Fork The System Episode 10: Albert Tseng

Welcome to Fork The System — a podcast spotlighting the innovators, researchers, and advocacy leaders reimagining how we feed the world.

Our tenth guest is Albert Tseng, the co-founder of Dao Foods, a venture capital firm that seeks to grow the alternative protein space in China. Dao Foods invests in promising Chinese start-ups, provides mentorship, and builds stakeholder ecosystems to strengthen the Chinese alt-protein industry. 

Main resources:

• LinkedIn: https://www.linkedin.com/in/atseng34/
• Website: https://www.daofoods.com/

Feedback Form: bit.ly/forkthesystemfeedback

Transcript: https://docs.google.com/document/d/10uoUfLtScr6VO6w5kX49wz3nz78bE7tQmXKm6Ndg4DI/edit?usp=sharing

Transcript

Albert:

I believe that capital and business were powerful agents for that change because it allowed for [the] organization of people into personal incentives to drive these different technologies and solutions for humankind. 

Capital and financial engineering has sometimes gotten offside in terms of, is it actually providing value for humankind, right? And so what I would say about impact investing and social enterprise is let's put societal change and societal development at the center so that we're actually moving ourselves as a world forward in a positive way.

[Music fades in]

Sherry:

Welcome back to Fork The System, a podcast spotlighting the innovators, researchers, and advocacy leaders reimagining how we feed the world. I'm your host, Sherry Shu, exploring how we can build food systems that are sustainable, ethical, and free from animal suffering. 

Sherry:
Hey everyone, thanks again for being patient with me as this episode took a lot longer than I expected to finish up. This semester has honestly been kicking my butt, but I promise you that next semester I'll have a lot more time to make sure that we can go back to our regularly scheduled monthly episodes.

That being said, I'm excited to bring you our 10th-ever Fork the System episode and last one of the year, where I got to sit down with Albert Tseng, a veteran in the venture capital space. We got to talk about a promising and underserved new landscape for alternative protein innovation — China! So without further ado, let's get right into the episode.

Sherry:

I'm here with Albert Tseng. Albert is the co-founder of Dao Foods, a venture capital firm that seeks to grow the alternative protein space in China. Dao Foods invests in promising Chinese startups, provides mentorship, and builds stakeholder ecosystems to strengthen the Chinese alt-protein industry. Albert, it's really great to have you on the podcast. 

Albert:

Thanks for having me, Sherry. Excited for the talk.

Sherry:

Excited as well. I think your journey is really interesting and something our listeners can probably learn a lot from. So what inspired your journey into this whole food tech and impact investing space? 

Albert:

So I started out as a mechanical engineer and then a biomedical engineer. So I worked in the Canadian healthcare system for about a decade, but it was actually my travels with my wife actually—before we got married, we travelled around the world and wanted to see the world as many Canadian kids do. And I was just astounded by how good we have it in Canada relative to a lot of other countries.

These were just sort of backpacking trips just to see the world, but as time went on and as my career was developing, I was often thinking, is there a more exciting career out there? Is there a more exciting use of business and capital? I see myself as really a capitalist, seeing sort of the power of capital markets and business. But at the same time, there's all these problems in the world that seem intractable. And I often thought, is there a way to sort of marry my interest in business with solving some of these more difficult problems? 

So I kind of interrupted my career, and I started in a new career in the area of social impact investing and social enterprise. I did a one-year program at the Harvard Kennedy School. That's actually where I met my current co-founder of Dao Foods. He was a visiting scholar from China. But after that program, we went on our separate ways. I actually went to the UN and started doing some business at the base of the pyramid. So, trying to understand how to use business in lower-income countries to try to develop markets.

And I did a bunch of different things and then ended up back in Toronto, working for a startup that was using big data and technology to understand the spread of infectious diseases. But where it leads into food tech was that we were venture financed through a venture capital firm in Hong Kong called Horizons. In that portfolio was a lot tech companies like Facebook and Zoom, but they also had a bunch of food tech companies. This is going back to, I guess, 2013-ish. And so Impossible Foods, Perfect Day, Modern Meadow, Eat Just were all part of that portfolio of companies. 

And every year they would bring the founders of these companies together to just share experiences. I met all these companies and I said, hey, what are they working on? Why are they re-imagining food? And so that's when I sort of started asking those questions. I started trying to understand, okay, what is the current food system look like? I think many of us, myself included, do not really think about where your food comes from. As I started to dig into that question a little bit more, got more educated on the harms of industrial animal agriculture and sort of the things that you don't see.

And so that's when I started saying, okay, well, is there a more humane and just and more sustainable future of food? And I started looking at the data and it was interesting because these companies were in the U.S. or Europe. But when you look at the protein demand and where highest increases in animal protein consumption would occur in the coming decades, it was Asia and in particular, China. 

China consumes about 26% of the world's meat and almost 50% of the world's seafood. And that's only at the current per capita meat consumption of average Chinese citizen is about half as much as an average American. So you can only imagine as 1.3 billion people and their incomes continue to rise that the demand for meat and seafood, and other animal proteins will continue to rise. And what I saw was that there was not as much innovation happening in China as there was in North America and Europe. And so that's kind of the origins of Dao Foods was we need to actually spur on more innovation, more entrepreneurship, more technology development in China, because that's where the greatest impact will be in the coming decades. 

There are no silver bullets in terms of the solutions to any of these global problems, but solving industrial animal agriculture has outsized impact because it has so much impact on climate change. It has impact on waste production. It has impact on antimicrobial resistance, because we use a lot of antibiotics prophylactically within farm to animal populations, which then affects humans. There's a lot of opportunity to try to solve some of these downstream problems. 

Sherry:

Something that I was thinking about is a comment you made earlier about like, I'm a capitalist, I believe capital holds the power to kind of solve these problems. I'm curious, like, where do you think the power of capital really lies? And do you think there are any shortfalls that capital has in terms of the problems it can solve? 

Albert:

When you look at Adam Smith and a lot of early economic theory, it was all about solving problems, transportation and the first car, right versus horse and buggy, whether it was, you know, any medical inventions that came about to solve an illness. I believe that capital and business were powerful agents for that change, because it allowed for organization of people into personal incentives to drive these different technologies and solutions for humankind. 

Capital and financial engineering has sometimes gone offside in terms of, is it actually providing value for humankind, right? And so what I would say about impact investing and social enterprise is, let's put societal change and development at the center so that we're actually moving ourselves as a world forward in a positive way.

Sherry:

Thanks for sharing your perspective. That's really interesting. So going back to Dao Foods specifically, you mentioned that you saw a gap in the market in terms of focus on China, especially as it's one of the world's growing meat consumers and producers. What does Dao Foods specifically do? What are your day to day operations in China? And what opportunities are you pursuing in China? 

Albert:

Sure. When Tao and I, my co-founder started, we just sort of saw this as a problem. And at that time, we actually both of us were working elsewhere, right? And we just saw this as an opportunity to highlight this issue and try to engage others. So we said, oh, maybe we should just start with a white paper, try to get people interested in this topic. 

But we ended up talking to colleagues that had been doing this elsewhere in the world, in the U.S. and Europe. And they said, hey, you guys are already in impact investing. We need some people to actually build this ecosystem out in China.  We started bringing some international experts to China and connecting them with government stakeholders and entrepreneurs and investors to try to just say, like, what are the opportunities in China? There was a lot of conversations. But at the end of the day, we said, okay, well, there needs to be some action on the ground.

Sherry:

Right.

Albert:

And so we started looking for companies that were doing interesting things. And we ended up finding a few companies and then one in particular that we said, well, let's actually try to get some financing for this company.

So we helped a company called Starfield out of Shenzhen, China, do their angel round. And they started having some good success in terms of reaching fast food chains like KFC and other Chinese national chains. And so what we said was, well, actually, one company can't do it alone. China is a huge market. We actually need hundreds of these companies to actually develop plant-based meat, plant-based dairy, cheeses, seafood, all sorts of different microalgaes, a lot of new novel proteins. 

So we said we need to actually help get more companies kickstarted in China. We started an incubator where we would work with companies to help from various levels of beginnings, whether it was like just a business plan or whether they had a prototype already to actually help them get started, help them raise their first round of financing. So right now we're up to 23 companies, mostly in China, a few abroad where we believe there's strategic value in bringing them into the Chinese marketplace. 

The base, we work with the companies to help them grow, because at the end of the day, we need companies to be creating products that are engaging consumers and introducing them to more sustainable ways of eating. Those companies need a healthy ecosystem of investors, of business partners that understand what they're doing and can help them grow. And that's where we do a lot of ecosystem building to work with those partners to understand where the future lies. And then the final part is we work with a lot of investors internationally and within China to say, hey, this is an investable area. The future of food is exciting. We need more capital flowing into this sector. 

Sherry:

Very interesting. How does the VC space in China differ from, for instance, the US? Is it very different operating as kind of a VC investor ecosystem builder in China? 

Albert:

I guess there's a lot of similarities in terms of the entrepreneurs, the relationship with the investors. What I would say is that in China, the investors are probably a little bit more cognizant of where the government is heading and the types of initiatives that the government is supportive of. 

That's why there's been a lot of investment money that has gone into electric vehicles in China, into solar panels, because that was a focus area of the Chinese government. There are a lot of local mayors and regions in China that have funds and resources to help entrepreneurs in that area. 

Sherry:

Yeah. Is alternative protein something that the government is focusing on, do you think, more and more? 

Albert:

I wouldn't say that it's a high-priority area relative to others like electric vehicles. It has been mentioned in government policy agendas. What President Xi had said is the big food concept. Over the coming decades that we should not only be getting our food sources from animals, plants, but we should also be using microbial sources and other novel proteins.

China imports a lot of soy, for example, from the US and Brazil, and 70% of that is used for animal feed. If China continues to be reliant on foreign countries for its inputs to the growing livestock production, then that's a national security issue. I think that government stakeholders are trying to say, how do we shore up our food security? 

I think COVID taught us a lot about how supply chains can be completely interrupted. If you can be more self-reliant and produce food in more efficient and more local means, then that's probably a good investment area. We work a little bit with the government of Singapore, and they have a 30 by 30 agenda, which was to have 30% of their food sourced in Singapore by 2030. 

Sherry:

Yeah, we've talked about the 30 under 30 in another episode, so that's really cool that things are coming full circle. It's definitely something that Singapore is really a world leader on, kind of focusing on this. 

I think it's really interesting to see how alt proteins, although it's a difficult policy issue that the government might deprioritize in comparison to other things, it's also something that can achieve a lot of a government's other goals, right? Like you mentioned, by investing in alt proteins, if you're able to tackle a trade reliance issue, if you're able to tackle a food security issue, then that can be a very appealing solution to three birds with one stone of intensive animal agriculture issue as well. So I think that's really unique about this space, how interconnected food is with all these other problems.

Albert:

For sure, yeah. I mean, if you look at the statistics, Our World in Data, the website, has fantastic visualizations and data showing the use of the world's resources, right? So when you look at the amount of arable land that is used for animal feed, it's huge swaths of land. So that affects land use for other means and growing other things. It affects wastewater, it affects climate, it affects deforestation or soil desertification, like all of these things, to your point, are often driven just because of the scale of agriculture and food. 

From a climate or environmental perspective, obviously, energy has been a hot topic over the last few decades. Transportation has also been electric vehicles and other means of transportation, huge in terms of investments. But food and agriculture really has not absorbed much innovation and capital relative to those other areas. So I'm hoping in the coming decade or two decades that that will shift, and that more people realize that in order for us to be better custodians of the earth, we can actually use our brightest minds and innovation around solving some of these issues and making the food system more sustainable. 

Sherry:

For sure. Here's to hoping there's more attention put towards this issue. 

This continues off a topic we already talked about, but are there specific barriers that make China a difficult market to play in versus opportunities or advantages China has for all protein development? So what are kind of the pros and cons of all protein development in China? 

Albert:

Yeah, I mean, I think it's a huge market, right? And so when people say, oh, what do Chinese people eat? It's like we divide the country into five strategic city cluster areas, each of which have probably over 100 to 150 million population. Each of those have very different culinary backgrounds and culinary cultures, different entrepreneurial cultures, different business frameworks. There's no one China, right?

So one way China being big is great because it's a large market, but you can't really look at it that way. And we often encourage our entrepreneurs to say, like, make sure you understand what your first target market is and focus on the needs and value that you can create for that small target market first and then expand from there. 

The other part of it is that there's so much competition, right? And in particular in food, there's the live streaming and the social media way of marketing in China. And every week, there's a new food innovation, right? Whether it's like cheese on coffee or like cilantro is the biggest thing. Every week there's something new. As a result, it's like the churn of ideas and new products that are being pushed to consumers is super high. 

So it's hard to really stand out. And it's so not concentrated and people are getting information from all sorts of ways. So getting attention is actually really difficult, right? And so that's why I think a lot of our entrepreneurs who have been successful have partnered with these Wanghong (网红, meaning “internet viral”) brands, like these really large brands that already have some consumer attention already. 

Sherry:

Or like fast food, right? 

Albert:

Yeah, Starfield has done a really great job with Daikos and KFC, Shi Cha, which is a bubble tea brand. And so I think it's challenging China because it's so big, but at the same time, there's a lot of opportunities. And as we're competing for the wallet shares of Chinese consumers, it has to taste good and has to be cost-effective.

And then I think that if you can meet those needs, then people are willing to say, oh, actually, it's sustainable as well. That's another reason why I should buy this product. And maybe we get some traction that way. 

So I think you've got to solve those first issues. Like nobody's going to eat it or buy it if it's super expensive or it doesn't taste great. So those are the minimal cost of entry. But then if you have these, like a brand that talks to young people and says like, hey, we want to be more sustainable, more responsible for the Earth's resources, then I do think that young people care. 

Sherry:

Have you seen through the startups that you've been working with a high amount of consumer acceptance and adoption? Because as a Chinese person myself, or a Chinese-Canadian, I know that meat is quite ingrained within a lot of cultural dishes, for instance. And my assumption is that there's probably some unfamiliarity with all proteins or like, oh, you want to take away the core essence of this meal or this cultural dish that we have. Have you seen this level of backlash when working with all protein products in China? 

Albert:

Yeah, certainly. There's always criticisms and like some quite famous over the last few years, ads that have not gone well because some of these criticisms and whether or not this is a advent of foreign actors that are trying to reduce the nutritional value for Chinese citizens. 

It's kind of like the coal-fired power plants sort of argument where the West, Europe and the United States basically did whatever they wanted for the last century. And then now that China has become rising, now you're saying we should limit our coal-fired power plants, we should be more energy efficient, we should eat less meat. That's not fair because we're on our development path now, right? 

But then what we try to position is that these are leapfrog technologies. People would prefer to have an electric vehicle now in China than a gas vehicle because there are benefits to it. So can we not do the same thing with food and say there are tasty, nutritious, cost-effective ways to eat without the harms of industrial animal agriculture, right? I don't think we're there yet. Obviously, people will say, oh, we'll never get there, right? But we've said that about so many different technologies in the past. 

If you look at any of the innovations, like I'm particularly excited about mycelium. So the roots of mushrooms and the fungi kingdom, most people don't understand that the plant kingdom is bigger than the animal kingdom. But what's bigger than the plant kingdom is the fungi, right? And we have not explored, because it's under the forest floor, all the species of fungi that could be used for a variety of different things, including food. And in China, fungi has been used for centuries in terms of Chinese traditional medicine. 

This is something that's probably less weird or new in China than, say, in North America or Europe. So I'm excited about these entrepreneurs that are actually creating new products, new solutions. And I do think that in the coming years, we're going to see even better things come out of all this research and development.

Sherry:

Yeah, that's really exciting. On the consumer side of things, there's obviously the pushback, but also probably some unique ways you can gain acceptance, whether that's cultural marketing, cultural food, and also using mycelium or fungi that's familiar to Chinese culture. 

But what about the producer side of things? Let's say China produces a substantial proportion of the world's aquaculture or fish or a substantial proportion of pork. Is there pushback from these agricultural groups as well in terms of shifting production towards plant-based protein plants? 

Albert:

It's hard to say because I think we're still at the early stages. There's not very many plant-based meat companies that are ascending so quickly that we're challenging the trillion dollar meat market, right? What I will say is that the dietary makeup of protein in the United States and China, if we just compare those two, is quite different. 

Last year, I believe, was the first year that China surpassed the United States in terms of per capita protein consumption. So that sounds weird, right? Because I had earlier said that the average Chinese citizen eats only half as much meat as the average American. But the protein breakdown is quite different. So roughly speaking, two-thirds of the protein that Americans eat is animal-derived, whereas one-third is plant-derived. 

But it's the opposite in China, where two-thirds of the protein comes from vegetables and one-third from animal sources. And only in the last few decades has there been a rapid increase in the animal protein consumption. There's a chance to actually double down on plant-based proteins in China, like tofu and seitan, and just actually push on traditional as opposed to needing all these new novel proteins.

But I do think that there's going to be multiple solutions to this. It's up to entrepreneurs to actually make exciting products and solutions that meet the consumer's demand. So to answer your question, I mean, I think there will always be pushback from interests. But I don't think governments are completely ignorant to the food security issues at hand and the problems that will come as people in China become richer. 

So I do think that there will be government support for a lot of these novel proteins and rightfully get more protein into diets, but do it in a way that is good for the country, is good for people, is good for the planet. Hopefully there is a way to, and I think this is similar with green energy as well, right, where the ideal world is one where we, as countries develop, create or set better habits almost than previously industrializing nations had in terms of production of goods, services, energy use, etc.

Sherry:

Yeah, I think I just have one final area of curiosity, which is just what are some of the most exciting alt-protein startups that Dao Foods has incubated, is looking to grow, or just new technologies on the horizon? You mentioned mycelium, but I'd love to hear of some more that Dao Foods is helping with. 

Albert:

Sure. Yeah, I mean, I already mentioned a couple, right? So I think every entrepreneur and every team is different in terms of what their superpower is. 

With Starfield, their superpower was co-creating with brands, right? I mentioned that this particular entrepreneur, her family has been involved in the restaurant business for multi-generations. So she was really active and successful in reaching out to a lot of these large brands, national-level brands and chains, and co-create like a Fantuan, like a rice roll with plant protein in it for breakfast. That's a different thing than, say, just a Beyond Meat burger or an Impossible burger, right? It was very much customized to the needs and really thinking about the voice of the customer of their clients, right? 

Maybe I'll just mention two companies. One, based in Shanghai, it's a company called 70/30. Their roots was actually vegan advocacy, but they also believed that actually creating products was the best way to sort of change people's minds about ways to eat. And so they had been tracking a lot about what was happening internationally with mycelium, but then they said, we want a China-first strategy. Let's take a look at all the different fungi species that are used in Chinese traditional medicine and other areas that have already been improved. And let's take those species and develop food products with it, as opposed to like an American or European company saying, here's a species that we have no idea what the regulatory pathway would be like in China. 

Sherry:

We're seeing kind of some of the problems of that approach, I think, even in the States, right? Where some sketchy alt protein things are being banned, maybe because they're made of ingredients that people aren't familiar with. So I think it's really interesting that you're using existing familiar ingredients instead of around that. 

Albert:

And then another mycelium company, they do a different type of mycelium fermentation. They do solid-state fermentation, but they actually make a flour. So it's the flour that people would use in making baozi or like buns. And you wouldn't think that you would have protein-packed powder and that you would only get the protein from what's inside the dumpling or the bun. But they're actually saying, no, we can put superfood ingredients into staples, right? So they embed mycelium protein, which also have omega-3s and various healthy components right into the flour. So people are getting nutrition from dumpling and buns. 

And some of the other ones are working on microalgae, novel proteins. We have several plant-based milk companies that are tackling, say, the bubble tea market, which consumes tons of milk. There are plenty of impactful solutions that we can get out into the marketplace. 

Sherry:

That's so exciting. Albert, the work you're doing is really cool. The work Dao Foods is doing is fantastic. And it's great to hear that even though the market is just starting, there's so much opportunity and companies so far in the space that have been doing really unique things. So thank you so much for sharing your journey, sharing the various things that Dao Foods is working on, and just telling us more about what's going on in China and why it's a space we should care about.

Do you actually have any tips for young entrepreneurs or even students that might be listening who are interested in entering into the space? It's super novel. So I think for a lot of early career folks, it's a scary space to enter. They don't really know what's out there, right? 

Albert:

Yeah, I would say just continue to be curious and continue to reach out to people. I would say that in general, this is still a very early industry. And so it's very accepting of young people with a variety of different skill sets to come in. And there's not only startups, but also more established companies that are working in this area. 

So I would say that — just start networking and just start reaching out to people. Try to find your unique capability, like whether you're a data scientist, a biochemist, a marketer, or a lawyer, whatever. This industry needs all of it. And so just trying to talk to 100 people in the industry already, like if you reach out to 100 people, I would guess like 40 to 50 would take a call with you. 

If you're passionate enough in the area, you're going to learn something from it at the very least, and maybe you'll actually get some opportunities.

Sherry:

That's it for this episode of Fork The System. If you have a guest or topic you'd like to hear about, share your ideas using the feedback form linked below. Until next time!

[Music fades out]