Fresh Start isn't your everyday startup incubator. The two-year-old project invests in food industry startups, and because it is located in Israel's periphery – Kiryat Shmona, right next to the Lebanese border – the state's share of the funding, and effectively, of the risk, is higher than it is in most other incubators.
“We’re interested in everything in the food tech field,” says Dr. Tammy Meiron, the incubator’s chief technology officer. Meiron, who has a doctorate in biochemistry and food sciences from the Hebrew University, is a major figure in Israeli food tech and has been involved in dozens of startups. “Food substitutes, obviously, along with all their verticals; waste reduction packaging (reducing garbage), which is done in part by extending shelf life; and new materials. The entire spectrum from a food’s supply chain to individually adjusted nutrition.”
Out of every dollar invested in the incubator, 85 cents will come from the government and the remainder from the bidding consortium. Under the terms of the license, at least 100 million shekels ($31 million) will be invested in companies selected by the incubator during its first eight years of operation.
“We’ve already made five investments, and we can talk about three of them,” says the incubator’s CEO, Ronny Barak. “The basic funding is 3 million to 3.5 million shekels per company, but with two companies, we’ve already put in extra money beyond the floor set by state subsidies.”
Blue Tree: Fresher-tasting – and healthier – orange juice
Fresh Start’s first investment, made in June 2020, was in Blue Tree, a juice company. “Fifty percent of all juices in the world are orange juice,” says Yuval Klein, the company’s founder and CEO. “This is a market with a turnover of $17 billion a year.”
Klein isn’t a typical food tech entrepreneur. In the distant past, he was one of the founders of The Third Ear, a legendary chain of Israeli record and music shops. But now, his heart belongs to oranges. He talks about them with great enthusiasm and reveals a secret: Any Israeli orange juice that claims to be "100 percent natural fresh-squeezed," in almost every brand, is likely to be imported from concentrate. "Few oranges are still grown in Israel.”
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The fact that juice is usually sold from concentrate isn’t the problem – it's the sugar. “Orange juice is almost 10 percent sugar,” Klein says. “By comparison, cola is 10.6 percent. Today, the world wants two things in food: for it be tasty and for it be healthy, in that order of importance.”
Blue Tree developed a way to reduce the sweetness of orange juice. It captures the sucrose via a method that can be integrated into the juice’s production line, enabling the production of juices with varying sugar levels: 10, 20 or 30 percent less sugar. He adds, "We believe that, through a process that will take a good many years, every juice in the world will have less sugar.”
“We’re still running taste tests, but I can already tell you that most people prefer it less sweet,” Klein says. “We were recently at an event and handed out our low-sugar juice. It was hot and people were dying for it, because when you reduce the sweetness, the acidity becomes more dominant and the juice tastes fresher, as if the orange had just been picked.”
Blue Tree is riding a trend toward healthier food and changing tastes, but it is also being helped by regulation. “There are taxes on sugar all over the world that can reach 25 percent of the cost of the raw material,” Klein says. “Another advantage is that when you reduce the sugar level, the raw material shrinks by 40 percent compared to its current size, and that creates an economic advantage in the supply chain.”
Blue Tree’s process creates “orange sugar” as a byproduct, but Klein admitted that he has no idea what it could be used for.
Blue Tree received an investment of $1 million from Fresh Start, and recently signed a commercial contract for a pilot with the Israeli juice company Priniv. “In April we’ll start the installation, and in September 2022, fresh-squeezed natural orange juice that also has reduced sugar will be marketed for the first time, in Israel and abroad,” Klein says. The company also has a contract with a Brazilian firm to produce tens of millions of liters of juice, but that will take effect only in 2024.
Blue Tree employs four people. Klein is also a personal success story for the incubator, because he moved to Kiryat Shmona. Nevertheless, he still divides his time between the Galilee and his second apartment in Jaffa.
Pigmentum: Vanilla flavoring from an unexpected source
Another entrepreneur, Tal Lutzky, was born into agriculture. He grew up on Kibbutz Sdot Yam, complete with a weekly “work day” – then customary in kibbutz schools – and seasonal work in the avocado groves. After the army, it was almost natural for him to find himself at the Hebrew University’s school of agriculture in Rehovot.
“By the end of my bachelor’s degree, we had already approached one of the faculty – Prof. Alexander Vainstein, who later became our partner – with an idea we had developed through which we could write on plants with their own pigments. We thought the idea was intended for the ornamental plant industry.”
And that’s how Pigmentum began – an idea for decorating leaves with a logo, a name, greetings and the like. Lutzky’s partner in the venture was his classmate, Galilee native Amir Tiroler. They developed the idea for their startup at ASPER-HUJI Innovate, Hebrew University’s entrepreneurship center.
At that time, Meiron and Noga Sela Shalev, Fresh Start’s vice president for business development, were serving as mentors at the center, which is how they found out about the idea. Sela Shalev thought it was a nice concept, but its proposed application was a waste. So she suggested that the young entrepreneurs change direction.
“We realized that the traits we had developed could be used in various ways in the food, pharma and cosmetics industries,” Lutzky says. “Pigmentum was founded to serve as a platform for producing natural ingredients in a variety of plants and for a variety of industries.”
The company developed an activating substance that can be introduced into a plant through spraying or irrigation and causes the plant “to kill itself,” in Lutzky’s words, to produce a specified natural compound that affects the plant’s characteristics. For instance, one could ask lettuce to be red.
And as the name indicates, that’s exactly what the company is doing right now. “Our first product is a pigment, but further down the line, there will also be flavor and scent additives,” Lutzky says.
Meiron explains that currently, to produce natural food colorings, growers raise purple cabbage or black carrots and crush them to extract the pigment. “This is an expensive, inefficient and unsustainable process,” she says. “Pigmentum has a technology that can express any ingredient in the plant whenever they choose – and in the entire plant, including the roots. For instance, it’s possible to grow tomatoes and then, after harvesting them, turn the stalks and roots into pigment.”
“At this stage, we’re moving ahead on two plants – tobacco and lettuce,” Lutzky says. “Both are leafy, with short growing cycles, and easy to grow, including in closed systems near the production factory, so the product can be closely controlled.
“The world has a big stability problem in the supply of raw materials for food products,” he continues. “For instance, there’s currently a shortage of oranges, so there’s a shortage of orange flavoring. We can produce an orange flavoring in lettuce." Another example? "It’s hard to grow vanilla. It mainly grows in Madagascar, with a particular pollinator. We can produce the taste and scent of vanilla in lettuce.”
Lutzky says the market for flavors and scent additives is estimated at $32 billion a year, and of this, around $8 billion consists of natural additives, which is Pigmentum’s field. “And the natural segment is growing all the time, mainly because the synthetic additives aren’t healthy,” he adds.
ProFuse: Real meat, slaughter-free
The current trend in food tech is meat substitutes, and Fresh Start’s newest investment is ProFuse. The company’s field is optimizing the differentiation and aggregation stages of producing cultured – or lab-grown – meat. The company also received $1 million from the incubator.
There are several different technologies for creating protein substitutes. One is based on vegetable protein, usually from peas. But there’s also an exciting technology of cell cultures – taking a single cell from an animal, then multiplying it in the lab until a portion of meat has been grown.
This isn’t a substitute, but actual meat, the same meat that comes from an animal. However, the process is lengthy and expensive. A kilogram of cultured meat currently costs around $22,000. But the cost is expected to become equivalent to that of real meat in just nine years.
“ProFuse is based on six years of biological research on muscle cell regeneration conducted at the Weizmann Institute by Prof. Eldad Tzahor, Dr. Ori Avinoam and Dr. Tamar Eigler-Hirsh,” says Guy Nevo Michrowski, ProFuse’s CEO. That research was aimed at repairing damaged heart cells, but muscle is also what we want in our steaks, as opposed to fatty tissue.
Tzahor, Avinoam and Eigler-Hirsh are now part of ProFuse’s team – Tzahor as an adviser and Eigler as chief technology officer.
Michrowski is a veteran entrepreneur, and this issue is dear to his heart. “I have 20 years of experience in other high-tech fields, but 11 years ago, I became vegan and decided I wanted to engage in sustainability as a lifestyle,” he explains. “And since it’s hard to get members of my family to go vegan, I decided to give them a substitute.”
ProFuse signed a deal with the Weizmann Institute to commercialize the Tzahor Lab’s knowhow, and it’s now using the technology to significantly speed up the culture process.
“This technology makes it possible to accelerate the muscle cell’s differentiation and aggregation process by a factor of nine – and that’s the process that’s responsible for 50 percent of the cost of making cultured meat,” Michrowski says. “We’re a technological enabler – like a fuel additive that improves engine performance. And we’ll work with whoever is producing cultured meat," he says. "Many Israeli startups are involved in cultured meat, and could benefit from this development."
Fresh Start began in June 2019 with a surprising bidding bonanza over operating a food tech incubator in the Galilee. One side consisted of entrepreneur Erel Margalit, founder and chairman of the venture capital fund JVP, together with two corporations – Nestle-Osem and Unilever – and some academic institutions. The other consisted of Tnuva, Tempo, the VC fund Finistere (which invests in agritech companies) and the investment platform OurCrowd.
Margalit thought he would win because of his years of activity in the Galilee, which continues to this day. But Tnuva also wanted the contract, because it felt it was losing the race for innovation and the food of the future to its rival Strauss – a pioneer in the field that has operated a successful food tech incubator since 2014.
In the end, Tnuva’s consortium won because it submitted the better bid. “The real winners of this tender are the northern region and Kiryat Shmona, where we will invest in more than 40 new food tech companies that will produce hundreds of new high-quality jobs,” Tnuva CEO Eyal Malis said at the time.