FoodTech in 2020
Early-stage startups and venture capital funds revolutionizing the way we consume food
Industry Overview
The Food sector has proven to be of increased vitality over the course of the past year as the nation and world has struggled with unique challenges presented by COVID-19 and climate change. Driven by technological innovations, this sector of ventures has vast potential to create a sizable impact not only financially, but in how the world lives and eats. As COVID-19 altered consumer behavior, trends such as ghost kitchens, delivery apps, and online grocers flourished. Additionally, improved infrastructure will be able to impact in creating permanent shifts towards eating in a more healthy, environmentally friendly fashion. Furthermore, venture investment into emerging trends such as cultivated protein and automation reached new heights in 2020.
In 2019, this market was valued at $220B and is expected to grow at a CAGR of 6% over the next 8 years to $340B. Investment into this space will be able to capture unique value and significant financial returns. This proved to be true in 2020, as venture investment totaled over $18B, up 9% over 2019.
Sectors to watch in this industry include delivery, industrial tech, and consumer discovery. Within delivery, robotics and automation have proved to be ripe as parallel trends such as IoT have enabled new forms of technology. Delivery marketplaces have also become everyday necessities for many consumers- UberEats accounted for 50% of Ubers Q3 revenue. Within industrial technology, applications to limit food waste and increase supply chain traceability have proved valuable as being able to provide enterprises with more ways to reduce environmental impact. With COVID lockdowns, cooking became a way for people to relax and enjoy quality meals. As such, personalized nutrition applications and kitchen enablement software saw high growth.
Overall, it’s evident that food centric technology is increasingly creating new consumer behavior and developing new avenues for climate mitigation. As such, venture deals in this industry will not only reap financial returns, but create an impact on the way that we eat.
Major FoodTech Venture Firms
In 2020, FoodTech seed round investments saw a growth in deal size to $1.3M from $1M, signaling increased competition on early stage rounds. This increase in check sizes is paralleled by an upturn in the average exit in the industry, jumping to $40B in 2020 from under $10B just 2 years prior. A majority of these exits have come through acquisitions as companies such as Uber and DoorDash have experienced higher liquidity through IPOs.
Firms that have tailored their thesis to direct funds into the FoodTech and agriculture space such as CPT Capital, Agronomics, and Finistere Ventures have seen high rates success in this space. Additionally, industry agnostic firms including SOSV, 500 Startups, and Horizons Ventures have also cracked the top 10 for deal count through 2020.
Through their thesis driven investments, CPT Capital and Agronomics have been able to keep in touch with not only consumer trends, but biological shifts as well. This has proved to be vital in identifying protein alternatives such as Impossible Foods and Beyond Meat. Finistere Ventures has also carved out its space in the food system, directing investments into revolutionary agricultural companies to help drive innovation from a producer standpoint.
Industry agnostic investors such as SOSV, 500 Startups, and Horizons Ventures have been able to be in touch with macro level consumer trends and invest into them to identify startups revolutionizing the food experience. This has led to a total of 95 venture deals forged between these 3 firms over the course of the past year. As consumer behaviors continue to shift through the course of the remainder of the pandemic, these firms will be poised to continue placing investments into high growth startups in this space.
Promising Early-Stage Startups
There is tremendous opportunity within the food industry for innovation. Whether it be in meat alternatives or new forms of delivery, the sector is ripe for disruption. I’ve researched 10 startups that I believe to be promising prospects for investment utilizing PitchBook data and TechCrunch articles. These 10 companies are detailed below.
Niflr is an AI based grocery platform that enables self-checkout technology within stores. This is a company that has incredible promise as it is able to sell into multiple retailers and find scale quickly. As evidenced by Amazon’s recent moves in the automated grocery space, this is a segment that can create a lot of value throughout the coming decade and is gaining legitimacy throughout the pandemic as well through its ability to limit contact points.
Flowaste is a company that enables cafeterias and quick serve restaurants to reduce food waste. The company enables food tracking and insight generation to waste, allowing organizations to optimize orders through these understandings. As food waste is a $1T global issue, they are helping solve a huge societal issue and assist organizations in cutting waste costs.
Dinabite is a restaurant marketing application that allows its users to find high quality food deals near them. As the restaurant industry has struggled throughout the pandemic, companies such as Dinabite that empower local eateries will be a vital part of recovery efforts.
The Better Meat is developing protein alternatives that mix both plant and animal proteins, allowing consumers to experience the same taste as meat with lower environmental impact. This space has seen incredible growth as evidenced by Beyond Meat and Impossible Foods and has gained legitimacy through remarks of prominent environmentally conscious executives such as Bill Gates.
Wildgood is the producer of a plant-based ice cream product that provides environmentally and health-conscious consumers with a new way to enjoy dessert. LOHAS has been an emerging consumer trend that has gained traction among millennials and Gen Z in recent years, and companies such as Wildgood have the opportunity to capitalize on this trend.
SMPL Food Products provide convenient organic snacking products available through their online store. As much of the food industry turns to ride the wave of e-commerce, brands who have preexisting channels and infrastructure set up will be able to take advantage of this trend.
Quevos is an egg white based snack product that offers consumers a way to not only eat healthy but maintain proper eating habits as well. As consumers are balancing the pulls involved with working from home, brands that allow consumers to conveniently be healthy will find their place and provide true value.
Kitchen Ventures is a company seeking to bring healthy, delicious cooking to every neighborhood. The pandemic has shown the dichotomy of food options for individuals in food deserts and food swamps compared to affluent neighborhoods. Startups that bridge this gap and empower individuals to have healthy eating habits will create vast impact in traditionally disadvantaged communities.
Dietary Assessment provides fast and accurate dietary assessments to consumers seeking to better their eating habits and better understand their bodies. In doing so, they empower individuals to bring healthy habits to life, lose weight, and feel good. As consumers feel better about their eating habits they will only further dive into the product, creating a potential user retention effect that would power high growth.
Raketa is a company that provides not only grocery delivery services, but restaurant delivery as well. This positions them to be a part of their customers’ entire food journey and provide value the whole way. In partnering with grocers and restaurants alike, they’ll experience a network effect from the food supply side that will win over consumers in their market.