The year the Valley embraced sustainable food innovation

“The food industry is broken,” says Josh Tetrick, a 32-year-old entrepreneur who’s creating plant-based egg replacement products that could one day disrupt the global egg industry. His 11-month-old company, Hampton Creek Foods, is working out of a food lab in the South of Market area of San Francisco, just a few blocks from Internet startups like Twitter, Zynga and Airbnb. During a tour of the lab this week, Tetrick’s lovable golden retriever, and unofficial company mascot, Jake, was parked good-naturedly on a bright red couch in the lobby, underneath a photo of Bill Gates eating a muffin made with Hampton Creek’s egg-free baking product. It’s a feel good sort of place.

Photo of Bill Gates taste testing Beyond Eggs muffin.

Photo of Bill Gates taste testing Beyond Eggs muffin on the wall of Hampton Creek’s food lab. Hampton Creek CEO on the left.

In the culinary lab

In Hampton Creek’s lab, Tetrick’s staff of 19 — armed with a combo of science degrees, chef experience and food industry chops — are obsessing over eggs. What gives an egg — the result of a chicken menstrual cycle (eeww) — its unusual characteristics and how can those characteristics be replaced with a combination of plants? The team has worked on over 344 prototypes for their egg-yolk product, and have studied 287 types of plants that range from peas and canola.

Jake the golden retriever and unofficial Hampton Creek Foods mascot

Jake the golden retriever and unofficial Hampton Creek Foods mascot

The lab is filled with industrial food measurement equipment like the “texture analyzer,” which basically pokes baked goods to see how much they bounce back. Before the company moved into the lab, Tetrick was doing these types of tests with his finger in his studio apartment in L.A. He discovered that switching the recipe to include a new type of pea, delivered the fluffy, elastic muffins that people really craved. Who knew?

Earlier this month Hampton Creek Foods, started offering samples to customers of its baking product, called Beyond Eggs, which can be used in goodies like cookies, muffins, and cakes. The team is also developing egg-free¬†mayonnaises, sauces, and dressings, which Hampton will likely first sell to food manufacturers, instead of straight to consumers. Tetrick says they’re close to a deal with a large food company, which they hope to close next month. They’re also working on a scrambled egg product, too.

The lab of Hampton Creek Foods

The lab of Hampton Creek Foods

The real reason that Beyond Eggs could eventually catch on is because it’s not striving to be an eco or vegan product. It will be about 19 percent cheaper than using eggs, will last longer on the shelf than eggs, is safer to use than eggs, and is better for you than eggs. Then there’s all of the feel good aspects — the poor environmental and inhumane conditions of the egg industry, and the reduced carbon emissions by decreasing the amount of feed (mostly corn and soy) that goes to chickens. But all of those won’t matter if the products don’t pass Tetrick’s “Dad Twinkie” test: in theory deliver a twinkie that’s cheaper and better for you, but that tastes exactly the same.

A new eco-food innovation movement

Hampton Creek Foods is just one of a new type of eco-food innovator that is being incubated in Silicon Valley. The company is backed by Sand Hill Road heavy weight Vinod Khosla’s firm, which is why Bill Gates — whose an investor in Khosla’s fund — gave Hampton’s muffins a taste test last year (and by the way, couldn’t tell the difference between a muffin with eggs and a muffin with Beyond Eggs). Khosla partner Tony Blair also did the taste test.

Assortment of Unreal Candy

Assortment of Unreal Candy

Khosla is backing other sustainable food startups, like organic and healthier candy company (Unreal Candy), a salt replacement product (Nu-Tek Salt), plant-based meat replacement startup Sand Hill Foods, and a fake cheese company. During Khosla’s LP meeting last Summer, Bill Gates called the budding food innovation movement — which is making food more sustainable and also cheaper — a “huge thing” that “will confound the pessimists.” Gates’ team also recently created and will soon release a documentary about four food innovation startups, one of which is Hampton Creek Foods.

Other investors beyond Khosla and Gates also see promise in sustainable food tech innovation. Valley investor Kleiner Perkins and Obvious Corp — the company behind Twitter — have invested in Beyond Meat, a startup making plant-based faux-chicken products. NGEN Partners has backed sustainable lettuce grower Bright Farms, a vegan restaurant company Native Foods Cafe, and stevia zero calorie soda company Zevia.

Lettuce grown via BrightFarm's supermarket growing method.

Lettuce grown via BrightFarm’s supermarket growing method.

In addition to plant-based proteins and healthier foods, other startups are working on “cultured meats” or lab-grown meats. Modern Meadow is the most well-known of those, and it’s backed by investor Peter Thiel. Modern Meadow is looking to basically print out synthetic lab-grown meats, and somehow overcome the ick factor that goes along with the process.

Josh Balk, the Director of Corporate Policy for the Humane Society calls the emergence of new eco-food entrepreneurs as a “tremendous movement.” We see innovation in plant-based foods, as the next way that technology can help animals, says Balk. The first was in transportation — shifting from horses to cars — and the second was replacing animals in movies and TV with CGI, says Balk.

This isn’t to say that plant-based proteins isn’t already a big business. Kellogg’s(s k) owns veggie food giant MorningStar Farms, Kraft(s krft) has its Boca brand, and ConAgra(s cag) has Lightlife. But these startups think that their technology innovation can create products that are far better — without compromise — than the current ones on the market.

MorningStar Farms

Is Cleanfood next?

Is eco-food tech the next big thing for innovators and investors? Well, a lot of the investors that backed clean power and “cleantech” companies over the years, are now turning to this movement. That’s because the thesis behind cleantech and “clean food” are the same: the population will hit 9 billion by 2050, and the planet will need to better manage food for this massive population and in particular find more efficient ways to make proteins and meats.

The meat, agriculture, dairy and egg industries are highly inefficient ways to produce edible proteins. Many of these new startups are looking at plant-based proteins not as a way to sell eco-food, but as a way to produce protein more efficiently, more cheaply and with less energy. In particular developing nations that have growing appetites for meat consumption, like China, India and Brazil, could be strong markets for a lower-cost type of meat.

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Looking past economics and efficiency, the next-generation — the so-called Millenials — are becoming a lot more health and environmentally conscience. Sustainable brands that can also create better products will win out with this demographic. DBL Investor’s Nancy Pfund, who backed both Tesla and SolarCity, told me last year that she thinks eco consumer products will be a hot area for entrepreneurs in 2013.

Finally, cleantech and clean power startups haven’t exactly produced great returns for most investors. So it makes sense that some of these investors are looking at similar, but different, trends that piggyback their former thesis but add a new twist. Khosla, Kleiner and NGEN all made significant bets on cleantech.

Still, food technology — unless it’s IT-based — hasn’t traditionally been the fodder of venture capitalists. When I ask Tetrick why his company is “venture backable,” he says because they are creating a powerhouse of innovative thinkers that can come together across disciplines, and traditional food companies just aren’t as nimble. Tesla used that same argument for why as a startup it can revolutionize the car industry, and out innovate against the large automakers.

But Tesla is a sort of outlier on a lot of levels. It’ll be harder to disrupt more traditional industries without Moore’s Law in your corner. But in the meantime, as these startups sink or swim, at least they’ll be putting the spotlight on a crucial problem: the food industry is broken and it needs technology and innovation to be fixed.