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What’s Happening With FoodTech Investing?

Venture capitalists have invested more than $ 18 billion into food-related startups in the pandemic year 2020.

The expectations regarding venture capital differed from the results of 2020 as PitchBook reported last July. When the pandemic in March 2020, many predicted that the pace of funding was likely to slow due to the fear of lockdowns, social disconnection, and pressures on the economy overall. However, 2020 was an unprecedented year for venture capital in the U.S., with $156B invested in startups and $74 billion that was raised by VC funds. In addition, in contrast to what some experts would expect in the midst of an apparent recession, the corporate venture capitalists (CVCs) almost matched their record of investing $68 billion.

“FoodTech” startups have received record amounts of investment in venture capital during 2020 in the form of $18.9B invested in companies within this category, which is a 10% increase over total of the year. As per PitchBook, FoodTech refers to companies that are developing technologies to enhance the experience of consumers in buying, food choices, and consumption. The main drivers of this funding as well as general developments within the FoodTech market were:

Supply disruptions to the chain and outages of stock for traditional dairy and meat products, in addition to an emphasis on healthy diet, increased demand for alternatives to protein

The demand for meals that are easy to prepare and the flexibility of take-out from restaurants during lockdowns prompted funding for direct-to-consumer meal kits, online shopping, and food delivery businesses.

Investors also supported solutions that could reduce the price for food manufacturing and delivery, while making sure that food safety is maintained. They also offered funding to startups that are able to identify the most optimal flavor, texture, and combinations of ingredients.

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Incorporating information taken from PitchBook and the NVCA’s quarterly Venture Monitor report, this analysis highlights this report. It also provides insights from the U.S. VC industry as in general, as well with specific observations for foodtech startups. FoodTech startup market that are based on the work of Touchdown with 1894 capital, Kellogg’s venture capital fund for corporate clients.

FoodTech & VC Funding Highlights

The year of 2020 was record-breaking in terms of VC activities in the U.S., with $156B invested. However, the overall number of deals decreased from the previous year which suggests that VCs focused their funding on larger deals with less companies.

The FoodTech sector was in line with the market overall in terms of investment, with $18.9B spent on 886 companies, which is a 9percent increase over the amount of deals that were made in the year. Particularly, the value of deals to meat substitutes made from plant-based sources increased 20% by 2020, indicating a growing consumer desire for healthier and sustainable alternatives. But, FoodTech funding saw a higher percentage of growth in value of funding over the last four months than U.S. market as a overall, suggesting that the sector particular factors sparked interest for investors.

It is clear that the coronavirus pandemic profoundly altered the consumption habits of consumers however, it also had a significant influence on food production in general. COVID-19-related infections in the sector led to closures and disruptions in supply, which led to shortages and higher prices that consumers pay. This have led to a greater concentration on keeping food supply chains in good order and have led to a rapid shift towards automation and other technological advances. In the end, artificial intelligence technology such as traceability and food safety systems, delivery of food, and cloud-based retail companies (retail companies that make use of the capabilities of data analysis offered through cloud computing) have attracted record amounts of venture capital.

Alternative food products, especially alternatives to meat, as mentioned, benefitted from the meat packing industry’s problems and changing consumer attitudes. When the coronavirus first appeared within the U.S., sales of vegan meat substitutes soared to triple-digit rates. Alternative protein options like dairy and meat products made from plant sources provide consumers with the confidence of knowing the origins of their food and is also environmentally sustainable.

The pandemic has also shed the light on the human “gut microbiome” and the impact it has on overall health and well-being. People are looking for more food that have health benefits, such as increasing immunity. Although research into how gut microbiome impacts overall health is still relatively new more than $1 billion has been invested into U.S. microbiome-related startups in the last five years, and more than $3.4 billion being invested worldwide during the same time period according to PitchBook.

CVC Highlights

The year 2020 saw corporate funds were involved in 48% of their dollar value and were involved at 26% in the transactions in the United States. In the graph below, the $68 billion invested by companies was almost $10 billion more than in 2019, which indicates that CVCs were still on the market in spite of the economic uncertainties.

CVCs are a significant funding source for FoodTech startups, especially ones that can benefit from commercial or strategic collaborations with big corporations. For R&D companies that are heavily involved in R&D that require expertise and scientific resources of large corporations could significantly accelerate the process of 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 which is a company that offers automated checkout systems for shopping, in the month of October, 2019.

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

Danone Manifesto Ventures focuses on food and food technology companies that are disrupting food as well as drinking. The company made a bet into Sun Genomics, a company which offers customized probiotic solutions that are based on whole-genome sequencing diagnostics.

From its initial purchase of Kuli Kuli, a moringa-based product brand, to its latest purchase of Plantible, an industrial plant protein producer, Kellogg’s capital investment of 1894 is into both CPG brands as well as their enabling platforms.

Notable FoodTech Deals and Exits

U.S. Plant-based protein giant Impossible Foods closed a $500 million Series F in the month of March 2021. It’s possible that the next big opportunity in the sector is a plant-based chicken product because Impossible recently announced the introduction of chicken nuggets made from plant-based protein, following rival Beyond Meat’s announcement of new chicken tenders made of vegan ingredients.

Animal-free dairy innovator Perfect Day increased its Series C round to $300 million in July 2020, and plans are in place to introduce a brand new Ice cream brand. The company creates proteins that are nutritionally similar to cow’s milk. Other companies focused on the replacement of dairy milk include NotCo which makes use of A.I. to find animal proteins that match their ideal substitutes from thousands of plant-based components. NotCo has raised $235 million series D on July 20, 2021 to broaden its range of products in dairy, cream, mayonnaise and meat substitutes.

Ordermark completed with a 120-million Series C in October 2020. Its technology allows it to route online orders made through multiple ordering platforms to a single printer to be fulfilled. The company plans to use this money to join forces with other establishments and expand the size of its “ghost kitchen” platform, NextBite.
In March 2021, the developer of egg substitutes made from plant sources and laboratory-grown animal meat Eat Just raised $200M. The funds will be used to boost the production capacity of its cell-based meat subsidiary’s capacity as well as accelerate research into growing meat using cells taken from animals.

The portfolio company of 1894 Myco Technology uses fungi-based food-processing platforms to enhance the taste and worth from agricultural goods. The company has raised more than 100 million dollars in funding, the most recent round of funding being a $39 million Series D round in June 2020. Other companies working on applications for the use of mushrooms in food have also raised similar funds. Companies that operate in this area comprise Meati Foods, Mycorena, Prime Roots, and Enough.

Food Innovation in the News

The treatment of microbiome could extend the lifespan The advancements in the field of microbiome health could allow people to last longer.
Technology is helping plant-based foods appear and taste betterStartups are now focusing on creating a more vegan food experience for consumers.
Sugar reduction is on the top priority for both consumers and manufacturers. Stevia and functional fiber could provide a way to reduce sugar consumption and improve the health of your gut.