Harnessing the Force of Creative Destruction: A Thesis in “Food is Health”
We believe in the power of innovation to make it better. Our investment focus is on the key lever points where a specific innovation drives consumer adoption, lowers cost, and drives productivity gains in Food, Health, and Agriculture.
Innovation as a concept is defined as the introduction of a “new idea, method or device,” effectively creating something new that has not existed before. It is a key economic force, but one that is often overlooked. Done right, innovation delivers better, cheaper, and more sustainable solutions to the world’s big problems. Innovation is a deflationary force. It increases productivity, boosts overall GDP, and contributes to broad social good.
Best of all, innovation delivers this value whether markets are up or down.
At iSelect, we view innovation as an asset class that calls for the integration of capital, markets, talent, and customers. It involves equity, debt and project finance – not just venture capital – transcending the start of a new business through the first few years after an IPO or acquisition. For that reason, we typically originate investments at the Seed or Series A stage, investing in equity or debt convertible to equity. We work with other firms that provide growth capital, debt, project finance, and revenue finance to capture the entire lifecycle of innovation as it applies to our thesis.
Because disruptive innovation occurs in a transitional period, the market changes what it expects from new entrants. We once all wanted faster computers, endless digital storage, and portable devices with long battery life. Each of those kicked off a period of disruptive innovation.
During these times, we find the maximum opportunities to improve productivity, improve product quality, reduce costs to consumers, and maximize returns to investors. And it is why we say that iSelect invests in disruption.
A Generational Investment Theme
iSelect invests in three verticals:
- Agtech: Agrifood supply chain
- HealthTech: Health and wellness with a focus on cardiometabolic disease
- “Food is Health,” how we can use nutrition to prevent cardiometabolic disease
The U.S. spends $1.7T on food each year. It spends $1.9T on healthcare costs related to poor nutrition. This out-of-control healthcare spending is a result of our poor nutrition. In addition, global population growth and the increase in the middle class are driving a need to nearly double protein output by 2050.
Food is Health is designed to tap into this period of disruptive innovation. The food and health systems represent a $3.6T market in the U.S. alone, with trillions of more work to be done worldwide. iSelect sees this as an opportunity to invest in the critical building blocks that redefine the food and healthcare systems. Our goal is to unlock the innovations that will lead to beneficial changes in agriculture, food, and health, building a better and cheaper solution that delivers ESG as a positive externality and no added cost. Innovation is better.
To this end, we invest in three primary areas: soil health, human health, and food is health
Food System Innovation: We seek to solve simultaneously:
- Doubling protein production
- Improving the taste, affordability, and nutritional quality of the food we eat
- Improving the environmental sustainability of our agricultural system and
- Increasing farmer profitability.
This includes supporting the development of more and better protein sources from multiple sources (animal, plant-based, fermented, cultivated, etc.) to support the global shift to protein and improvements to yield, taste, and overall crop biodiversity. None of this is possible without better economic incentives for growers and an overall improvement in food security.
Our sub-themes in food and agriculture include:
- Data-Driven Agriculture: Crop analytics and precision agriculture are changing what is possible on the farm, with remote sensing technologies providing localized crop and climate data and eliminating manual sampling and testing, even among livestock. This shift to in situ measurement enables farmers and ranchers to do more with less, delivering better products at scale for lower cost.
- Scaling Protein: As the world’s population grows, demand for greater protein access is also growing. That is why iSelect supports what we view as the three pillars of protein to meet this demand: Animal protein, plant-based protein, and cultivated / fermented proteins. Innovation in this area is not only about health but providing more and more people with access to the proteins they need to thrive.
- Synthetic Biology: Innovation around biology, particularly as it pertains to redesigning existing natural systems, is enabling a wide range of capabilities on the farm, in the food system, and beyond. iSelect targets syn bio segments such as precision fermentation as a service, modular small reactor fermentation, and biologics production primarily for use in fermented or cultured proteins, as well as secondary applications in agriculture for genetics and crop protection.
- Maximizing the Human Microbiome: iSelect takes a holistic view of the microbiome, understanding that gut health is vital to overall health and is intimately related to a healthy diet in many instances. Our goal is to help support a healthy microbiome through diagnostics and new treatments, focusing on certain prebiotics, probiotics and postbiotics that have important and outsized positive effects in specific populations.
Human Health Innovation: Our goal is to empower patients to make better, more impactful decisions that improve their health. To this end, we invest in preventative healthcare tools like those used for diagnostics, personal health devices that support measurement & management and lifestyle change technologies that help people eat and live better. We are also investing in genomics and personalized medicine technologies that offer more accessible access to personal health data and the help needed to interpret those findings and take action.
- Improving Human Health: Chronic cardio-metabolic diseases such as Type II diabetes, cardiovascular disease and obesity are among the most costly to treat and indicate the increasing linkage between disease and our metabolism. Often, these diseases are directly related to the food we eat and associated inflammation in our bodies. iSelect is committed to addressing these conditions by combining food and health system innovation.
- Data-Driven Health: Data systems are serving to educate patients and increase self-care, while advanced analytics are accelerating the research and discovery processes for new drugs and treatments, leveraging AI and Big Data to make sense and correlate disparate systems.
- Enabling Technologies to Support Healthcare Innovation: Investing in platforms like gene editing, big data, and fintech to build new systems.
We are interested in a few other exciting challenges that include
- Micro Fluidics: Using a combination of microfluidics and nanopores to dramatically rethink fermentation from big iron to a massive array of small fermentation systems
- Food Science: A total digital model to model ingredients to optimize taste, nutrition, cost, and quality
- Lifestyle Medicine: Replacing the front end of healthcare with a digital co-pilot that helps people optimize their metabolic, physical, and mental health
- Just in Time Agriculture: Transformation of the supply chain to eliminate supply-demand imbalance on a near real-time basis
Deviations in our Investment Strategy
iSelect invests in new business models, data-driven businesses, and teams with experienced leaders in their markets. We avoid therapeutics, companies that are using equity for capital intensive spending, as well as business cases that are built solely on extrinsic incentives such as carbon credits. We prefer a base case that is profitable without incentives.
That said, we are thinking about but not yet ready to invest in:
- Controlled Environment Agriculture (CEA): such as vertical farming operations. The models are too cash intensive at this point. They need more project finance. We are intrigued by opportunities for REITs or other capital providers to enter. Also, options that alter the in store experience to drive the adoption of “Fresh” over-packaged goods in grocery.
- Direct-to-consumer: high levels of competition and lots of cash are needed to break free from the pack. Our team does not have much direct-to-consumer experience
Our team is built around health and ag, so we stay in our lane.
Not in our Investment Strategy
Finally, we do not invest in the following:
- Industries outside of agtech or health
Other Reasons we do not Invest
We review 100s of companies a year. We are in diligence with many. We have a finite set of capital. We, unfortunately, do not invest for several reasons:
- Dry Spell: We have lots of investment commitments. Sometimes we have more deal flow than capital. Noen the less, we continue to meet to keep the relationships because things change.
- Valuation: Our investors hire us to get them a specific return. We think about the exit and entry prices to make that calculation. When your valuation is high, the answer is relative. Someone must understand the reason and the math. It is hard for us always to do that. It is best if the entrepreneur can explain in detail how their valuation leads to an exit with gains > 20% IRR. During that discussion, we may realize whether we can help reduce the risk or can’t. It is an excellent discussion to have.
Entrepreneurs who come to iSelect should discuss our strategy and how iSelect can help them achieve financial returns for investors.
Are we missing anything?