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The Next Startup Craze:Food 2.0

Silicon Valley investors and startups are trying to improve our food. Do they bring anything to the table?

Most tech startups are silent spaces where earbud-clad engineers peer into monitors. Not Hampton Creek Foods. The two-year-old company’s office—a filled-to-bursting space in San Francisco’s South of Market tech hotbed—grinds, clatters, and whirs like a laundromat run amok. That’s the sound of industrial-strength mixers, grinders, and centrifuges churning out what the company hopes is a key ingredient in food 2.0: an animal-free replacement for the chicken egg.

Silicon Valley venture capitalists have funded several food-related startups in the past year, but Hampton Creek has gathered the most momentum. It has A-list investors including Founders Fund, Horizon Ventures, and Khosla Ventures, and two undisclosed industrial food companies are experimenting with its plant-based egg substitute. The prepared-food counter at Whole Foods began using the startup’s egg-free Just Mayo mayonnaise in September 2013, with four other mainstream grocery chains lined up for the first half of this year. And, thanks to a recent investment round that boosted Hampton Creek’s funding to $30 million and drew in Li Ka-shing, the wealthiest person in Asia, Just Mayo soon will be sold by a large online grocer in Hong Kong.

Hampton Creek Foods and other startups have big dreams of restructuring the food supply so that it uses less land, water, energy, and other resources. In doing so, they are taking on corporate giants such as ConAgra, General Mills, and Kraft that spend billions on research and technology development.

Such ambitions have run up against considerable challenges in industries such as clean tech. But those involved in the new food binge might prefer a different example. Hampton Creek’s CEO, Josh Tetrick, wants to do to the $60 billion egg industry what Apple did to the CD business. “If we were starting from scratch, would we get eggs from birds crammed into cages so small they can’t flap their wings, shitting all over each other, eating antibiotic-laden soy and corn to get them to lay 283 eggs per year?” asks the strapping former West Virginia University linebacker. While an egg farm uses large amounts of water and burns 39 calories of energy for every calorie of food produced, Tetrick says he can make plant-based versions on a fraction of the water and only two calories of energy per calorie of food — free of cholesterol, saturated fat, allergens, avian flu, and cruelty to animals. For half the price of an egg.

That’s a tall order. The lowly chicken egg is a powerhouse of high-quality, low-cost nutrition. Yet, in prepared foods from salad dressing to cake, it’s prized less for its nutrients than for its culinary properties: emulsifying, foaming, binding, gelling, and many more. Those functions are conferred by the egg’s unique complement of proteins. Rather than trying to reproduce the egg wholesale, Hampton Creek focuses on discovering vegetable proteins that replicate specific functions in food preparation.

The rear of Hampton Creek’s facility is devoted to finding them. There Josh Klein, a biochemist who formerly worked on an AIDS vaccine, runs a high-throughput screening pipeline designed to comb through millions of plant cultivars for proteins with certain characteristics such as molecular weight and amino acid sequences. So far, Hampton Creek has examined 3,000 plants and discovered 11 desirable proteins, seven of which are already allowed in food by the U.S. Food and Drug Administration. One is the Canadian yellow pea protein that emulsifies the oil and water in Just Mayo. Another binds the company’s cookie dough, called Eat the Dough, which is due to hit store shelves this month. A third goes into a prototype viscous yellow liquid that looks much like a beaten egg and possesses a similar nutritional profile, minus the cholesterol.

When Hampton Creek chef Chris Jones, late of the Chicago eatery Moto, pours the prototype into a heated pan, it solidifies as though it came out of a shell. The fake egg looks and feels authentic, but in a test last winter it was rife with off flavors, and the team is still working to make the formula satisfying under all possible conditions in which it might be prepared and eaten—with ketchup, refrigerated, left out in the open, and so on.

A convincing animal-free scrambled egg alternative would be a unique product, but Hampton Creek’s emulsifiers and binders won’t have the market to themselves. They’ll compete with an array of existing egg substitutes—never mind eggs themselves. Egg replacers are widely used in packaged foods to cut costs and mitigate fluctuations in egg prices. These products, usually derived from soy, milk, gums, or starches, typically are cost-competitive with Hampton Creek’s offering. Some of them also can be functionally more effective than eggs.

Competition isn’t the only challenge. First, while Tetrick is intent on conquering the mainstream, his egg-free products risk being relegated to the vegan aisle. “I think their success is going to be limited to a niche market for now,” says Christine Alvarado, an associate professor of poultry science at Texas A&M. And should the company discover a compelling protein that comes from an unusual plant, it must convince farmers to supply that crop in huge quantities without raising costs. “The more specialized your raw material, the higher risks the supply chain will face,” observes Jon Stratford of Natural Products, which makes a soy-based egg substitute for the food industry.

Then there’s the fundamental question of whether Hampton Creek’s proteins are, indeed, better than traditional egg replacements. In fact, Hampton Creek’s own patent application offers egg replacement recipes made entirely of off-the-shelf ingredients (with additional processing such as grinding into very small particles). “Food scientists have been doing this for 100 years or more,” says Gregory Ziegler, a professor of food science at Penn State University. (Tetrick responds that the recipes in the patent applications came from an earlier stage of research.)

Nonetheless, Hampton Creek’s approach is working so far. Tetrick expects to have his egg-free mayo in 15,000 stores by late summer, up from 3,500 now, and he has his eye on fast food chains and food service companies. To accommodate the demand, he plans to triple the size of his work force by the end of the year and expand his floor space thirtyfold. And once he has established a toehold in the egg market, Tetrick plans to start putting his plant-protein database to use in other areas; he hints at substitutes for chicken or beef. “I consider a broken food system my enemy,” he says.

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