Why We Invested: ProteoSense (THRIVE V)

The Effect of Food Safety Lapses

Food-borne illnesses can be devastating. I’m willing to bet that most of you have been inconvenienced by contaminated foods or beverages at some point in your life. Just to put things in perspective, in the U.S. alone, almost 50 million people suffer from food-borne disease each year — that’s over 15% of the entire country’s population. And according to the World Health Organization, on a global scale, nearly 600 million people are affected by food-borne illnesses each year leading directly to the deaths of 2 million people. Those are some pretty grim numbers.

But the effect of food safety is not just limited to people — food safety blunders can also decimate restaurants and businesses. Take the classic case study of the precipitous fall from grace of Chipotle, previously one of the mightiest and fastest-growing food chains revolutionizing the “fast casual” restaurant movement. One of Chipotle’s key value propositions to customers was their foresight to use only the freshest ingredients in an industry dominated by processed foods. As consumer preferences shifted sharply towards fresher ingredients in the mid-2000s, Chipotle’s fresh ingredient operation continued to multiply in size, which made it tough to keep up with sanitation practices and quality control. In mid-2015, Chipotle’s food safety woes began rearing its ugly head starting with separate salmonella and E. coli outbreaks tied to tomatoes, cilantro and lettuce that affected hundreds of customers across over 10 states. That was followed by a norovirus outbreak that infected several more. In 2018, after Chipotle thought it was finally in the clear, one of the Ohio stores infected 650 people with Clostridium perfringens, another food-borne disease variant. These incidents caused a mass exodus of customers and investors from Chipotle and the chain has been struggling mightily to regain the public’s trust ever since.

If you take a look at the CDC’s 2018 and 2019 Outbreak overviews, you’ll see details about several major E. coli outbreaks that affected romaine lettuce, ground beef and even flour, ingredients we take for granted that are commonly used in almost everything we consume. Collectively, these outbreaks resulted in over 500 cases of illness across nearly all 50 US states with 158 hospitalizations and 6 deaths. The impact is staggering and cannot be understated. This is why investing in food safety testing and analysis is critical for the future of food production.

And This Is Where ProteoSense Comes In

I’m intrigued by the growing yet fragmented food safety market and believe that ProteoSense really has the opportunity to be a transformational technology. ProteoSense wants to turn the food industry on its head by empowering all segments of the food supply chain to detect food and waterborne pathogens faster than current processes allow. In a nutshell, their sensor technology integrates antigen marker analysis and electrochemical detection that allows growers, packers, processors, shippers, and wholesalers in the food industry to test food products and food production equipment for pathogens and get quick results without having to send samples to a lab and waiting up to a week for outcomes. ProteoSense’s testing technology improves food safety, increases production efficiency while reducing costs, and minimizes recalls. This will, in turn, allow farmers, processors and retailers to develop higher confidence in the integrity of food products throughout the value chain.

Why ProteoSense Is Going To Kill It

• They have a killer team

Mark is an 8x entrepreneur and has developed a level of poise and leadership capability that comes with having run both successful and failed companies. He’s built a team of like-minded entrepreneurs and executives who have led 30+ product releases, own 30+ patents, and collectively built 12 startups that have raised over $100M in capital. But what jumps out at me the most is that his team has overseen 6 exits — they know how to build a company to scale and understand what it takes to successfully get acquired. This outcome is very difficult to achieve and the experience of going through the M&A cycle not once, but six times, is priceless.

• The problem size is huge, so there is definitely a significant market need for this right now

Notice I emphasized “problem size” instead of “market size”. My belief is that, if a startup is solving a critical problem, the market potential will be there. Right now, there’s a huge problem with food recalls, supply chain risks and inefficient food safety testing timelines. Food safety recalls have been increasing each year over the past decade and a majority of food producers have been affected by a food safety recall in the past few years. And the financial implications of a recall are catastrophic to most of these producers — with the average direct cost of a recall at nearly $10M with intangible costs such as reputation damage and sales loss adding several million more to that. Current pathogen testing solutions take too long to process and by the time results come back, the damage has already been done to both the brand image and the company’s consumers. Food producers are crying for a better solution with higher accuracy and faster turnaround and ProteoSense does just that.

• Their technology is easy to use and has wide-ranging applications

ProteoSense’s high-sensitivity field portable system combines off-the-shelf communication devices with an easy-to-use software interface and disposable biosensors to detect food-borne pathogens without incubation, reducing total test time from days to minutes — a 10x improvement over existing tests. The ProteoSense system is durable so you can use it in the field, in a plant, or in a store. The beauty of ProteoSense’s solution is that it can also test for all of the primary food-borne pathogens including salmonella, E. coli, listeria and campylobacter, and the test itself can be administered on-site by non-technical personnel — it’s that comprehensive yet easy to use. Imagine being able to get results in under 90 minutes. The current food supply chain system demands efficiency and results and ProteoSense can deliver on both.

In addition to produce and water testing, ProteoSense’s underlying biosensor technology is applicable across an array of industrial applications, including in poultry, dairy, and meat processing, as well as in biomedical and environmental testing.

• They have landed some of the biggest food companies as trial customers and have good traction

ProteoSense is currently engaged with big names such as Taylor Farms, Tyson Foods and Driscoll’s in field trials, with several other large produce growers, processors, shippers and distributors in the pipeline. At scale, ProteoSense will be able to offer their portable device and sensor cartridges at under market rate and still have high margins. This ensures that the business model is scalable and sustainable.

• Shifting consumer preferences are driving demand for fresh ingredients and new types of food so food safety is paramount

The news has recently been dominated by headlines of the Beyond Meat IPO and the massive fundraising efforts of other alternative food startups. In a dramatic shift, consumers are driving significant change in the global food supply chain system by demanding healthier food products, fresher ingredients, better distribution options and more transparency into how their food is made and where it comes from. People want more sustainably produced food and this shift from processed food to fresh food diets comes with increased challenges in preparing and maintaining fresh ingredients. Uncooked and unpasteurized products are ripe for harmful bacteria outbreaks.

A burgeoning middle class and increasingly busier lifestyles are also contributing to an increase in consumption of pre-packaged, ready-to-eat foods with short shelf lives. But consumers still want fresh ingredients in these easier meal options. The mix of packaging and fresh ingredients introduces contamination risks that need to be meticulously managed.

Final Thoughts

Technology is a key element to elevating food safety practices and reducing food safety incidents. Food businesses have traditionally been slow to adopt technology, citing cost and implementation complexity as key limiting factors. ProteoSense is able to address both of these concerns and still deliver high quality results, which is why I was excited to welcome Mark and his team to the THRIVE family; the impact and benefits will be huge. Under the radar, the government has also been pushing for food safety reform — pushing for stricter food-safety regulations and giving the FDA more power to regulate food facilities and oversee key parts of the food supply chain. This push to minimize contamination risk tells us that everyone from farmers to food manufacturers to importers will be in the market to adopt food safety services. That’s even more validation for what ProteoSense is doing. For us, choosing ProteoSense was also equally about investing in its founder, Mark Byrne, as it was about the impact potential. Mark is a great entrepreneur and we really wanted to be a part of his journey. We’re really looking forward to seeing what’s in store for ProteoSense moving forward. Check them out at http://www.proteosense.com/ to learn more. I’m also happy to facilitate an introduction for anyone interested in meeting Mark and his team.

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Jonathan runs the award-winning THRIVE Accelerator program at SVG Ventures in Silicon Valley, which was named Most Valuable Agrifood Tech Accelerator at the 2019 AgFunder awards. At THRIVE, Jonathan empowers, supports and invests in early-stage, growth-driven startups that are using technology to advance the future of food and agriculture. In 2019, Jonathan was selected as part of the 2019 AgGrad 30 Under 30 class and is a member of the NationSwell Council, an invite-only cross-sector community of service-minded leaders and innovators who are tackling the nation’s most critical issues. Jonathan has a BA in History from Rice University and an MBA from the Johnson School at Cornell University.