Plant-based foods investor says her focus is more on teams than taste

If you’ve been seeing a slew of new alternative meat and animal products popping up in your grocery store, Lisa Feria is at least partially to thank.

Feria has spent the last seven years investing in startups in the sector. She and her partners at Stray Dog Capital have invested in over 40 companies, from the well-established Beyond Meat to up-and-comers No Evil Foods, Kite Hill and Yo! Egg.

Based in Leawood, Kansas, the firm has been around since 2015. Feria, who is CEO and managing partner, has seen most of the ups and downs.

Recently, the big names have been struggling: Beyond Meat’s share price slid 80% over the past year. Milk alternative maker Oatly has been beset with production woes. And consumers have generally cooled on the products. As demand has sunk and companies have adjusted, with McDonald’s stalling rollout plans for its McPlant burger and meat giant JBS shutting down its plant-based meat division.

And yet Feria and others remain bullish on the sector. TechCrunch sat down with her to see why she’s still upbeat and what she’s telling her portfolio companies in these uncertain times.

“Food has always been a passion of mine,” Feria said. Her first job was at General Mills, where she used her expertise in chemical engineering to help bring new products from the lab to production. After business school, she went to Procter & Gamble to understand how the “front end” of the consumer packaged goods business worked.

While at P&G, she said she had an “ah ha” moment. “The more that I opened doors and looked into windows and peeked into closets, the more that I realized that our food system is broken,” she said. “There’s not enough work being done — particularly on the governmental side — to change how we feed ourselves and how we will feed the growing population.

“And so the question was, where do I plug myself in?”

After toying with the idea of starting a business, she realized that her experience in operations, manufacturing and consumer packaged goods was better suited to the other side of the equation: venture capital.

Feria’s time in the food industry pointed her toward the earlier stages of investment. “Early-stage food is this swamp land, and entrepreneurs are trying to cross it,” she said. Her experience helping to scale new products not only helps her vet new investments, she said, but also allows her to assist portfolio companies when they get bogged down.

In the seven years that Feria has at Stray Dog, she’s seen her fair share of pitches — some 500 to 700 every year.

“Initially when we started investing, our objective was, ‘Let’s find the best of the best product,’” Feria said. “And that was honestly not the best approach. Because we’ve seen more amazing, incredible, mind-blowing products fail because they don’t have the right team than the opposite.

“As a matter of fact, when we invested in Beyond Meat, they only had a few small products out there, including chicken strips that were frankly not the best I’ve tasted. But when I got to know the team and their vision, and most importantly the technological foundation that they would build the product pipeline on, we realized that is where we want to be as a fund.”

That focus on teams has guided her investments ever since. She looks mostly for companies that are balanced between big-thinking visionaries who attract talent and more grounded types that can run a business.

That latter skill is particularly important today as funding grows scarcer and consumers have proven to be more fickle than expected. Many will try a plant-based product once or twice, but fewer will become repeat customers.

Plus, inflation has been hitting people’s pocketbooks hard, and many early-stage plant-based food companies have been caught in the crossfire. During the pandemic, when meat prices surged as a result of processing plant closures and staffing shortages, meat alternatives looked increasingly appealing. But that surge was transient. Meat prices rose once more in step with inflation, but they’ve started to drop of late.

That’s put pressure on companies, and particularly startups, that sell plant-based animal products. “Early-stage companies in the space don’t always have the scale to offer pricing that is on par with traditional dairy or meat products,” Feria said. “Ultimately, when the industry is at scale, we expect many plant-based alternatives to be more affordable.” But for now, she said that Stray Dog is looking to invest in companies that can reach scale faster.

That might mean finding new companies that can scale quickly to reach profitability. It might also mean encouraging existing companies to limit their cash burn or find additional financing, even if it means taking a down round, Feria said.

The answer may also lie in consolidation.

“There are a lot of companies that don’t have enough differentiation or don’t offer a product with high enough quality to make it through. We believe there will be consolidation in the industry, and consumers will ultimately decide with their dollars which companies stick around,” she said. The ones that do survive may find themselves ripe acquisition targets — the market has soured on IPOs lately, particularly in the wake of the poor performance of publicly traded plant-based meat companies.

“The impact of these large public companies has impacted the perception of the industry, but it doesn’t change their potential,” Feria said. “There’s no other lever as influential and as strong toward climate than food because there are so many humans on the planet — and there’s going to be so many more.”