On this theory, it’s reasonable to think that a cell-based meat company in the future would look similar to how Beyond Meat currently looks. They would have proprietary technology in all of the main areas and they would own their own manufacturing facility where they would create the raw material for their meat products. After a small amount of processing to turn the mixture of cells into an edible material, they would pass this material off to co-manufacturers who would then take care of simple processing like flavoring and packaging. The company would also have a strong brand that would increase consumer trust in the new technology.

It’s Hard to Start a Horizontal Company Right Now

The Good Food Institute used to publish a list of “whitespace” ideas for new alternative meat companies. Many of these company ideas involved focusing on one part of the value chain, then supplying other vertically integrated companies. However, we’ve seen relatively few of these companies being formed—most cell-based meat startups are developing complete food products. There are lots of reasons this could be the case:

Specialized companies need relatively more technical expertise over a narrower area, as opposed to general biotech expertise. Companies take a long time to get off the ground, so we could just not be seeing the specialized companies yet. Cell-based meat companies are all very young, and could specialize in the future.

However, another explanation in light of low end disruption is that a horizontal business model is fundamentally difficult at this point in the industry’s development. Consider a company focusing solely on media for cell-based meat. This company won’t know exactly what the technology will eventually look like, making it difficult to position themself as a supplier. For example, it’s not clear whether they should focus on media for induced pluripotent stem cells or immortalized myocytes. They also don’t know exactly what technologies vertical companies like Memphis Meats will develop in-house. If the industry ends up being concentrated to a small number of companies, each with unique media needs, it’s possible that a specialized company wouldn’t be able to sell their generally applicable product.

Essentially, a horizontal company is doubling down on risk in an already risky business. The “bets” that cell-based meat companies are taking right now are 1) the technology is fundamentally possible in the short-to-medium-term, 2) consumers will eat cell-based meat, and 3) governments won’t block the development and sales of cell-based meat. A horizontal company has these risks plus the added risk that their products won’t be compatible with the dominant processes of other companies.

Some of the efforts for specialization are by pre-existing companies that want to be suppliers in the future. This could make more sense for large biotechs, given that they already have substantial capacity. This strategy would work especially well if aspects of the technology end up not being heavily customized. For example, if basal media ends up being the same in cultured meat as it is in biopharmaceuticals, then cell-based meat companies could source basal media from an existing company, just like Beyond Meat sources their dried pea protein blend from existing suppliers. Here, established companies have an advantage over startups given their existing capacity, and ability to de-risk their exploratory activities with an already-stable business.

Caveats

The question of who will be advantaged at a particular stage of an industry’s development is only partially related to what an entrepreneur should focus on right now. It takes a long time to start a company and develop a technology platform. Roughly speaking, if one thinks that plant-based meat will become “good enough” in 5 years, but it takes 2 years to bring a new company to market readiness, then the correct time to start a specialized company in plant-based meat is in 3 years.

Of course, what we’ve been discussing is a theoretical model, not empirical truth. Models can help retroactively explain facts, or generate hypothesis about unknowns given a structural understanding of the phenomena. However, in the real world, there’s always random noise, and competition in business tends to select for outliers. Therefore, I think it’s a mistake to place too much weight on any particular model. There could be important differences in the alternative protein industry that will cause it to diverge from the model in ways that are hard to predict, or anomalies could take the industry in unexpected directions [6]. While I think it’s clear what the model says about alternative proteins, I think we should use this conclusion as one consideration among many.

Who do you think will be the most successful companies in the early days of the alternative protein industry? Let me know in the comments!