Investing in Upcycling with The Future Food Fund - Uplifting Upcycling #6

Cracking the secrets to attracting investment for upcycled F&B products in Japan.

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Good morning Market Shakers. Today we interview Japan’s largest food-tech venture fund, The Future Food Fund.

The Future Food Fund invests in innovative food tech companies with big potential to contribute to our sustainable food future. This includes upcycled food and beverage companies, such as U.S. startup ReGrained. We sat down with Jennifer Perez (J.P), Venture Capitalist at the fund, and talked about all things investing and upcycling.

The Future Food Fund was established to create a food tech ecosystem in Japan

The Future Food Fund was established 3 years ago by the online D2C organic and specially cultivated food delivery service, Oisix ra Daichi (Oisix). CEO, Koheyi Takashima, was already actively involved in investing in food tech startups and he regularly made trips to the U.S., where he observed that food tech in places like Silicon Valley was strongly connected in an ecosystem. This was not the case in Japan at the time. Certainly, there were separate elements, like VCs, CVCs, angel investors, accelerators, etc, but they were scattered and didn’t work in synergy.

J.P: Takashima-san believes very strongly that food tech plays an integral part in establishing a sustainable food future for Japan and the world. He recognized that for Japan to best support food tech, we needed to create an ecosystem like the ones that work so effectively in the US. 

So, The Future Food Fund was established, and big players such as 7&i Holdings, and Mos Food Services got involved as limited partners.

The Future Food Fund invests in upcycling for a sustainable food future

The Future Food Fund is motivated to invest in companies whose products and technology can transform our food system for the better. Their diverse portfolio consists of startups working on new foods, upstream food production, kitchen tech and other food-related services. Upcycling is one area of innovation that they have a real appetite for.

J.P: Upcycling is a major trend in food tech, and it’s only going to grow more important over the next decade, so the fund is always looking for innovators in this space.

At the same time, our parent company Oisix ra Daichi and our limited partners really influence our interest in upcycling startups. Oisix’s vision is to create a sustainable food system for the future so that as many people as possible can lead happy and healthy lives. Oisix has worked really hard to embody this vision and as a result, has a food loss rate of 0.2%~0.3%. Most supermarkets have a 10 - 15% food loss ratio. 

In this sense, Oisix has really inspired the fund to support innovators seeking to reduce food waste and introduce new innovations in this space that can help companies like Oisix create value from their waste.

Jennifer explains that, so far, the fund has invested in ReGrained, a purely upcycled food company that had played a major role in leading the upcycled food movement in the U.S.

J.P: ReGrained were a very attractive prospect to us for this reason because we connected with their Mission.

ReGrained rescues spent grain from the beer brewing process and upcycles it into protein and fibre-rich SuperGrain+ which they sell B2B, enabling companies to make their products more sustainable and nutritious.

J.P: Our strategic partners are all interested in the potential of upcycled products too. 7&i Holdings and Toyota Tsusho have been active in the space already. So the Fund has a lot of motivation to invest in upcycling innovators.

Bringing upcycled products from overseas to Japan

The Future Food Fund has several investments overseas. We asked Jennifer if the fund’s partners are seeking to sell products they invest in Japan.

J.P: Part of our strategy when investing in companies overseas is to eventually bring their products and technology to the Japanese market. That’s one of the main points we consider: how can we leverage an innovation in Japan? We see the potential for this with ReGrained.

Upcycling startups still growing in Japan

Bringing products to Japan is not yet on the cards, however. We’ve already talked at length about how upcycling is still a niche concept in Japan, and the Future Food Fund is seeing the same.

J.P: We’ve seen an uptick in upcycling startups in the last year or two, but it’s still a really nascent market. There are also very limited data points on the market and that shows there are huge amounts of potential for growth and for innovators to really define the space. 

When asked why upcycling has been slow to take off in Japan, Jennifer sees both tradition and trends as key reasons.

J.P: A lot of upcycling in Japan happens at home. People are used to taking waste and upcycling it in their kitchens. Take Kiriboshi Daikon, it’s a product that can use scraps from other dishes to make a new dish. The leftover broth from this dish would also be used in other dishes. Because people incorporate waste saving practices into their cooking, it’s hard for people to see this as innovation so to speak.

This is where the second point comes in. Upcycling needs to become a “boom” in Japan. When it starts to become popularized and becomes fashionable, or a trending term, it will take off in a big way.

We’re already seeing this with fashion in Japan. People are wearing vegan leather shoes, or bags made from recycled plastics, to make a statement. The next step will be having an upcycled food item in your bento box.

What will be the spark that triggers the boom in Japan? Jennifer believes media attention will be key.

J.P: We’re seeing more and more players in Japan, including startups like, one of our portfolio companies, and other creative startups like CRUST, and Greenase promoting upcycled food and beverage. This kind of promotion influences big media players in Japan to feature it. TV and even newspaper media have a big impact in raising awareness amongst consumers in Japan. 

The Future Food Fund already sees upcycling trends in Japan

J.P: Products made from upcycled fruit and vegetables are probably the most prominent. There’s a lot of awareness around the amount of “ugly” fruit and veg that goes to waste in Japan. So companies are looking for ways to upcycle this as Oisix does with banana-peel jam for example. I think this is the kind of product that consumers are most receptive to at the moment too.

How the Future Food Fund chooses to invest

We asked Jennifer to give us a rundown of what the Future Food Fund looks for when investing in a food startup.

J.P: First and foremost, a company needs to have the potential to generate a strong financial return. They need a robust business model and plan, and a high-quality product with a defensible IP.

Secondly, F&B products have to taste good. If it doesn’t taste good then customers won’t eat it, so this is something we focus on. Fortunately, we have both the expertise of Oisix and also our limited partners to be able to conduct taste tests on products pitched to us.

Finally, we’re interested in the kind of impact that a product can have on food loss. The more sustainable a product is, the more attractive it will be. 

For upcycled startups looking for investment, this means doing some homework. Jennifer reinforced that companies should be able to clearly articulate a product's value proposition and its potential to be profitable. Likewise, startups should be ready to show investors that their product has real potential to save waste.

J.P: Upcycled food and beverage products are still new, so startups need to go beyond just explaining that they have a cool product. Startups need to help potential partners envision the product they’re pitching can work in practice. Explaining how their product can help a business grow, or solve their problems, or how it can fit into XYZ partner scheme, for example, really does a lot of the legwork for businesses and VCs.

A good way to do this would be to invest some time in thinking about the end-user, even if you’re B2B. Build a detailed persona of the customer who will eventually consume the product. Imagine how they will consume the product. How will they become aware of the product? What magazine will they read about it in? Creating a fulfilling, detailed persona like this will help you communicate to an investor. It shows an investor you’ve done your homework and thought about the whole product journey right up to the most important part, the end consumer.

The Future Food Fund seeks to invest in the next generation of upcycling

J.P: We’re looking for startups with a unique value proposition. Upcycling is interesting from the perspective of input. Most upcycling startups so far are focused on one kind of input or one kind of output. Companies that focus on turning waste bread into beer for example or a company that upcycled fruit into jams and fruit snacks. To see a company that has multiple inputs and also multiple outputs would be really interesting. Also, startups which are making alternative meats and dairy products from upcycled ingredients.

As we’ve discussed in previous posts, upcycling is still a new market and many players are focussing on creating one solid product. As we saw from our interview with ARANEA last week, technology is developing, however, and the potential for upcycling companies to take multiple inputs and produce multiple outputs is there. This translates into even more potential to create value from the huge amounts of food that are currently being wasted around the world.

The Fund sees a future in upcycling in Japan

We asked Jennifer to leave us with her predictions for the future of upcycled foods and beverages in Japan. 

J.P: In the past few years, we’re seeing some macro trends in Japan that point to upcycling taking off. Firstly, awareness of upcycling is on the up in Japan right now, in part due to COVID-19, which resulted in huge amounts of food being wasted, opening people’s eyes to the need to do more with less and build more sustainable supply chains. 

In this sense, we’re really past the point of no return; upcycling is going to become a natural part of our food system. 

Secondly, there is currently a push from all areas of the economy towards innovation, to ensure Japan remains economically relevant. Government, VCs, corporates, universities, and everyone is looking to collaborate and drive innovation. I think it’s the perfect time to be an upcycled food startup in Japan because you can leverage desire for sustainable food solutions and a lot of available support. 

While the environment in Japan is shifting for upcycling to be able to take off, the market still needs time according to Jenefer.

J.P: Realistically, I think we’re at least 20 years off before we have a truly circular food system in Japan. We will see gradual shifts over the next few years. There are opportunities for upcycled grain-based products to take off because of the versatility of their applications in confectionery. 

Once upcycled products start to enter the mainstream, I think consumers will want to know about the origin of upcycled ingredients. This is something that strongly interests Japanese consumers. They want to know the story behind a product. 

As momentum builds, I think upcycling will become the “mottainai” of the younger generation. We’re already starting to see this in fashion, where centres of youth culture like Shibuya 109 and LOFT are pushing upcycled fashion products. It’s only a matter of time before influential brands, stores, and social media start promoting upcycled foods and then it will spread quickly among younger consumers.

That’s all folks

With the future of upcycled food and beverage looking bright in Japan, this article comes to a close. We’d like to say a big thank you to Jennifer Perez and the Future Food Fund for collaborating on this interview. We learned a ton about the state of upcycling in Japan and how innovators can attract investment, and we hope you did too.

You can find out more about the Future Food Fund on their website, and follow their latest activities on Facebook.

Next week we’ll be introducing an upcycling innovator from outside abroad whose product is uniquely appealing in Japan. See you next Tuesday.

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