Will Fake Foods Fallover from Finance Failure Fallout?
Silicon Valley Bank collapse exposes risky sectors: Alt-protein, synthetic biology, ag-robotics and more.
UPDATE: The Biden administration bailed out SVB after I published this article - so I added some later comments at the end. This isn’t a bailout of a bank - this is a bailout of Silicon Valley itself.
For those who missed the news, a historic financial explosion happened in the heart of California’s Silicon Valley at the end of last week. Silicon Valley Bank, America’s 16th largest bank, collapsed into federal government receivership following a run on the bank.
For anyone ‘watching tech’ this collapse is a spectacular moment. It may even mark the start of a chain reaction (or not? - we will see). Silicon Valley Bank (SVB) boasted that almost half of all U.S. venture-backed technology and life science companies banked with them (holding a total of $342 billion in client funds and $74 billion in total loans).
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Significantly SVB also banked more than 2,500 venture capital firms. They in turn underwrite almost all tech startup companies in the US and many beyond the US. If you think of financing in the high-tech industry as a jenga game tower, now imagine that a pretty important foundational block (or in fact several of them) just blasted dramatically out of place.
Long known as a risk-taker willing to fund risky tech-bets that other banks wouldn’t touch, Silicon Valley Bank famously started over a poker game and was ultimately ‘hoist by its own petard’ of tech-gambling - as high interest rates have cooled tech exuberance. Despite rumours that Elon Musk may buy the bank (please no) or that the collapse may start a wider run on banks and the US financial system, the immediate shock among the technocrati comes from just trying to wrap their head around what the collapse of this key pillar of the US tech financing system means for tech companies. Bets are on about which which tech firms will and won’t come out alive. "This is an extinction-level event for startups," said Garry Tan, CEO of Y Combinator as he and others in the Silicon Valley elite this weekend tried to drum up public sympathy for ‘heartbroken founders’ who may have lost their companies. Tech bros like Tan are also suddenly displaying a supposed deep concern for the wellbeing of tech employees - concern that had been notably missing as tech companies laid off over a hundred thousand workers in the past few months.
Over the weekend the first order of business for reporters was trying to see through the dust and turn over the initial rubble to identify what corporate bodies may be amongst the victims. Initially findings are that exposed tech firms include giants such as Roku and Roblox.
With a few spare hours on a snowy sunday morning I thought i’d also take a hand at initial rubble exploring. Truthfully, its hard to identify from public documents which private firms had their money in SVB’s now empty vaults ( thats the point of ‘private’ companies - we can’t see what they are up to with their money). However it takes no special powers of insight to predict that once the dust clears food sovereignty, climate justice and biodiversity movements who track the current tech takeover of our food systems, may find some familiar names lying amidst the casualties. That is because Silicon Valley Bank has long been one of the most significant underwriters of so-called “cleantech”, “green-tech” and what they call “innovative agriculture firms” — including some of the biggest names in biotech, robotics, and automation.
Movements who track the current tech takeover of our food systems, may find some familiar names lying amidst the casualties. That is because Silicon Valley Bank has long been one of the most significant underwriters of so-called “cleantech”, “green-tech” and what they call “innovative agriculture firms” — including some of the biggest names in biotech, robotics, and automation.
For example, it occurred to me that given SVB’s penchant for risky bets it was pretty likely that some of the corporate bodies under the rubble may turn out to be from the most grotesquely over-hyped of the foodtech sectors : namely alt-proteins. That is the silicon valley manufactured industry where biotech and big data companies try to promote highly engineered and processed fake meats under shaky ‘green’ claims. My hunch seem likely to be right. The two biggest names in alt-protein - Impossible Foods and Beyond Meat - both turn out to be connected with Silicon Valley Bank.
For several years Silicon Valley Bank had in fact been actively courting the alt-protein crowd. In a webinar run by alt-protein propaganda-shop the Good Food Institute, SVB’s Sustainability Director, Jordan Kanis, boasted that over ‘the last 5 or 6 years’ (this was in 2020) the bank had put “a lot” of money into food and agtech investment. On the alt protein space he explained SVB were “working with companies in plant-based, in fermented and in cell based”.
Kanis particularly emphasizes the bank’s relationship with “our friends at Impossible and Beyond Meat”, proudly telling the story of how Silicon Valley Bank was in at the ground floor financing Impossible Foods back when the company was still called ‘Jasper Ridge Creamery”.
“As a matter of background in alternative proteins I first got introduced to it in 2012 when I was on a call with Samir Koul at Khosla ventures and we were talking about a different company and at the end of the conversation he mentioned “I have this other company” which was called Jasper Ridge Creamery at the time, and they are doing this interesting thing where they are going to use plants to make a product that looks and tastes exactly like meat . And he said ”I know it sounds crazy” and I kind of nodded - it does sound crazy - but its something we are really excited about and its high risk , high reward. And so 8 or 9 years later they made some great progress and actually not long after that conversation I got introduced to the team at Beyond Meat as well - and you know , those are 2 great success stories obviously.”
Indeed Silicon Valley Bank co-arranged a $150-$200 million dollar loan to Beyond Meat in 2020 just ahead of its high profile IPO (Initial Public Offering) and on several investor presentations SVB executives highlight Beyond Meat in particular as one of the companies they most proudly work with.
Surprisingly the possibility that Beyond Meat (and probably also Impossible Foods) may be highly exposed to the SVB meltdown has not yet filtered out into media reporting or questions (and who knows? like Peter Thiel maybe they moved out any cash in time or - being an alt protein company - maybe they had no cash?!) But almost inevitably the costs to these and other alt-protein leaders will emerge in the coming weeks. When and if it does so, such news would be another hit to the glossy alt-protein story at a time when the fake meat industry , like the fake-money industry of Crypto and Web 3, is already beginning to unravel in front of investors eyes.
Alt protein was always really an investor shell game , not unlike the biofuel bubble of a decade ago or the more recent crypto-bubble. Outlets such as The New York Times and Bloomberg have recently reported on how that bubble is already starting to fall apart under its own hype and how fake-meat-sellers such as Impossible and Beyond Meat are rapidly losing sales. Insightful commentators such as Michele Simon, (formerly of the Plant Based Foods Association - and definitely no shill for the meat industry) has argued persuasively why this is no surprise: The underlying business case that highly-processed techno substitutes will just automatically edge out mainstream meat sales - is just wrong-headed hopefulness. Instead alt-protein profits are swelling the coffers of big meat and big finance with little corresponding real world impact on meat sales. Michele Simon and others have warned of how the the techno alt-protein industry is stuck in a bubble-minded echo chamber co-ordinated by the Good Food Institute, enrolling celebrities and funded by discredited crypto-cash ideologues. Ultimately it has all the hallmarks of a glitzy scam.
Unfortunately its a scam that has bedazzled and ensnared even long-term green commentators who should know better - such as UK Guardian writer George Monbiot who recently (and quite bizarrely) chose to burn his bridges with social-justice based food sovereignty and agroecology movements. He hooked up instead with a corporate-friendly ecomodernist youth club ‘Re-Planet’ - in order to generate free hype for the alt-protein industry’s claim to ‘reboot food’. If the blast from the Silicon Valley Bank collapse has indeed detonated at the heart of the alt-protein industry Monbiot and his ecomodernist lost boys may have give to away rather a lot more of their light green sheen to reboot this already faltering industry.
Beyond alt-protein/fake-food the SVB downfall may also threaten to set off chain collapses in fake-life, fake-ag and automation sectors. Possibly the largest public synthetic biology company, Gingko Bioworks, have already come out and admitted that they are exposed to the bank collapse. Gingko make bioengineered ag-microbes for Bayer, biosynthetic flavours, fragrances and ingredients for various companies and are positioning themselves to capitalize on the next pandemic. They apparently had “only” 74 million dollars squirrelled away in Silicon Valley Bank as a result of their takeover of AI genetic engineering firm Zymergen. In their submission to SEC on Friday Gingko try to minimize this as merely 6% of their cash but since the US Government is only obligated to bail out holdings under $250,000 - thats over 73 million uninsured dollars that investors might feel Gingko should be careless to dismiss so lightly.
Antheia, a synthetic biology company that makes biosynthetically engineered copies of plant-based medicines, last June announced $40 million in venture debt financing from Oxford Finance LLC and Silicon Valley Bank to build a biomanufacturing plant in Silicon Valley. The company is run by experienced syn bio scientist Christina Smolke, wife of syn bio superstar Drew Endy who runs the bioengineering department at Stanford University.
Ginko and Antheia won’t be the only syn bio pioneers sweating this weekend. A quick look through past SEC filings suggest other syn bio companies that may be directly exposed to the SVB collapse - Twist Biotech, Codex DNA, Singular Genomics, Ziopharma and major sequencing company Pacific Biosciences among them - however since almost the entire Synthetic Biology industry is backed by prominent venture capital firms who in turn banked with SVB, the entire syn bio industry , like the alt protein gang, may be about to experience a cascade of secondary and tertiary shocks.
Automation and Robotics - especially in agriculture and food - was another focus of Silicon Valley Bank’s interests and also another area that the food sovereignty movement are increasingly opposing as a further corporate grab on our food system. Like other tech evangelists Silicon Valley Bank saw climate change not so much as threat to food production and existence but as a big shiny tech money-making opportunity:
“With climate change complicating conventional farming practices amid a growing demand for locally sourced food, there is a tremendous opportunity for the disruption of traditional field agriculture” explained SVB’s Jordan Kanis in an introduction to a report on vertical farming, “ Here on the front lines of innovation and disruption, we at Silicon Valley Bank have the opportunity to partner with and finance many companies challenging the current agricultural paradigm.”
“Here on the front lines of innovation and disruption, we at Silicon Valley Bank have the opportunity to partner with and finance many companies challenging the current agricultural paradigm.” - Jordan Kanis
Two examples of SVB investment in agri digitalization:
Coco food delivery robots from Los Angeles in 2021 raised $36 million in a Series A round led by Silicon Valley Bank in collaboration with Sam Altman (of Chat GBT fame) and Peter Thiel’s Founders Fund.
ClearPath Robotics, a company that retrofits agriculture machinery with autonomous capabilities, closed a $30 million Series B round from several investors including Silicon Valley Bank.
SVB also backed a number of vertical farming startups.
Below in no particular order are a few other firms that food sovereignty and tech critical movements may want to watch as the rubble clears from the SVB collapse (or sparks secondary collapses?). I’ll add to this list as news emerges of other relevant firms - so keep coming back!
National Carbon Technologies - a leading US producer of Biochar - acquired Cool Planet Inc in 2020 who had received a - A $91 million Biorefinery Assistance Program loan guarantee from Silicon Valley Bank in October 2014
UPDATES 13th March: Hours after I published this piece Janet Yellen of the US Federal Reserve announced that the US Government was going to bail out Silicon Valley Bank just as the tech bros had been lobbying for all weekend. While technically not a bailout with taxpayer funds it looks like the bailout will be covered by bank fees which will of course get passed on to the consumer - so ordinary folks in the US all pay for it one way or another.
Many commentators have pointed out how the tech bro’s spent the weekend irresponsibly amping up rhetoric that there would be a general run on the banks if the fed didn’t apply special measures to save their particular bank that funded the tech industry. In fact on sunday Yellen actually announced the government would rescue two banks - SVB and Signature Bank, which is apparently widely used by crypto companies - ie yet another tech bank. Importantly , the reason they claimed they were doing this is because the loss of those two particular banks supposedly creates a “systemic risk” for the entire American financial system. There have been hundreds of banks fold since the 2008 crash that were not protected in this way. Both Yellen and President Biden insisted that their interest was not to protect the bank but its depositors - that is the tech (and even crypto) industry.
What is clear and should be oft repeated and reflected on is that what the US Government has just done is bailout Silicon Valley and the tech industry, rather than any bank per se. They have accepted the logic that the risky, speculative bubble-driven highly problematic startup culture of Silicon Valley itself that SVB helped foster and encourage is “too big to fail” and too important to American capitalism and that letting it fail would be a “systemic risk” to the US financial system.
What the US Government has just done is bailout Silicon Valley and the tech industry, rather than a bank per se. They have accepted the logic that the risky, speculative bubble-driven highly problematic startup culture of Silicon Valley itself that SVB helped foster and encourage is “too big to fail” and too important to American capitalism and that letting it fail would be a “systemic risk” to the US financial system.
This raises some fairly troubling conclusions including:
Firstly, that the venture capital firms and tech bros who are gambling with our environmental and food systems using risky technologies have now demonstrated their political clout in a moment of threat. They not only quickly forced the US government to over-ride rules but got them to designate themselves as something special in need of protection - unlike say workers rights or agroecological farming systems that the same tech bros are happily sweeping aside.
Secondly, that any sudden political moment that existed this weekend in which government could have used the SVB crisis to demand changes in behaviour by the tech industry - anti-trust action for example and breaking up of monopolistic power, guaranteeing gig worker rights , data governance moves etc - has just been handed away again with a carte blanche promise that the tech cash is all safe and will be kept safe.
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