Over the past 12-24 months, Silicon Valley has been slowly showing its hand on two of the most important sectors to come: Artificial Intelligence and Lab Grown Meat.
From a historical lens, a lot of wealth and returns have been made in Canadian small caps and mid caps simply by following the trend lines and capital inflows of the private venture markets and Silicon Valley. This thesis has proved true across technology, cannabis, psychedelic therapeutics, biotech and many other sectors.
But when it comes to AI and lab grown meat, there is a large dislocation between venture dollars and public issuers.
For public issuers in Canada, AI has mostly been an obscure concept with no commercial applications, integrations or opportunities. The deep technology required to handle the compute and language modelling required for AI has been monopolized by heavily financed startups, leaving little opportunity for Canadian listed companies with significantly less capital.
Then, there is lab grown meat. Not to be confused with plant based meat (IE, a burger made of beans or lentils or other vegetables) lab grown meat is real, genuine animal meat made from the cells of an animal. While it's worth researching and understanding, the most layman way to think about this production method is similar to how you brew beer. Bioreactors and precision fermentation enable real animal meat to be made without needing to raise, feed and slaughter animals.
This has been the best kept secret in Silicon Valley over the last few years. While the top venture funds in the world and Bill Gates, Richard Branson, Jeff Bezos and others poured capital into hundreds of private companies in the sector, there wasn't a single public issuer on the planet. With billions upon billions of dollars being thrown at startups seeking to make burgers, steaks, wagyu, sirloin and more from cell lines of animals, the public equity markets had never heard of "lab grown meat".
That began to change over the last year. There are now four companies in the world that are listed issuers in the lab grown meat sector. With only one of those being listed in Canada ($CULT)
However in the last few months, there have been two groundbreaking approvals for lab grown meat. First, for UPSIDE Foods lab grown chicken. And more recently, GOOD MEAT (a subsidiary of EAT JUST) getting approval for their lab grown chicken, which they have been commercializing already in Singapore, the current only legal country for lab grown meat.
And unlike AI, there is the ability to execute on a real business plan in lab grown meat without the need for hundreds of millions in invested capital. This is largely because the price parity around lab grown meat is being compressed quickly, due to more innovation and scale. And now with regulatory approvals coming in North America, there is a looming demand for what is seen to be the first ever ethical and kosher approach to producing real animal meat.
So, what is the "risk on" opportunity for investors in Canadian listed companies?
There's only one at the moment, which is CULT Food Science, trading under the symbol $CULT
From a look at their recent news, you can see a flurry of fundamental developments. Firstly, Marc Lustig acquired 15% of the equity in the company. Marc Lustig previously founded Origin House, which sold to Cresco Labs ($CL) for $1.1B CAD. Secondly, the company recently closed a small financing round with institutional capital participation. And lastly, they just acquired the "Because Animals" brand, which is the first pet food company ever using lab grown meat and had Silicon Valley investors such as Draper Associates, SOSV and Orkla, a $7 billion dollar publicly traded food conglomerate.
For a sophisticated investor, those recent accomplishments could possibly be seen as relatively early stage and needing to be executed upon to have significant value for shareholders. After all, this is a nascent sector trying to get its foothold in the capital markets landscape.
So the larger question becomes, what is the catalyst for lab grown meat?
The answer could very well be a simplistic one: attention.
Over the past 180 days, media coverage for lab grown meat has skyrocketed. Google search requests for "lab grown meat" have also skyrocketed. The term "cultivated meat" and "cultured meat" has been everywhere from The New York Times to The Wall Street Journal on the back of the two recent FDA approvals.
Like many biotech opportunities, trends are often thematic and non linear. Lab grown meat is very likely at the beginning of a steep curve of discovery by the mainstream media and by extension, retail and institutional investors.
If Silicon Valley trends have shown anything in the past, it's that the crossover into public equity markets is inevitable. Long before the unicorn companies IPO or SPAC, risk on capital looks to flow into listed issuers with lower market capitalization and the potential for asymmetrical upside.
Whether this will be the case in lab grown meat, remains to be seen. For now, keep an eye out for the best kept secret in Silicon Valley becoming the next big trend.
Good Luck To All.