SIMULATE raises $50M in Series B funding

Ben Pasternak, Co-founder, and CEO of SIMULATE, joined Yahoo Finance Live to discuss the company's latest funding round and the rise of plant-based meat.

Video Transcript

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SEANA SMITH: Simulate, the startup that makes Nuggs, is a plant-based chicken nugget, just received, raised to $50 million in a funding round led by Reddit co-founder Alexis Ohanian's venture firm. We want to talk about all this and what their future holds for this company. We want to bring in Ben Pasternak. He's the co-founder and CEO of Simulate. And Brooke DiPalma is also joining the conversation. Ben, congratulations on this new fund raise, $50 million. how do you plan to use it?

BEN PASTERNAK: Yeah, thanks so much for having me on. For us, we've spent the past three years making the most accurate chicken nuggets simulation and with this new funding, we intend to hire the most talented material scientists, food scientists, flavor scientists, and really great engineers to continue to make the greatest products.

BROOKE DIPALMA: And I have the chicken nuggets right here, actually. They look, and I have to say, that they actually smell just like real chicken nuggets. And you're a Gen Z entrepreneur, so I'm curious, how are peers in your age group viewing this product, as well as the rise of plant-based protein? And are they your main consumers?

BEN PASTERNAK: Yeah, well, we kind of started the company on the basis that all cultural change starts with younger people. And for most Americans, their first meat product is a chicken nugget or a chicken tender. So that's, that's why we decided to start with focusing on Nuggs. And the initial adoption has been really, really crazy. We've obviously created a brand around the chicken nugget, and we've seen a really good response so far. And in general, I think that younger folks are much more open-minded to trying these new products and you're kind of seeing that as a pattern.

BROOKE DIPALMA: And another hot topic right now is the chicken sandwich wars happening at all these major fast food. You recently introduced the disc, which is a chicken patty of sorts. How are you looking to expand this product? And could you potentially see it as an alternative in this fast food war?

BEN PASTERNAK: Totally, yeah. We initially launched direct to consumer only and we really wanted to ensure we get the products right before scaling beyond that. And we kind of made the decision towards the end of last year after we had such a positive response to start scaling to retail. So we launched in Walmart, Sam's Club, Target and Whole Foods, and have more on the way. But obviously, for chicken nuggets and chicken tenders and these types of products are primarily sold in fast food chains and food service restaurants, so we're getting ready to scale that right now, and there's quite a lot of deals in the works there.

ADAM SHAPIRO: Congratulations, by the way. I think you've got to hit. And I was looking at the nutrition labels, comparing your Nuggs to the traditional animal-based nuggets. Yours are healthier; less salt, less fat. I just want to ask you a question, and I want to just preface this with just about everything in the world has cellulose, which is a filler. Lots of companies use them. But given what you're doing here, and it's such a small amount of the ingredient in your Nuggs, why even use this product of methyl cellulose? Again, totally safe, every food product out there has it, but why put it in there to begin with?

BEN PASTERNAK: Yeah, well, for us, our core objective right now is enabling people to subconsciously transition over to a meat alternative. And to do that, the product has to be indistinguishable from what it's trying to simulate. And using that ingredient enables us to do that right now. Long-term, we're not really subscribing to the shorter the ingredient list, the more healthy it is for you.

And even our kind of view around food processing is that all food processing is, is using technology to turn food A into food B. And I think that the greatest food processing technology ever invented was fire, right. It's the first technology that enabled us to process food outside of the body. So Simulate's more techno optimistic in that sense, and yeah, we don't really buy the typical food trends.

SEANA SMITH: So, Ben, you're targeting Gen Z, or I should say that's the majority of your audience, and millennials. How does that affect your marketing spend? Are you allocating more towards social media then versus more traditional avenues?

BEN PASTERNAK: Yeah, I mean, we primarily have grown through Facebook, Instagram, and TikTok. I can't say we've invested much money anywhere else to be totally honest. And TikTok, obviously, has everyone's eyeballs right now and we've seen a lot of success there. So I think that the more traditional marketing channels, perhaps work for other companies, but for us, it's just not our DNA and we like to do things a little differently.

BROOKE DIPALMA: Like you mentioned before, you recently expanded into Target, Walmart, Sam's Club. Online, it comes for about $44.99 for 100 Nuggs. How are you looking at price point to reach the average consumer as you expand into these stores?

BEN PASTERNAK: Totally, yeah. You know, when we first launched direct to consumer, the intent was to be able to iterate on the product and make it better and better as quickly as possible. And at a certain point, we want the product to be super accessible, right, and the way to do that is to make it really cheap and ensure that there's a lot of points of distribution. And yeah, in retail, we saw it for $4.99 in most cases, which is well below the direct to consumer pricing. And primarily, most of our revenue right now comes from our retail, which happened very quickly.

ADAM SHAPIRO: How did you develop this stuff? Are you a food scientist or, it's not like you to sit around in your kitchen say, I'm going to make plant-based chicken nuggets?

BEN PASTERNAK: Yeah, I wish I was a scientist, but unfortunately I'm a middle school dropout. That being said, we put together a team of food scientists, material scientists, flavor scientists, nutritionists. Initially there was just two of us, but we just grinded really hard and kept iterating on the product and making it greater and greater. When we first shipped it in July 2013, it was pretty not great, and people were not a big fan.

But we kind of take this approach of. kind of like a software like approach of releasing new updates to it and making the product better and better. And I think now we see quite a lot of success and most people can't tell the difference between a Simulate chicken nugget and an actual chicken nugget.

SEANA SMITH: Ben Pasternak, great to have you. Co-founder and CEO of Simulate. Thanks so much for joining us. We wish you all the best. And Brooke DiPalma, thanks so much for hopping on here as well.