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Here’s What To Know About FoodTech Investing

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Venture capitalists have invested over 18,000 billion dollars in startups that develop food technologies in the 2020 pandemic year.

Venture capital expectations diverged from those of the year 2020, as PitchBook reported last July. At the onset of the pandemic in March of 2020, many anticipated that the pace of funding will slow down amid the fear of lockdowns, social disconnection, and pressures on the economy overall. But 2020 turned out to be a record year for venture in the U.S., with $156B of venture capital being invested in startups, and $74 billion in funding from VC funds. And, in stark contrast to what one might think when the year begins to enter an apparent downturn the corporate venture capitalists (CVCs) almost matched their record-breaking 2018 investment, putting in $68 billion.

“FoodTech” startups were able to receive record-breaking venture capital in 2020 which was $18.9B invested in companies within this sector, a 10% increase from the amount of 2019. As per PitchBook, FoodTech refers to firms that develop technology to enhance the experience of consumers in food selection, purchasing and consumption. The primary drivers for this funding and general developments within the FoodTech market included:

Supply disruptions to the chain and outages of stock for traditional meat and dairy products, and the emphasis on healthier eating habits, an increase in the demand for alternatives to protein

The need for easy-to-prepare meals and flexible restaurant takeout options during lockdowns prompted funding for direct-to-consumer meal kit, food delivery, and e-commerce companies.

Investors also provided strategies to reduce the cost in food distribution and production, while making sure that food safety is maintained. They also provided funding for startups identifying the most optimal flavor, texture, and ingredient combinations

Including information from PitchBook and NVCA’s quarterly Venture Monitor report, this analysis highlights highlights from this report. It also provides insights from the U.S. VC industry as an entire, as being specific to foodtech startups. FoodTech startup market which is based on Touchdown’s work using eighteen94 capital. It is 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 fell from 2019 which indicates that VCs focused their funding on larger deals with fewer companies.

The FoodTech sector mirrored the entire market, with $18.9B invested in 886 companies. This is a improvement of 9% over the amount of deals that were made in 2019. Particularly, the value of deals for plant-based meat alternatives increased 20% by 2020, which reflects a growing desire for healthier and sustainable alternatives. Yet, FoodTech funding saw a greater percentage growth in its value of funding over the last 4 times than U.S. market as a whole, suggesting that sector particular factors sparked interest in investors.

It is clear that the coronavirus pandemic fundamentally changed the habits of consumption among consumers however, it also had a huge impact on the food manufacturing industry in general. COVID-19 infections within the industry resulted in shutdowns and disruptions in supply, which led to shortages and higher prices paid by consumers. These issues caused an increase in concentration on maintaining food supply chains and have driven a move to automation and the corresponding technological advances. This has led to the rise of artificial intelligence such as traceability and food safety platforms, food delivery, and cloud retail businesses (retail companies that rely on the analytical capabilities provided via cloud computing) received record-breaking levels of venture investment.

Alternative food products, especially protein alternatives, as previously mentioned, profited from the meat packing industry’s struggles and shifting consumer attitudes. The coronavirus was first discovered in the U.S., sales of vegan meat substitutes soared to triple-digit growth rates. These alternative protein solutions — such as dairy and meat products made from plant sources offer consumers the confidence of knowing the origins of their food and that it is environmentally friendly.

The pandemic 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 the ability to boost immunity. While research on how the gut microbiome affects overall health is still relatively new, over $1 billion has been invested into U.S. gut microbiome startups over the past five years, with over $3.4 billion being invested worldwide over the same period, per PitchBook.

CVC Highlights

in 2020, CVC money was deployed 48% by dollar value and took part with 26% deals that took place in the United States. As can be seen in the chart below, the $68B investment by companies was almost $10 billion more than the amount invested in 2019, which indicates that CVCs were still on the market in spite of economic uncertainty.

CVCs are a major source of capital for FoodTech startup companies, especially those that would profit from commercial or strategic partnership with large corporations. For R&D high-tech startups using the experience and resources of big companies can meaningfully accelerate commercialization. These CVCs are a few of the most active FoodTech investors:

Kraft Heinz’s Evolv Ventures invests in new technologies throughout the value chain of food. As an example, Evolv invested in Zippin an automated checkout systems for shopping, in October of this year.

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

Danone Manifesto Ventures focuses on food and technology businesses that are disrupting food and drink habits. The firm invested in Sun Genomics, a company which offers customized probiotic solutions basing their solutions on whole-genome sequencing diagnostics.

From its initial investment in Kuli Kuli, a moringa-based products brand, through its latest deal with Plantible, the plant protein producer. Kellogg’s capital investments into both CPG brands and their supporting platforms.

Notable FoodTech Deals and Exits

U.S. Protein leader based on plant sources Impossible Foods closed a $500 million Series F deal in March 2021. It’s conceivable that the next opportunity in this category will be a plant-based poultry since Impossible recently announced the launch of plant-based chicken nuggets, following rival Beyond Meat’s introduction of new, vegan chicken tenders.

Animal-free dairy pioneer Perfect Day increased its Series C round to $300 million in July 2020 which includes plans for launching a new Ice cream brand. The company is developing proteins that are nutritionally identical to those found in cow’s milk. Other companies that concentrate on replacing dairy milk are NotCo which makes use of A.I. to find animal proteins that match their ideal substitutes out of thousands of plant-based ingredients. NotCo was able to raise $235 million in Series D on July 20, 2021 in order to increase its offerings in milk, cream, mayonnaise and meat substitutes.

Ordermark, a food tech investor, closed an $120 million Series C in October 2020. The company’s technology is able to route online orders made through multiple ordering sites to a single printer for fulfillment. The company intends to use the cash to establish partnerships with more establishments and expand its “ghost kitchen” platform, NextBite.
In March 2021, the developer of egg alternatives made of plant material and laboratory-grown animal meat Eat Just raised $200M. The funds will be used to increase its cell-based meat company’s production capacity as well as accelerate research into cultivating meat from cells harvested from animals.

The portfolio company of 1894 Myco Technology uses fungi-based food-processing platforms to transform the flavor and worth from agricultural goods. The company has raised more than $100 million in capital, and the most recent round being a $39 million Series D in June 2020. Other companies working on applications that use mushrooms in food have raised similar amounts of money. The companies operating in this field comprise Meati Foods, Mycorena, Prime Roots, and Enough.

Food Innovation In the News

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Technology is making food made from plants more appealing and delicious -Startups are focusing on creating a healthier plant-based food experience for the consumer.
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