Section 1: How to Think about Disruption:
Andras Forgacs, Modern Meadow: The Entrepreneurial Ecosystem
Andras Forgacs, Modern Meadow
Modern Meadow develops technology to biofabricate meat and leather.
How do you define entrepreneurship?
People traditionally think of entrepreneurs as start-up individuals, solo entrepreneurs or a small team where something is built from nothing. But it’s also important to think of entrepreneurs as people who can exist within larger organizations. You can be an entrepreneur anywhere. In my mind, entrepreneurs conceive of a big idea which exceeds their current capabilities. They then acquire or enlist the resources and capabilities to achieve that big idea. Entrepreneurs obviously rely upon an ecosystem around them, whether that is the world at large or an organization in which they operate. I believe that both of those definitions apply to entrepreneurs. Additionally, an important difference between a true entrepreneur and a partial entrepreneur is: “Does the buck stop with you?” and “Do you take full responsibility for the outcome?”
What is the distinction between entrepreneurs inside and outside of established organizations?
The clever word that I have heard about entrepreneurs at large organizations is “intrapreneur”, someone who conceives of a new initiative and then enlists the resources at the organization to spearhead that initiative. An entrepreneur would then be someone who does that in the world at large, i.e. in the wild. But the DNA which drives a really great entrepreneur is similar to what drives a really great intrapreneur as well.
With both kinds of entrepreneurs, what is the role of existing organizations and governments?
There is an idealized vision that clever start-ups are conceived in garages and basements, with teams of renegade loners who devise some kind of clever widget or product and take over the world. That’s a great vision, but in my experience it’s rarely the reality. Really successful entrepreneurs are often driven by an understanding of an unmet need, which often means they understand an industry or problem really well, and they actually come from the industry which gave them the insight to see the problem which needs to be addressed. They then assemble ideas or resources that are already around them. That doesn’t happen in a vacuum, but it relies upon many inputs and resources. It relies on technology or insights that may come from anywhere.
In terms of governments, they can either be an enabling or limiting factor. There are some things that only governments can really do. There are public goods that must exist for entrepreneurship to thrive, including education, security and infrastructure, which are of course foundational to entrepreneurship. These are all enabled by good governments. In addition to that, many things are built upon great research that happens in academia, research institutions and labs around the world, and this research is often funded by governments. We need this funding for innovation, which can then be applied in an entrepreneurial context.
In the last decade, there has been an increasing understanding that basic research will push the boundaries of scientific knowledge further, but we also need to think about how we move that out of the laboratory and into the community. Some governments have a better appreciation of that today than they did 10 years ago. Private risk capital doesn’t know how to effectively operate in that space. There are some effective examples, but private equity and investment is generally not good at funding early-stage, or translational, research. Instead, it tends to only operate once the path to commercialization is much clearer, with perhaps a five- to ten-year journey to market. Comparatively, government has the patience to invest much earlier than that.
There is a flip side. There are many things required by government, which can hamper entrepreneurship. This includes regulation, licences and taxes, among other things, that can slow down the entrepreneurial process. However, there is a lot that can be done to bring the two communities closer together because, ultimately, the role of government is incredibly important, and when done properly, it can really fuel the pipeline for new ideas.
Where do you see the most exciting opportunities for entrepreneurs today?
There is a growing interest in entrepreneurs who are looking to solve problems at the level of atoms and not just bits. Digital innovation is huge and incredibly important, but I am also seeing a lot of really innovative companies trying to solve problems in the world of matter. They are coming up with great physical products. This is certainly enabled by software and other technologies, but what I am really excited about is that we are entering into an era when innovating in matter is also becoming cheaper. Similar things are happening in biology and other areas of physical innovation in the entrepreneurial community. For example, we are seeing laboratorial services emerging, as well as cloud-based research. You can now rent access to core facilities and equipment. There are many things that are lowering the cost of scientific innovation. There is a real opportunity and upcycle in physical innovation.
Where do you see the role of corporates in this process?
I would say that large corporates, that misunderstand entrepreneurs and see them as threatening, are missing the opportunity. The smartest, most enduring and excellent companies are the ones that understand the power of entrepreneurship and how to enlist it. For example, Google, Apple and Amazon are able to create entrepreneurial ecosystems and ingest innovation. There are also companies that are defensive to innovation, and they will become marginalized over time. I would simply say that while our technology may be disruptive, the smartest players recognize that a revolutionary technology should be welcomed rather than feared and repressed.
Government can help level the playing field by limiting the coercive power of established companies. In the United States, that power is well held in check, but in some emerging markets incumbents have a more monopolistic power and so it’s difficult to be a start-up in some locations, because the established players have the connections and they can crush what they perceive as a threat.
It is well understood in Silicon Valley and some other parts of the world that the big guy and the small guy can be beneficial to each other. I hope that understanding can be spread more widely.
What is the role of other emerging technologies, such as big data, at a science start-up like Modern Meadow?
We are standing on the shoulders of giants, who are standing on the shoulders of many other giants. In the course of all the problems that we are addressing, and all the product development challenges that we are working on, we are really leveraging incredible advances in other fields and other research labs around the world. All of them – from advances in biology that have happened in the past few decades, and advances in genetics which are becoming more important in our work, to advances in software, computation and experiment design – are critical for us to build upon.
In terms of big data, computation is advancing and data capture and analytics have evolved so much that measurement is becoming far cheaper. Running the right experiment and maximizing information gain is the basis of clever science. If you can now get even cheaper measurement information and allow that to inform the next wave of experiments, then that can accelerate product development, and that’s how we are leveraging the benefits of big data.
How do you see Modern Meadow disrupting the meat and leather industries, and what are the biggest hurdles?
We are so early-stage on the development of food in particular that incumbent meat producers are more worried by many other things than by the technology that will be a factor a decade or two from now. More immediately, they should be worrying about disease, climate change, prices, logistics and many other things that are currently on their radar, which means we shouldn’t be a factor yet, and we certainly haven’t had any controversy from them.
In terms of consumers, there are a lot of strong opinions and emotional associations when it comes to food. However, because we are R&D and not a commercial product, we aren’t yet really front and centre with consumers. Anecdotally, however, I find that about 50% of people would try cultured meat. Once you explain to them how it’s made, then it is demystified and the willingness to try is quite high. We are taking natural cells, growing them, culturing them, as is the case for yogurt and yeast, and that it is a very clean process. Worldwide, around $1 trillion dollars of slaughtered meat is consumed. If 50% of people are willing to try cultured meat, then that’s a huge market opportunity. If you are wrong by an order of magnitude of 5%, or even two orders of magnitude of 0.5%, then it’s still a huge market. The entrepreneurial leap here is well worth taking.
That said, there are regulatory hurdles. There is potential for controversy among consumers; there’s a strong domestic incumbency and potential political lobby, and that’s why we aren’t starting with food. For several reasons, we are now focusing on biofabricating material, specifically leather, which has better design and performance properties and can create really high-end, desirable products. We are confident that we can create an appealing library of materials for manufacturers and retailers, where there isn’t a strong regulatory environment and people are more willing to try wearing experimental materials. The wearable route is appealing for this reason. Technology is sometimes better to manifest in an inedible form first, which people can easily understand, and then they can be introduced to other products that are edible. That said, there are a huge number of early adopters. The reaction at food tastings has been hugely positive.
Modern Meadow recently closed its Series A funding and is doing science as start-up. Can you give an insight into this process from a scientific, entrepreneurial perspective?
Our capital formation started with grants, including Small Business Innovation Research (SBIR) grants from the US Department of Agriculture and from the National Science Foundation. They were small but important grants that gave us some validation and allowed us to start operating. We also received some philanthropic funding through Peter Thiel’s Breakout Labs organization, which is mandated to fund transformative, breakthrough ideas that can have an impact on a very large scale, including the many ideas that contain risk and may not be compatible for venture capitalists at an early stage. Breakout Labs has become our supporter with a grant, and that had a huge effect not just financially but also in terms of the credibility of being backed by Peter Thiel, who previously backed Facebook, PayPal, Palantir and now us. That continues to be very helpful today.
Approximately $2.5 million of seed money was then raised from angel investors and venture funds, which allowed us to run for the first two years of our existence. We then raised our Series A, which was our first major institutional funding round. We were fortunate enough to come into contact with Horizons Ventures, which is the venture fund of Li Ka-shing, the incredible Hong Kong businessman who also has one of the world’s largest foundations supporting medical research and technology for the greater good. We had an early interaction with Horizons Ventures, which really liked what we are doing, and that’s how they became the lead investors in our Series A.
Initial grants were catalytic, and we still apply for grants for ventures that profit-seeking investors would not be comfortable with due to the time frames and scientific risks. However, like any good company, Modern Meadow cannot be captive to grants. We must start with grants and then move into risk capital to allow the organization to scale up.