Fats are a key element in the human diet as they are a key energy source, aid with nutrient absorption and most importantly, are a natural vehicle for flavor – as most flavor and aromatic compounds are fat-soluble.
For these reasons and due to the rise of alternative-protein and hybrid products, in recent years, many startups have emerged offering alternative fat sources.
Alternative fats global investment (USD millions) and number of deals
This graph shows that global investment since 2016 in fat alternatives has been growing, despite a recent downward trend, primarily driven by large deals made between 2021 and 2022.
As the graph illustrates, until 2017, the number of funding rounds in the industry remained low, largely because fats were not considered a sufficiently pressing issue to attract investments. Since then, both the number of rounds and the total investment have increased exponentially, reaching a peak in 2021, in line with broader trends in venture capital. Although investment has declined since 2022, annual funding has consistently remained above 60 million, and this trend is likely to continue due to increasing health concerns within the food industry. Moreover, the number of deals has continued to grow despite the decline in total investment, highlighting the emergence of a greater variety of solutions.
The “number of deals” chart offers a more accurate representation, as the trend toward fat and oil solutions continues to grow steadily. It is expected to keep increasing as technologies like precision fermentation and cellular agriculture advance, and the costs of scaling up production decrease.
In addition to the investment trend, it is essential to examine the tangible results and advancements these companies are achieving. For example, Checkerspot, a U.S.-based startup developing oils through precision fermentation with algae, has partnered with the Swedish giant AAK to produce alternative oils on a large scale in an eco-friendly manner.
Meanwhile, Nourish Ingredients, which specializes in animal-free fats, has teamed up with New Zealand dairy giant Fonterra to co-develop dairy products featuring fats derived from precision fermentation.
In terms of product development, there have also been notable breakthroughs. California-based startup Savor has created a non-dairy butter alternative suitable for various everyday consumer products—a venture in which Bill Gates has invested. Other startups, like California’s Zero Acre Farms, already have an approved product in commercial distribution in the U.S., gaining a growing reputation with backing from investors such as Chipotle and Virgin.
Finally, it is important to recognize that the sector faces several challenges. Key among these is reliance on advancing technologies, particularly precision fermentation and cellular agriculture, in terms of scalability and cost reduction. Cost is especially crucial, as current solutions are priced above the market average. Addressing this issue is vital to capturing a larger market share. Additionally, regulatory barriers can pose significant challenges in terms of both cost and time, particularly for startups with promising solutions but limited financial runway. Social acceptance will also be essential as public awareness of these food production technologies continues to grow.
