Venture capital investment in the food technology sector fell for the eighth consecutive quarter in Q3 2023, with 205 deals reported reaching $2 billion in value. New PitchBook Report.
This is a 13.9% decrease compared to the previous quarter, when 268 investments were made worth $2.2 billion. And compared to the previous year, it was down more than 71%. At PitchBook, we consider “food tech” to be a field that includes alternative proteins, bioengineered foods, discovery and reviews, e-commerce, food production, restaurant and retail technology.
“It’s a little disappointing to see deal activity continue to be weak,” report author Alex Frederick, senior analyst for emerging technologies at PitchBook, told TechCrunch. “But the market is still developing.”
He believes one of the bright spots in the third quarter was Instacart’s IPO, and says there was excitement in that regard, especially since it did so well. But Frederick also said he hasn’t yet seen many other tech startups retreat.
He added: “The IPO window remains closed and venture activity will continue to be challenged.”
Investor opinion
Meir Rabkin, founder and managing partner of climate technology venture firm Blue Vision Capital, said in an interview that climate technology as a whole has been “very resilient” over the past two years. He notes that this resilience is about corporate valuations, and that the contraction felt in other sectors was not as widespread in climate technology.
Rabkin said investing in food tech is “a bit of a tough space” for a variety of reasons, including relatively high capital expenditures and time-consuming research and development.
“That being said, there’s a lot of disruption and innovation that needs to go on there,” Rabkin said. “It’s a very exciting space to be in.”
But Christina Rohr, managing director of food and agriculture investments at impact investment firm S2G Ventures, says capital constraints aren’t all bad.
She found that when the availability of capital decreased, companies’ business models became more resilient because founders considered more capital-efficient methods. She is also considering different types of collaborations, including licensing her models.
Lohr isn’t surprised that venture capital is lagging in food technology, as companies focus on achieving scalability and positive unit economics.
“We are in an environment that is influenced by commodity prices and supply chain costs,” Lohr said. “Given all of this, to be scalable, costs must be comparable to existing technology and products. With these large rounds coming together, investors are looking at technological milestones and , we look at the combined ability to achieve these milestones in a manner that has positive unit economics.”
Plant-based is not growing as fast
Meanwhile, the alternative protein sector saw $724.2 million invested in 46 deals in the third quarter. The report says venture capital funding for plant-based foods is “down significantly from its peak in Q3 2021,” but deal activity remains strong, with further increases for the second consecutive quarter. That’s what it means.
Despite the rise in plant-based investment deals, Pitchbook’s Frederick said the sector is “struggling” when it comes to meat substitutes, citing shrinking grocery store shelf allocations. Ta.
The reasons for this are primarily price and taste perception, and because these products are processed foods, it is difficult to get new customers to try these premium products, Frederick said.
“It’s hard to get it and keep it on the shelf,” he said. “Achieving results is critical for these companies.Currently, consumer packaged goods across the board are under significant challenge from rising prices.Consumers seek lower-cost alternatives. The trend is for plant-based beef companies to sell at a 2% price premium over conventional meat.”
Notable deals in alternative proteins in the third quarter include that of Meati. Series C extension is $200 millionMeatable’s $35 million round and €40 million raised is enough.
As seen on TechCrunch
Fresh capital injection puts Farmless on path to first alternative protein product
I wrote a funding update on Farmless, a company I reported on earlier this year. A Dutch startup working to develop alternative protein sources through fermentation technology has raised a further €4.8 million in seed funding. This will be applied to Farmless’ goal of discovering microorganisms that can be fermented and used in various food applications.
what else are you reading
Great deal: The Canadian Food Innovation Network has awarded Crush Dynamics approximately $2 million to develop and test new ingredients that improve food quality and reduce sugar and sodium content in foods. learn more.
Sustainable supply chain: The Clean Food Group has now received £1 million from the UK Government to fund a project to promote new low-emission food production systems. read more.
Cultured meat support: Alternative protein investor Big Idea Ventures has launched Nexture Bio, a startup that will develop scaffolding technology used to create 3D meat substitute products that more closely resemble whole cuts of meat. get the scoop.
Eye stain: The alternative seafood industry has a new advocate: the Future Ocean Foods Association, founded by Marissa Bronfman. It involves his 36 companies from 14 countries representing cultivation, plant-based and fermentation technologies. read more.
Next time I go to New York, I will: Stop by Eleven Madison Park to try The Every Company’s newly added plant-based egg alternatives to the menu. check it out.
If you have an interesting tip or information about something happening in the world of venture or food technology, please contact Christine Hall at chall.techcrunch@gmail.com or Signal at 832-862-1051. Anonymous requests will be honored.
Source: techcrunch.com
