Use case - Y - D'Ornano + Co

Objective

New Investment

Investment stage

Venture Capital

New Business model

Alternative Proteins

Case Study

D’ORNANO + CO. PERFORMED HYBRID GROWTH DILIGENCE FOR AN INVESTOR CONSIDERING A LATE-STAGE VENTURE CAPITAL INVESTMENT IN THE WORLD’S LARGEST FUNDRAISING TO DATE IN THE SPACE OF ALTERNATIVE PROTEINS

The investor wanted to make a late-stage investment in a business that operates large vertical insect farms. The company has developed, through years of research, a proprietary method for breeding mealworms and then processing them to create premium organic alternative proteins. This protein source can be used by customers as the basis for products such as fertilizers, pet food, and human food. This insect-based protein has a positive environmental impact because it is less carbon-intensive to produce than traditional meat-based protein, yet still offers equivalent nutritional value. By leveraging at scale the natural qualities of mealworms, the company has been able to provide farmers and food markets high-quality products while promoting sustainability. The company needed to fund its growth while strategically refocusing to reach profitability faster.

Challenge

The company maintains strong support of historical investors who believe in the company’s disruptive potential and depth of addressable market. The company has structured its development around production facilities across Europe and the US. More than a decade into its journey, the company needed to refine its strategic focus to reach profitability sooner to ensure the long-term stability of the business. This required the company to determine its sales mix to focus on those products with higher margins. In parallel, the company needed to refine its large-scale overseas production partnership strategy. The company also wanted to optimize the size of its various production facilities and their level of technical equipment to rapidly serve prospects interested in its products.

Solution

The investor retained D’Ornano + Co. to apply its HGD for Late-Stage VC product which identifies in a short timeframe any deal-breaking items, secures key aggregates, and challenges the existence of a clear path to profitability with multiple scenario analysis. Going beyond classic due diligence, the firm’s HGD methodology layers Financial, Legal and ESG diligence on top of preliminary business model analysis and incorporates operational data mirroring the company’s economics in the assessment performed. The result is an in-depth analysis performed in record time to satisfy the expectations of an investor assessing a high-growth + disruptive asset in the context of a late-stage round.

Mission outcome & key client impact

By using the Hybrid Growth Diligence approach, we helped assess the intrinsic value and confirm the resilience of the target’s business model by testing:

To what extent the production volumes already committed through customer contracts secured the growth forecasted over the Business plan period;
The achievability of forecasted level of EBITDA, which depends on the ability to effectively manage a complex industrial plan, both in terms of construction of new plants and ramping up of existing facilities;
The strategic plans for managing the processes and cost of securing raw materials, energy and employees in a challenged macro-economic environment;
The sensitivity of assumptions made about the total level of cash needed to finance the project (including capex completion, financing of EBITDA losses, etc.);
The overall strength of a complex value chain, including risks associated with managing variables such as the plants’ construction, the supply chain, equipment maintenance, energy, plants’ lease agreements and potential deals with industrial partners.

In validating the target’s ability to grow at scale and its path to profitability, we helped our client confirm its investment thesis.

New Business Model

+ Vertical

Alternative Proteins companies produce plant-based and food-technology alternatives to animal protein. New customer behavior and interest in alternative-protein sources fostered by environmental and animal welfare concerns are growing. D’Ornano + Co. has historically conducted multiple Alternative Proteins assignments for global investors.