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Home » World News » Trends in FoodTech Investing

Trends in FoodTech Investing

Glasgow Telegraph by Glasgow Telegraph
September 6, 2022
in Featured News, World News
Reading Time: 5 mins read
Trends in FoodTech Investing
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Venture capitalists have invested over $8 billion to food tech startups in the 2020 pandemic year.

Venture capital expectations diverged from what was seen in 2020 as PitchBook reported last July. In the wake of the pandemic in March of 2020, many speculated that the pace of funding would slow down amidst the fear of lockdowns, social distancing, and strains on the overall economy. Yet 2020 proved to be an unprecedented year for venture in the U.S., with $156B of venture capital being invested in startups, and $74 billion raised by VC funds. In addition, in contrast to what many experts expected as the beginning of an apparent downturn, corporations with VCs (CVCs) nearly reached their previous record, investing $68B.

“FoodTech” startups had a record number of money from venture capitalists in 2020 which was $18.9B committed to companies in the category, a nearly 10% increase over the total for the year. Based on PitchBook, FoodTech refers to firms that develop technology to enhance consumer experience in the purchase of food and consumption. The primary drivers for this funding and overall trends for the FoodTech market were:

Supply disruptions in the chain of supply and shortages for traditional dairy and meat products, along with an emphasis on healthy eating habits, an increase in demand for alternative protein solutions

The need for simple meals and flexible restaurant takeout options in lockdowns led to funding for direct-to-consumer meal kits, online shopping, and food delivery businesses.

Food tech investor also fund solutions that could reduce the cost in food distribution and production, while making sure that food safety is maintained. They also helped startups identify optimal flavors, textures, and ingredient combinations

This analysis includes data drawn from PitchBook and NVCA’s quarterly Venture Monitor report, this analysis shares highlights from an overview of the U.S. VC industry as an entire, as in specific insights for the FoodTech startup market that are based on the work of Touchdown in partnership with 1894 capital, Kellogg’s corporate venture capital fund.

FoodTech & VC Funding Highlights

The year of 2020 was record-breaking with respect to VC activity in the U.S., with $156B invested. But, the total deal count decreased from 2019 which suggests that VCs concentrated funding in larger deals with fewer companies.

The FoodTech sector mirrored the overall market in terms of investment, with $18.9B spent on 886 companies, a rise of 9% from the amount of deals that were made in the year. Particularly, deal value to meat substitutes made from plant-based sources increased 20 percent in 2020, in line with a consumer preference for more eco-friendly and healthy alternatives. However, FoodTech funding saw a greater percentage growth in its investment value over the last 4 year than U.S. market as a whole, suggesting that sector particular factors sparked interest among investors.

It is clear that the coronavirus pandemic profoundly changed the habits of consumption among consumers, but it also had a profound effect on the industry of food manufacture as a whole. COVID-19 outbreaks within the industry resulted in shutdowns and disruptions in supply, which led to supply shortages and a rise in prices paid by the public. These issues caused an increase in emphasis on keeping food supply chains in good order and have driven a move towards automation and other technological advances. As a result, artificial intelligence, food safety and traceability systems, delivery of food as well as cloud retail companies (retail companies leveraging the analytics capabilities offered by cloud computing) have attracted record amounts of venture capital.

Alternative food products, especially alternative proteins as noted, benefitted from the meat packing industry’s struggles and shifting consumer attitudes. When the coronavirus first appeared throughout the U.S., sales of vegan meat substitutes soared to triple-digit growth rates. Alternative protein alternatives that are based on plants, such as dairy and meat products made from plant sources provide consumers with a sense of comfort in knowing the origins of their food and also that it is eco friendly.

The pandemic also shed more light on the human “gut microbiome” and the impact it has on overall health and wellness. People are looking for more food that have health benefits, such as the ability to boost immunity. Although research into how gut microbiome influences overall health is still relatively new, over $1 billion has been invested in U.S. startup companies related to gut microbiome during the past five years. This is in addition to $3.4 billion invested globally over the same period as per PitchBook.

CVC Highlights

In 2020, corporate funds poured 48% of their dollar value and took part on 26% of transactions in the United States. As can be seen in the chart below, the $68 billion spent by companies was nearly 10 billion more than in 2019, which suggests CVCs remained active in the market despite economic uncertainty.

CVCs are a key investment opportunity for FoodTech startups, particularly ones that can benefit from strategic or commercial alliances with large corporations. For R&D focused startups that require expertise and scientific resources of big corporations can effectively accelerate commercialization. These CVCs are a few that are among the top FoodTech investors:

Evolv Ventures, a subsidiary of Kraft Heinz, invests in new technologies throughout the value chain of food. For instance, Evolv invested in Zippin an self-contained checkout technology for shoppers, in the month of October, 2019.

Tyson Ventures invests in FoodTech companies that focus on food safety, such as Clear Labs, a genomic-based testing platform for quality and food safety programs.

Danone Manifesto Ventures focuses on food and food technology firms which are disrupting eating as well as drinking. The firm invested into Sun Genomics, a company that provides customized probiotic products with a focus on whole-genome sequencing.

From its original investment in Kuli Kuli, a moringa-based product brand, to its most recent acquisition of Plantible, the plant protein producer. Kellogg’s capital investments on both CPG brands and their enabling platforms.

Notable FoodTech Deals and Exits

U.S. Plant-based protein giant Impossible Foods closed a $500 million Series F in March 2021. It’s conceivable that the next opportunity in the category will be plant-based chicken because Impossible recently announced the release of plant-based chicken nuggets, that came after rival Beyond Meat’s rollout of its new, vegan chicken tenders.

Animal-free dairy innovator Perfect Day increased its Series C round to $300 million in July 2020 with plans to launch a brand new Ice cream line. The company creates proteins that are nutritionally identical to those found in cow’s milk. Other companies focused on replacing dairy products include NotCo the company that makes use of A.I. to find animal protein their ideal replacements among thousands of plant-based components. NotCo secured a $235 million series D at the end of July in 2021 to expand its range of products in milk, cream, mayonnaise and meat substitutes.

Ordermark completed a 120-million Series C in October 2020. The company’s software can direct online orders made through multiple ordering options to one printer for fulfillment. The company will utilize this capital to sign agreements with additional restaurants and to expand its “ghost kitchen” platform, NextBite.
In March 2021, the maker of egg alternatives made of plant material and experimentally-produced meat Eat Just raised $200M. The funds will be used to boost its cell-based meat division’s production capacity and speed up research on cultivating meat from cells harvested from animals.

Eighteen94 portfolio company Myco Technology uses fungi-based food-processing platforms to improve the flavor and value in agricultural produce. The company has raised more than $100 million in funding, with its most recent round a $39 million Series D round in June 2020. Other companies working on applications for the use of mushrooms in food have also received similar funding. Companies that operate in this area include Meati Foods, Mycorena, Prime Roots, and Enough.

Food Innovation In the News

Microbiome care could increase lifespan The advancements in the field of microbiome health could allow people living longer.
Technology is helping plant-based foods more attractive and tasty- Startups are now focused on creating a more plant-based food experience for the customer.
Sugar reduction is top priority for both consumers and manufacturers — Stevia and functional fiber might be able to help cut down sugar consumption and boost gut health.

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