at the time, it just made sense to form a fund together, particularly given the different skill sets and experiences and networks each one of us are bringing, because there was fortunately relatively little crossover with each of those.

SPEAKER_00: 17:27

And just for the people that didn't listen to the previous interviews, which again, I will link below with Mark and with Trip, in a few sentences, what is Trailhead? I mean, it didn't change a lot, I think, except that you made more investments. But in a few sentences, it's always nice to hear from another partner as well, how you would describe Trailhead and where you're at. We're now talking end of Q1 2022, so end of March, beginning of April, when this will be out, I mean, depending when you listen to this. So how would you describe Trailhead now, if somebody asks you, what are you What is Trailhead to you?

SPEAKER_01: 18:00

Yeah, really in just a couple sentences, Trailhead is a venture capital fund investing in early stage regenerative ag and food companies that improve soil health either directly or indirectly. They also increase profitability for the regenerative farmer while improving access and affordability for the regenerative consumer. So as you may have gathered from the conversation thus far, Certainly consider ourselves mission-driven as we truly believe regenerative agriculture presents the greatest opportunity for improving human and planetary health. We believe that opportunity necessarily provides for market returns or better and while we're investing in inherently impact-oriented companies.

SPEAKER_00: 18:51

Yeah, we had an interesting discussion with Mark, a conversation with Mark, discussion sounds so heavy, on the if there was tension between regeneration and hunting for unicorns, which I think I called the episode. And he gave a very interesting answer that I've since repeated many times. Like he said, maybe eventually not if we've regenerated enough land, enough people, enough communities, enough companies, et cetera. But there is a window now where he feels, and I think you agree, where there are definitely opportunities for outsized returns because let's say we're so far below zero that there's so much to do that there is the potential growth growth rate or the potential curve of just soil carbon levels or nutrient deficits, et cetera, is so large that there are opportunities for outsized returns, even though those returns are maybe a lot higher than, let's say, an old growth forest can sustain, which maybe is like 3% people have calculated. So there's an interesting moment there. We're so far below that there might be interesting moments for unicorns, although some people might think, oh, unicorns and region ag, should that, or region ag and food, should that even be possible, et cetera. So I I like the tension there. What do you see? You're saying outside returns or venture capital returns. When investors ask that question, do you have another answer to that? What do you tell them when they put on that skeptical face?

SPEAKER_01: 21:01

Yeah, they, well, I think we tell them and, you know, it necessarily needs to be addressed more often than I would have thought in that, you know, necessarily saying it's impact oriented. I think, you know, investors in our fund or in the market generally think that comes with concessionary returns. You

SPEAKER_00: 21:21

would think that we've tackled that with, I don't know, even Beyond Burger or Tesla. I mean, there's some interesting, with all the debate around them but some interesting impacts returns. I mean, if you were early in that, you made some Oatly as well, some interesting runs, let's say. And still you feel that skepticism when you have been going out into the market?

SPEAKER_01: 21:46

You know, I think... It may not be skepticism, but it warrants addressing and explaining that because this is impact-oriented, it is not concessionary. It is, yeah. I think the explanation in putting it in perspective is Yeah, because of the outsized opportunity in improving human planetary health, we expect outsized returns. But yeah, look at the food and ag venture capital investment spectrum historically. And really, we consider a lot of the investments that we're participating in food tech or ag tech, but with a regenerative filter layered in there. So if you look at that market historically, that's right, ag tech and food tech combined up until about 2020 had somewhere around eight unicorns, historically. Eight exits over a billion dollars. But in the last few years, those have accelerated rapidly. Historically, a lot of the companies were acquired in relatively early stages by some of the big strategic players to take them off the market or simply because they didn't have the luxury of venture investing in the first place because that was historically about 2% of the capital contributed to early stage startups because historically food and ag companies took longer to develop and more capital to develop. So it wasn't as compelling a venture capital investment, but we're at a point where consumer demand and awareness is significant enough and tech has improved enough that both of those factors together can accelerate that timeline and provide for those outside returns.

SPEAKER_00: 23:32

Let's talk about the portfolio. What investments have you made recently? What are some exciting ones we can share? I mean, they're all on the website. Your portfolio is on the website. So we're not disclosing any secrets here or scoops or news, but I still would like to unpack a few of them. What investments, let's say also in your part of the investment theme, have you been most excited about? Yeah.

SPEAKER_01: 24:00

Yeah. I would say, so really since you last talked to one of my partners, we've been making investments in what were that address waste reduction, traceability, transparency, carbon markets, and regenerative meat. So, you know, as I mentioned, really I focus on the supply chain and broadly to me, that means trying to improve efficiency and connectivity in the regen system. So we see that minimizing the role of middleman, enabling decentralized and reducing some of the waste that we talked about because, yeah, bottom line, we want to increase that 8% of the price that's going to the farmer. To try and move the ball in the right direction for all of those characteristics, well, one of the investments we made and great companies we partnered with was Food Maven. So, not sure if you've heard of or seen the Food Maven before, but they made a bit of a pivot. And really, now... provide better tracking and pricing for food items, including those that are regeneratively sourced. So they do this by having restaurants and other institutional food buyers download a browser extension. They're able to see real-time prices across a broad distributor network and in the process select for region characteristics. So they've also partnered with Google to help build out the internet of food that Google Food for Good has proposed, which is really, you know, addressing one of the major issues with the food system. It's just disparate and disconnected. So that effort really through some of the technology and software that Food Maven provides enables better transparency into the various nodes in the system and therefore better connectivity. So yeah, we love Food Maven for a lot of reasons, but one in particular is the ability to increase awareness and demand for regeneratively produced food.

SPEAKER_00: 26:03

which is something you see as an opportunity or something that's still lacking in terms of it's great to have many more farmers in transition, but if nobody buys it or nobody knows it's there and it goes into the standard, even the standard organic commodity markets, if you would be certified, we sort of lose that potential for storytelling, for premiums, for food as medicine, for nutrient density. We lose all of that because it just goes into the big pile. It seems like you've been making investments specifically specifically to tackle that, to decommodify these, which is not really a word I found out actually, but I've been using it, decommodify the supply chains or the supply webs.

SPEAKER_01: 26:44

Yeah, that's exactly right. I mean, certainly more regenerative food needs to be produced. But yeah, I mean, for one of the elements that Food Maven addresses that I didn't even touch on is basically they automate aggregation of food items, which is, you know, if you really understand that, it's surprisingly hard because it's very manual and because a lot of the time you may have 20 or more names for the same food item. So they've collected enough data points that they can kind of automate that and piece that all together. But what that process has prevented has been appropriate labeling of regenerative or even organic food items. So appropriate value has been hard to ascribe to those actual food items. So this goes a long way in helping appreciation for food items produced in that manner.

SPEAKER_00: 28:11

And I mean, of course, in this case, they are not investing. I mean, they're investing in technology, but it's not that they have to build enormous factory. So there is potential there that your investment dollars go a bit further than if you have to set up a massive robotics factory or something like that. In that theme of transparency and getting more dollars to or shifting, let's say, the food dollar spent, have you made other investments that are, of course, they're all exciting, but other investments that we have to talk about? Yeah.

SPEAKER_01: 28:42

Probably. We have made other investments that are worth talking about. And, you know, I mean, there's a few that we can touch on. Right. Food Maiden falls into that software category. We've made another software investment in the company by the name of Swarm Engineering. I mean, essentially, they're democratizing AI to find supply chain solutions for food and ag companies. So really helping them to optimize efficiency, but also enabling them to solve for sustainability characteristics in the process.

SPEAKER_00: 29:15

Because when you say Swarm Engineering, it sounds like... A robotics company, but that's maybe just my thinking about swarms. But it's not the case. So how would you describe that? What's a use case for swarm engineering? What's a typical client?

SPEAKER_01: 29:28

So, yeah, typical client. Let's say it could be... Yeah, I don't want to disclose specifics of who their customers are. I think, you know...

SPEAKER_00: 29:40

Is it a supermarket? Is it a restaurant chain? Is it a hospital? Is it a private person like me?

SPEAKER_01: 29:46

It is typically a... It could be a conventional ag company. It could be a big brand name company, you know, food and ag company as well. And basically, they may be using... Swarm Engineering. So basically, Swarm provides this library of algorithms that they develop or aggregate and basically apply to food ag companies after they fill out an interactive questionnaire. So some of the use cases for that would be Really solving for a proper blending of inputs, load balancing, resource management and routing appropriately, but also layering on sustainability metrics or also enabling better selection of sustainably or regeneratively produced ingredients in the formation or product. So in some

SPEAKER_00: 30:40

ways, it's really on the recipe blending side of food processing, not Not in a bad way, but of course, most food is blends. Most food are mixed and figuring out better or different mixtures.

SPEAKER_01: 30:56

There is the blending aspect and better mixtures component to it. There is the logistics component. And some of that logistics is appropriately routing some of that regeneratively produced food. In some ways, it's a bit of an extension to what HowGood offers, which you've looked at and talked about before. But that being a sustainability database, you can appreciate what certain food items do in terms of moving a product from degenerative to sustainable to regenerative. This really enables the company that's putting that product together to help find that product or find that ingredient and get it to the source so that that product can be made.

SPEAKER_00: 31:45

Yeah, and you mentioned regenerative meat. So let's unpack that a bit. What's the investment you've made in that space? And what is regenerative meat in this case?

SPEAKER_01: 31:57

Yeah, in this case, it is a cultivated regenerative meat company. So broadly, we recognize regenerative meat faces some real challenges in scaling. And Omeat represents a much better alternative to Kaepo meat until it does. So... Really, what OMEED is bringing is a very compelling technology. It enables cost parity with the current options out there because it's got a growth medium that reduces the cost 99%. They partner with regenerative ranchers by placing bioreactors on the farm to couple with the land and really provide them an additional income stream. It increases the output of regenerative cow by 20 to 100 times and replicates the the regenerative nutrient density of a regenerative cow. So, you know, checking the boxes of improving farmer outcomes, scaling regen meat in one way, localizing the system, and reducing negative externalities.

SPEAKER_00: 32:58

So it is a code. Okay. Let's, let's unpack that one a bit. So it's a, I would say many people probably would say, Ooh, cellular ag or cultivated meat. Sure. I can see them cringe basically, although this is a podcast and what you're saying, we're doing this localized working with the regenerative ranchers and basically taking a cow that, that has all the nutrient density has been on pasture, his or her, mostly most, most of it live and use that as the input, because that's always the What are the growth mediums? What's the input? What's the energy costs? How are we going to build these massive facilities that we've never done before at this scale? The only time we've done it is at medicine facilities, but they're much smaller. And you're saying we're taking a much more decentralized approach and using as input the regeneratively grown, if that's even a thing, the regeneratively grown, towards regeneratively grown cow as an input and sort of 20 or 100x that in terms of protein output. Which sounds very interesting. Is nobody else working on that? I've never heard about it. Is that an exception there to take that partly farmer approach almost to cultivated meat?

SPEAKER_01: 34:12

Yeah, we think it's unique and that's exactly why we like it so much. And I think that is a... proprietary process

SPEAKER_00: 34:20

and you say it's a transition or yeah it's a it's a until it scales enough but this could also be this could also be the scale like do you see this as a temporary solution as a an end solution potentially or how do you see this in in let's say the scaling of regenerative meat production or pasture it's

SPEAKER_01: 34:38

a

SPEAKER_00: 34:39

tricky

SPEAKER_01: 34:40

question regenerative meat production we absolutely support and want to scale but i you know recognize and even if that increases is tenfold, that gets to 10% of the market. So that's going to take a long time, and we're going to further the development of that in the process. But in the meantime, this does present a potential alternative for conventional incumbents to replace actual capo meat. And as a result, In the spirit of being a bridge builder and working with some conventional ag companies at one end and regenerative companies at another, there are some conventional participants that are looking to be involved here and actually start to use this product when it is ready for market. So

SPEAKER_00: 35:31

yeah, we're encouraged

SPEAKER_01: 35:32

that this could

SPEAKER_00: 35:32

be. How far is this for market? Like how, when can I eat this? Depending on where I am, obviously.

SPEAKER_01: 35:39

It's early stage. It's going to be a few years. Well, I should say it's early... I should say, sorry, it's going to be a few years before it fully scales, but of course there are samples and beef ready already, just not at a commercial scale yet.

SPEAKER_00: 35:55

And you mentioned it holds that nutrient density that were known and that actually draw you to the space to begin with of the pasture raised and proper pasture mixture, holistic management, et cetera, et cetera, or mob grazed, whatever we want to call it. So have you seen that under, I wouldn't say under a microscope, but like, have there been lab tests showing that what comes out of these bioreactors compared to I'm always saying almost saying the standard one but there's no standard here but against the bioreactors of the ones that let's say don't pay any attention to the input of where the cells come from have we seen differences there already like can we see those nutrient differences or is it too early for that

SPEAKER_01: 36:38

so you can you can look at those and we did discuss that as you can imagine this that's sort of This warranted some healthy debate internally. Hopefully, this is not too proprietary and you can cut it out if it is at the end. Basically, all the inputs, the cells, the growth medium, the scaffolding are all directly taken from the cow in really what is a minimally invasive biopsy. Basically, you get the molecular, cellular, DNA, and nutrient density level that's more or less identical to the meat from the cow. It's been tested and that's what the results show.

SPEAKER_00: 37:18

Wow. How difficult is it for, because I see these, it's interesting because we've had, not on a podcast, but we had a company present a tonic actually on decentralized insect growing to keep it at a farmer's level to make sure we don't have to transport all of the inputs and outputs because there's a lot of fertilizer coming out, good fertilizer, not the chemical one where we pay certain countries. But there's a lot of moving around of stuff, but then always the question is, okay, it doesn't make sense centralize it in a big facility where you control everything but you also have the risk of infections and the whole thing goes down or does it make sense to decentralize but then yet you're not on top of it constantly like how difficult is it to run will it be to run like a bioreactor like this is that does an average rancher need to get a biomedical degree or or bioengineering degree to to be able to run this is this remotely like how how tricky is this to do this decentralized because it sounds super nice but i'm also thinking yeah what if something goes wrong and it's like it's a long drive to replace something or to to go and check you lose the you lose the the whole fat basically your bioreactor like what's the what's the scale level needed to keep this running and to make sure that yeah the protein comes out on the other end

SPEAKER_01: 38:34

it's still going to be a significant facility and you know it's going to be selective ranches that that makes sense for it but you know it's not going to necessarily be the rancher who's running it the company is going to be on site facilitating that they've got a team and the lead scientists in the world in the space leading that effort so really they're going to be the ones addressing that but yeah

SPEAKER_00: 39:36

so why is it then to do it on site is it that easy access to the growth mediums to the cows do you need that or is it mostly to add revenue to the farmer like what's the driver of this decentralization like do you need to be close to the source is that helpful in this case I have no idea fresh in the is important here or not like is that a thing or otherwise you have to transport a cow with a lot of stress to a facility seven hours down the road i mean i can imagine that's not the point but or like what's the the the proximity here why does it matter so much

SPEAKER_01: 40:10

being close to the source is a major driver um but of course being able to partner with the rancher is and necessarily being able to focus on regenerative ranchers um is certainly an added benefit

SPEAKER_00: 40:24

and how do they respond to this i can imagine the cringe on their face i Like, yeah, we're going to place a biodirector. And that's going to need some convincing, I think. Or do they click quickly and get on board with we can 20x or 100x your work, basically? Your work on the protein side, not your work, obviously, on restoring the land, because there you still need the animal footprint. But we can sort of, there's a multiple here that you don't see, because otherwise you have to 20x your herd, which is definitely needed, but not so easy to do.

UNKNOWN: 40:55

Yeah.

SPEAKER_01: 40:56

No, very good question, very important one, and certainly one we thought about. I mean, as we were going through the diligence process, we called up, I mean, really, even before we made the investment, we were working hard to work with the team and see what we could do to, of course, build our confidence and conviction, but also help them further their plans. And so in the process, made a lot of calls to ranchers, and I don't want to speak out of turn, but it would be some name that you recognize and people you probably know. So significant regenerative ranchers, and they were very receptive to it. And so we're having conversations with the company now. Very, very interesting. I mean, you would, yeah, it requires some explaining. So

SPEAKER_00: 41:42

you're invested in them as well. Yeah. And so, okay, I think we're very interesting to follow this. And other ones that you're excited about are things you're still missing. Let's say if you look at a portfolio overview, like I would love to have a company because we're really missing, I don't know, a remote sensing one. I'm just, the first word that popped into my mind. Like what would be nice from a portfolio level to still have as you're obviously going to make quite a few more investments and then follow up investments over the next years?

UNKNOWN: 42:16

Yeah.

SPEAKER_01: 42:16

Sure. I would say one of those categories that I particularly would like to fill is a fintech company. And fintech can come in a variety of forms. But broadly speaking um a company that falls in that space we've looked at a number haven't quite got there yet are talking to a few now so are optimistic that happens soon but

SPEAKER_00: 42:41

um really to focus on economies for the farmer or what what fintech what should it address like really significantly move the needle for for like the the business side of the farmer and the rancher is that what you're looking at because i think there's a lot of space to improve there for sure

SPEAKER_01: 42:57

for sure for sure i think it's in improving access to financing options in one way. So it could be, you know, of course, you've had Dan from Steward on a few times. You know, I mean, of course, they're a terrific example of exactly. the kind of... But you didn't invest, right?

SPEAKER_00: 43:15

We did

SPEAKER_01: 43:16

not. I know you. You are in. Congratulations.

SPEAKER_00: 43:19

We're very, very, just full disclosure, very small investor that let us in. But yeah, it's been... We didn't set any terms, let's say. It's a few thousand. But I'm very happy to be part of the journey because, yeah, I hope there will be more, honestly. But it's such a crucial and such an underappreciated and neglected space. Like how to get more, not VC money, also that, but more... quote unquote boring money into the space, loans, et cetera, and banks are just not there to provide it for people that want to grow.

SPEAKER_01: 43:48

And that's right. I think we see some opportunities there where, right, I mean, the banks have not evolved. They're still incredibly opaque. And, you know, it takes forever to actually get a loan approved. So anything that's really helping to improve financing options for farmers is a big step in the right direction there. And there are a lot of opportunities out there. So no doubt you've seen a few financing platforms and yeah a few that unfortunately Trailhead was just not off the ground just yet to be invested in those companies

SPEAKER_00: 44:22

so there will be more there will be more but yeah it's a massive space there's so much refinancing needed there's so much and it's so difficult to get to get loans or to get I mean even the time it takes forever if you even get it and it just really stales an industry that wants to grow and can grow and and wants to meet consumer demand. And yeah, it's just not there. Or the solutions are not there, but the money is out there. So yeah, those bridge builders are crucial and very interesting. I wouldn't have expected you mentioned fintech, but it makes a lot of sense.

SPEAKER_01: 44:56

Yeah, yeah. I mean, I think it's a good example of some of the ways I think about VC and food and ag right now. Yeah, absolutely. The rest of VC can be leading examples. of some of what's to expect in the space. And Food and Ag is just somewhat lagging in that, which is understandable given the inherent points of friction. And you just can't iterate on a daily basis and instead essentially have annual harvests that require things to move a little bit more slowly. But again, that's accelerating. And you can see where fintech for the broader world has gone in the last 10 years. And you can see a lot of potential for that in the Food and Ag space to go.

SPEAKER_00: 45:44

Yeah, great. And let's shift gears a bit to a few questions I always like to ask, not necessarily at the end, but in this case, where are you contrarian? We've touched upon a few points, definitely inspired by John Kempf, this question. So where do you, when you go to RFSI, I always mix it up, the Regenerative Food System Investment Forum, which is going to be in Colorado, actually, in October. So all go, please. We might be there, not sure yet. But when you are there and you're with let's say the bubble of regen investments, where do you think fundamentally different?

SPEAKER_01: 46:20

Yeah, I think trying to be the bridge builders that we are, maybe a contrarian point of view, is that big ag will be part of the solution. It's hard to fight those incumbents when they have such a vast amount of capital and resources and really feel there are benefits to swinging them in the right direction by offering them some accretive expansion opportunities. But of course, we're seeing it now, you also have to establish standards and hold them to them. So that is one area that feels like a bit of a point of view. Also, I would say that innovative food and ag capital doesn't need to be concessionary, and that doesn't mean it's extractive. We've probably covered that, but I think, yeah, again... And, you know, it's not always the dots aren't always connected there. I mean, like basically mission driven venture capital really should be win, win, win. You know, if you're investing in businesses that are necessarily impact oriented, VCs are minority shareholders and everybody's incentives are mission aligned. So, you know, from from my perspective, that means you just got to ensure you've got patient capital. And so, you know, we've been very conscious about pursuing LPs who are mission aligned and appreciate the timelines. But again, longer timelines shouldn't mean, you know, any compromises on returns. I mean, I think some of the best investments ever are long-term holds. I've heard like in the case of Google, you know, John Doerr never sold. And you can imagine what that is. And, you know, take Sequoia, for example, who just established an evergreen fund for longer hold periods. So, you

SPEAKER_00: 48:12

Ooh, this opens a whole rabbit hole. Are we going, yeah, we're going there, we're going there. What do you, I mean, there's a question there, obviously, on the evergreen structure, which is not the current fund structure. Is that something you are... thinking about for like next funds as as i know if this fund is successful and probably it will this is not i mean you don't stop here like is it something you're i'm not saying planning because you're definitely not planning but thinking about okay what wouldn't a fund to look like and is evergreen then something or a longer period fund something you are are interested in or potentially exploring

SPEAKER_01: 48:51

it has been a consideration i think when we got things off the ground We didn't want to complicate them any more than necessary, just pretty much with standard terms and structure. So it's certainly a consideration in the future. I mean, in an ideal scenario, I kind of like the concept of a Berkshire Hathaway, where you can, you know... accumulate a portfolio of, of companies and partnerships that, you know, where we could be perhaps a little bit more value add and, and active in those efforts. I think you take the case of Berkshire where they're clearly passive, but they do provide, you know, some network benefits there, but yeah, with that structure. Yeah, yeah, exactly. I think you have some aggregation of resources and network effects and yeah. Um, really the intention to hold those forever so there's some appeal to that but then to your question about you know future funds and how how at least i'm thinking about this and we're comparing notes on this internally on a daily basis um well i wouldn't say daily but on a regular basis

SPEAKER_00: 50:06

are the lps ready for that like potentially like that's is there enough interest potentially? I mean, it will be a few years before you did it. Would it be possible to raise a 50 million like you're doing now or 5-0 or more? Or is it mostly we need to stay in the lanes, at least in terms of fund structures, to be able to raise enough to put it to work as we have 10 years left or nine years or whatever the number is to make a dent?

UNKNOWN: 50:37

Yeah.

SPEAKER_01: 50:38

Yeah, I think it, I mean, if the consideration is an evergreen fund or some other kind of structure, it's a conversation to be had when that additional fundraising starts. And yeah, since we were still wrapping up the first fundraise, that conversation is going to be down the road, but it's certainly a consideration. I think the intention for the next fund would be, yeah, very much in the lane and very consistent with what we were pursuing at this point, but necessarily a bit larger fund. So we can expect expand the ecosystem,

SPEAKER_00: 51:10

community. A double. You always have to double the second one, right? Yeah, that's the two X's. And so what if we took that away and you actually, tomorrow morning, which is in a few hours only for you, I'm very sorry for this late call. And I'm going to be conscious of your time and wrap up soon. But what if you'd be in charge of a billion dollar fund? And it could be an holding structure or like you don't have LPs. You won an enormous lottery. You have to invest it though. There's one condition. But a timeline could be or a horizon could be extremely long, extremely short. But where would you prioritize this? Where would you put that to work in the food and egg sector? If the food and egg sector, maybe you put it somewhere else, maybe nuclear fusion. But what would you focus on mostly? I don't need the exact dollar amounts, obviously. I just need what are your top sectors or sub themes you would put money to work if resources were sort of unlimited.

SPEAKER_01: 52:03

Yeah, you know, I think it would be a bit of an expansion of what we just started to touch on. Yeah, first, that similar early stage, but larger fund. But yeah, it would be a few different pockets of capital because, again, a few different pockets are needed from our perspective to address all the opportunities and needs within the food and ag system. So, you know, another one would be a land and infrastructure fund, which, you know, is necessarily a different risk and return profile. I'd want to add a pool for something like Mad Ag's perennial fund for progressive transition financing. And then maybe something like what Stephen Hohenreiter is doing at Grounded Capital, basically a fund for moving aspiring, well-sized, well-established companies and food brands to move along the curve from conventional to regen. I think that's needed and momentum worth building on. But maybe that's not all of the money and you've got to put a little bit of a pocket fund for just policy and education.

SPEAKER_00: 53:09

Lobbying is probably the highest potential investment, but it's not something we covered a lot. We will do a few interviews on that. It's not my favorite topic, but yeah but it's it's it's so important and but yeah not the most sexy subject to to talk about and as a final question if you had a magic wand and you had one you could you could use it once only and don't start like i will do three etc just one what would you change in the space or in the sector or globally it could be anything i i've said before better taste buds or global consciousness or everybody's meditating i mean it could be literally anything what would you use your magic wand for

SPEAKER_01: 53:51

Just one. Yeah,

SPEAKER_00: 53:56

venture capitalists always want to make multiple bets, etc. In this case, you just have

SPEAKER_01: 54:00

one. I think that's going to have to be a tax on negative externalities like greenhouse

SPEAKER_03: 54:07

gases.

SPEAKER_01: 54:08

So, yeah, broadly speaking, certainly wary of any revenue distortion there, but... I think that's got to be the one option or one stream to pull. I mean, there are a few others. I mean, if the one could be waived, there are a few other thoughts on where wishes could be spent. But, yeah, I think that's the one that's on the list.

SPEAKER_00: 54:39

We have to start paying for externalities. It feels like we're moving slowly in that direction. Of course, we're going to have an endless debate about carbon equivalent, which is way too simplistic, or CO2 equivalent, sorry, and other things. But at least let's start somewhere. You cannot, on a finite planet, treat it like it's an infinite waste dump, like we're doing now, basically. And that has to stop. There's no way around it.

SPEAKER_01: 55:08

Certainly agree with that. And as you know, we're talking through it a little bit. I mean, another wand to be waved, but very much in line with this. I mean, now that you mentioned it is really, you know, could food be priced based on nutrient density? So certainly appreciate what Dan Kittredge is doing there, but you know, if that nutrient density is in line, it is inherently incorporating better soil practices and better use of that land. And

SPEAKER_00: 55:35

did you see the paper coming out of, of David Montgomery, our Montgomery, sorry. And,

SPEAKER_02: 55:40

and

SPEAKER_00: 55:41

that's a, I will put it in the show notes so they published a paper recently a few weeks ago and I think it's part of their upcoming book and I hope because he already mentioned it when we interviewed him many years ago that they're working on a book on nutrient density and they've shown a very significant connection between soil practices so farming practices and agriculture practices and a nutrient density between conventional organic and farms that have been on a regenerative journey for I think at least 15 years and they looked at beef pork a number of grains and a number of vegetables and very small sample size that we shouldn't get all too excited about it but it feels like a sort of watershed moment like it feels like that there's somebody that did a proper a team of researchers obviously it wasn't just David but to show that connection between healthy soil healthy produce healthy gut the next level is healthy gut and healthy people but at least let's show the healthy produce side and there were significant differences even between higher end organic meat like beef and I think that they looked at the Cape Browns farm and the regeneratively grown or the, let's say the pastures that have been on a long journey, they could show significant differences, which is interesting because we go sort of, we buy the higher end organic and then, but it could still be higher end organic soil and corn that has been fed to these cows. And it just doesn't show in, I mean, coming back to the earlier discussion on beef, it just shows in the end result, which is very, very interesting. So I hope we're going to see a lot more research. But this seems like quite a significant milestone in, let's say, the nutrient density space. So I will put the paper below. It's super readable. I read it, which means it is readable. And we hope to have David, obviously David and Anne on the show soon to unpack this and where that research is going. And I think that's also a perfect end to this conversation. I don't want to keep you any longer because it's very late. And I appreciate very much this update and, of course, the story of how you got here, but also the update on Trailhead Capital. So thank you so much.

SPEAKER_01: 57:48

Absolutely, Koen. Thank you so much for having me.

SPEAKER_00: 57:57

Thanks again and see you next time.