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FoodTech & VC Funding Highlights

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

The expectations regarding venture capital differed from what was seen in 2020 as PitchBook highlighted last July. As the outbreak of the pandemic in March 2020, many speculated that the pace of funding would slow down amidst the fear of lockdowns, social disconnection, and pressures on the entire economy. Yet 2020 proved to be the best year ever for venture capital in the U.S., with $156B invested in startups and $74B generated by VC funds. Also, contrary to what one might think at the start of an apparent slump, the corporate venture capitalists (CVCs) almost matched their previous record, investing $68 billion.

“FoodTech” startups received a record amount of Venture capital funding in the year 2020 which was $18.9B invested in companies in the category, a nearly 10% increase from the total of the year. Based on PitchBook, FoodTech refers to companies that are developing technologies to enhance the experience of consumers in buying, food choices, and consumption. The drivers behind this funding and overall developments in the FoodTech market include:

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

The demand for meals that are easy to prepare and the flexibility of take-out from restaurants during lockdowns has led to the creation of direct-to-consumer meal kits, e-commerce, and food delivery businesses.

Investors also backed solutions that would reduce the cost in food distribution and production, while also ensuring safety, and gave money to startups who are trying to find optimal flavors, textures and ingredients

Incorporating data 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 an entire, as as observations specific to the FoodTech startup market that are based on the work of Touchdown using eighteen94 capital. It is Kellogg’s corporate venture capital fund.

FoodTech & VC Funding Highlights

2020 was a record year in terms of VC funding in U.S., with $156B invested. However, the total deal count dropped from the year prior, indicating that VCs were able to invest in larger deals with fewer companies.

The FoodTech sector mirrored the market overall, with $18.9B committed to 886 companies. This is a improvement of 9% over the number of deals made in the year. In particular, deal value to plant-based meat alternatives grew 20% by 2020, in line with a consumer desire for healthier and sustainable alternatives. However, FoodTech funding saw a greater percentage increase in value of funding over the last four months than U.S. market as a overall, suggesting that the sector particular factors sparked interest in investors.

It is clear that the coronavirus outbreak fundamentally changed the habits of consumption among consumers, but it also had a major affect on manufacturing of foods as a whole. COVID-19-related infections in the industry caused shutdowns and supply disruptions, leading to shortages and increased prices paid by the public. These factors led to an increased emphasis on managing food supply chains, and have driven a move to automation and the corresponding technological advancements. As a result, artificial intelligence technology including traceability and food safety platform, the delivery of foods and cloud retail companies (retail companies that make use of the analytical capabilities provided via cloud computing) have attracted record amounts of venture investment.

Food alternatives, particularly alternative proteins as noted, benefitted from the meat packing industry’s struggles and shifting consumer sentiment. When the coronavirus first emerged across the U.S., sales of vegan meat substitutes soared to triple-digit percentages. These alternative protein solutions — such as dairy products and meat that are derived from plants — give consumers a sense of comfort in knowing where their food comes from and are environmentally sustainable.

The pandemic also shed some light on our “gut microbiome” and the impact it has on overall health and well-being. The public is seeking out more foods with active health benefits like increasing immunity. While research on how gut microbiome impacts overall health is relatively new and has cost over $1 billion, more than that has been invested in U.S. startup companies related to gut microbiome in the last five years, with over $3.4 billion invested globally during the same time period according to PitchBook.

CVC Highlights

For 2020, corporations’ funds poured 48% by dollar value and took part at 26% in deals that took place in the United States. As shown in the chart below, the $68 billion spent by companies was almost $10 billion more than the amount invested in 2019, which indicates that CVCs were still active in the market despite economic uncertainty.

CVCs are a key financing source for FoodTech companies, specifically ones that can benefit from strategic or commercial partnership with large corporations. For R&D companies that are heavily involved in R&D, the expertise and scientific resources of big companies can meaningfully accelerate commercialization. These CVCs are a few of the most active FoodTech investors:

Evolv Ventures of Kraft Heinz invests in the latest technologies in the food value chain. For instance, Evolv invested in Zippin which is a company that offers autonomous shopping checkout technology, in the month of October, 2019.

Tyson Ventures invests in FoodTech businesses that focus on food safety. This includes Clear Labs, a genomic-based testing platform that provides food safety and quality programs.

Danone Manifesto Ventures focuses on food and technology businesses which are disrupting eating as well as drinking. The company has was a shareholder into Sun Genomics, a company that provides customized probiotic products based on whole-genome sequencing diagnostics.

From its first investment in Kuli Kuli, a moringa-based products brand, to its latest acquisition of Plantible, the plant protein producer. Kellogg’s eighteen94 capital invests into both CPG brands and their supporting platforms.

Notable FoodTech Deals & Exits

U.S. Plant-based protein giant Impossible Foods closed a $500 million Series F in March 2021. It’s possible that the next opportunity for the category could be chicken that is plant-based because Impossible recently announced the introduction of plant-based chicken nuggets, which followed rival Beyond Meat’s introduction of new, vegan chicken tenders.

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 new Ice Cream brand. The company creates proteins that are nutritionally similar as cow’s milk. Other companies that focus on replacing dairy milk are NotCo A company that utilizes A.I. to find animal protein their ideal replacements among thousands of plant-based components. NotCo was able to raise $235 million in Series D in July 2021 to expand its offerings in dairy, cream, mayonnaise, and meat replacements.

Ordermark closed with a 120-million Series C in October 2020. The company’s technology is able to route online orders from several ordering sites to a single printer to be fulfilled. The company plans to use this capital to sign agreements with additional restaurants , and also to scale the size of its “ghost kitchen” platform, NextBite.
In March 2021, the developer of egg substitutes made from plant sources and lab-grown meat Eat Just raised $200M. The money will be used to expand the production capacity of its cell-based meat subsidiary’s capacity and speed up research on growing meat using cells taken from animals.

Eighteen94 food tech investor, Myco Technology uses fungi-based food-processing platforms to enhance the taste and worth of agricultural products. The company has raised nearly $100 million in funding, the most recent round a $39 million Series D round in June 2020. Other startups working on use-cases for the use of mushrooms in food have also received similar money. Companies that operate in this area are Meati Foods, Mycorena, Prime Roots, and Enough.

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