This IPO will test Israeli stock market’s appetite for meat substitutes and other high-tech food

The taste for meat substitutes isn’t confined to consumers. Since Beyond Meat went public more than a year ago, Wall Street has demonstrated a huge appetite for the high-tech food category, and now the Tel Aviv Stock Exchange is adding the category to its menu.

MeaTech, which is developing technology for 3D printing of meat, was the pioneer. After it raised 20 million shekels ($5.8 million) at the start of June in a private placement, its shares soared more than 300% and today its TASE market cap stands at close to 310 million shekels.

The placement drew investment from leading institutional investors, such as Psagot and Metav Dash as well as from the food industry – Rami Levy, the founder of the namesake supermarket chain, and meat importer Adom.

Now Next Food is about to join the TASE. Earlier this week the research and development partnership filed a draft prospectus to raise 25 million shekels in an IPO. Next Food has never raised any outside capital and has no revenues, but it’s hoping to convince investors that it can successfully invest their capital in Israel’s emerging food-tech industry.

The global food-tech industry is taking off amid changing eating habits, and growing concern about animal welfare and the toll the meat industry takes on the environment. According to AgFunder, a California venture capital fund focused on food and agricultural technologies, global investment in the sector grew to $20 billion last year from $2.2 billion in 2013.

Israel is a leading player in the world industry. Abut 250 startups are in the sector. According to the technology news and data site Crunchbase, they raised $135 million last year, up from $52 million in 2013.

Multinational food companies PepsiCo, Nestle and InBev have set up RD centers in Israel and there have been several big merger and acquisition deals: International Flavors Fragrances bought Frutarom for $7 billion, Tapingo was acquired by GrubHub for $150 million the same year and InBev bought Israeli startup Weissbeerger for $80 million – all in 2018.

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In the stock market, Beyond Meat, the U.S. maker of plant-based meat substitutes, went public on Wall Street in May 2019 at a $1.5 billion valuation in the first IPO ever by a meat-substitute company. Since then, its shares have climbed 560%, giving it a market cap of $8.6 billion. Impossible Burger, its closely held rival, is estimated to be worth $2 billion.

The team behind Next Food is Yossi Tamar and Shay Lior, co-CEOs of Capital Point, which is a publicly traded holding company that invests in biomedical, information and green technology as well as in oil and gas in Israel. It also has a portfolio of stakes in publicly traded companies such as Delek Group and Bezeq.

Capital Point gained fame for an attempted takeover of the biotech company Can-Fite, which has led to a 40-million-shekel suit against the CEOs. Capital Point’s stock market performance has been unimpressive: Its shares have dropped 40% in the past three years to a market cap of less than 45 million shekels, less than a third of its shareholders’ equity.

Tamar and Lior have recruited a team of startup executives for Next Food. They are being led by CEO Chanan Schneider, who is now CEO of the Fresh Start FoodTech incubator in Kiryat Shemona. Schneider has led startups and was a partner in Agate Medical Investment.

The co-chairman is Guy Rosen, a vice chairman at the dairy company Tnuva and former chairman of the fund Maayan Ventures. Others include Ilan Hadar, who was a top executive at Foamix, an Israeli biomedical company.

Next Food will invest in all segments of food-tech in startups that are close to the sales stage. It will also help in RD, developing innovative production techniques and information technology for the industry.

It already has one portfolio company – SavorEat, which has developed a technique for making meat substitutes based on cellulose and employing proprietary 3D printing technology. Next Food has already invested $1.75 million in the company and plans to help it with a $3.5 million round at a valuation of $7 million.

In explaining SavorEat’s edge in the sector, Next Food says the startup is rising on two global trends – the growing interest in meat substitutes and in personalized food. In the case of the latter, SavorEat has tailored products to fit a consumer’s specific diet, lifestyle or medical condition. It has a collaborative agreement with an unnamed Israeli restaurant chain with 100 outlets.

Next Food is the first food-tech RD partner to list on the TASE as part of a drive by the bourse and the Israel Securities Authority to encourage publicly traded VC funds. To date, local investors have avoided early-stage tech companies because of the high risk and difficulty of valuing them even for experienced investors. Next Food, as its prospectus warns, fits into that category.