market volumes, growth directions, promising companies

When you hear the word foodtech, most people think of food delivery services from restaurants or groceries from a store. However, in reality this sector, which includes various technologies in food production and catering, is much broader. This includes a variety of areas – from the production of meat substitutes to robots in the kitchen and processing food waste. And companies in this sector do not lose their attractiveness for investors even in the face of reduced investment in all areas.

In mid-October, research company PitchBook published overview of the foodtech market for 2023, looking at it from the point of view of its attractiveness to venture investors. According to PitchBook experts, in the 12 months to June of this year, foodtech companies attracted venture capital investments 1,225 times. The volume of investments amounted to about $11 billion.

Investment activity in this sector decreased over the year – by 39% in terms of the number of transactions and by 75% in terms of their volume. However, this reflects a general decline across a wide range of economic sectors amid macroeconomic instability and market volatility, rather than any specific problems in the foodtech sector.

However, PitchBook notes signs of improvement. In the second quarter of this year, the number of such transactions increased by 13% compared to the first. True, their amount decreased slightly – from $2.3 billion to $2.2 billion.

However, PitchBook analysts believe that some growth in the number of deals could be an early sign of returning investor interest in the sector.

The peak year for investments in foodtech remains 2021, when the number of transactions exceeded 1.6 thousand and their value was $38 billion. As McKinsey partner Tom Brennan noted, over the past decade the volume of venture investments in foodtech and agritech (agricultural technologies) has grown approximately 20 times. In his opinion, interest in investments in these areas will continue even in the current macroeconomic situation.

Interest in the foodtech sector is evidenced not only by investments in the companies themselves in this sector, but also, for example, by the fact that in September, the Israeli incubator for foodtech startups The Kitchen Hub raised $70 million and launched a center to support such startups.

The leader in both the number and volume of investments remains the most traditional area – online trading in foodtech, that is, all the same services for the delivery of food and kits for preparing various dishes, as well as food delivery from restaurants. This is due, among other things, to the fact that, unlike many other sectors, which are more innovative and still only developing, such services have existed for several years and are already making a profit. Companies in this area have attracted venture capital investments 291 times, totaling almost $4 billion.

The interest of investors (not only venture capital) in this area is demonstrated by the IPO of the American food delivery service Instacart, which took place in September. The company raised more than $600 million, and its valuation on the first day of trading reached $11 billion

Another foodtech sector is the production of so-called alternative protein, in other words – various meat substitutes. It ranks second in the number of investments (270) and in their volume ($2.5 billion).

This includes, for example, plant-based meat substitutes, which are made from beans, seitan (a wheat gluten product) and other raw materials by companies such as Beyond Meat. One company working in this area, Meati, raised $172 million this year. It makes cutlets and other products from mycelium. In August $40 million received ENOUGH company, which produces meat substitutes from fermented mushrooms. Corporations such as Unilever and Marks & Spencer are already cooperating with it.

Another direction in the alternative protein sector is meat artificially grown in laboratories from animal cells. Unlike vegetable substitutes, which can already be found in many stores and restaurants, there are only the first examples of such artificial meat. In June, the U.S. Department of Agriculture gave the first approval for the sale of such meat is chicken created by Good Meat and Upside Foods.

This year, some producers of alternative meats recorded a decrease in demand for it is associated with inflation and rising costs of living. However, in the long term this direction remains very promising. According to some forecasts, the alternative protein market will grow at an average rate of 19% per year in the coming years. And will increase from $76.3 billion to more than $423 billion by 2033.

The third place in terms of investments is occupied by foodtech companies serving restaurants and retailers. These are, for example, restaurant automation services, robotization of processes in the kitchen, or the creation of delivery robots. Such companies attracted investments 236 times for a total of $2.3 billion.

Last year, the Saudi startup Foodics, which develops restaurant management systems, payment systems, etc., raised $170 million. This service allows you to manage various restaurant systems from a regular iPad. Another example of this kind of company is the Israeli startup Tastewise, which is developing an AI tool that allows restaurants to analyze customer preferences. It collects data on consumer behavior, restaurant visiting statistics and helps establishments draw conclusions about the preferences of visitors. Last year, Tastewise raised $17 million.

This week €12 million attracted German startup GoodBytz, which has developed a robotic assistant for chefs, Robotic Kitchen Assistants. As the developers note, the robotic assistant can be programmed to prepare various dishes, such as Caesar salad, ramen, porridge, etc. Such a system is already working in the kitchen of one of the food delivery services in Hamburg.

This area includes foodtech services that promote the digitalization of food production. For example, digital systems for monitoring food freshness, new and more environmentally friendly packaging, recycling food waste, etc. These types of companies have raised $800 million over 128 rounds of investment.

Among the companies in this sector, for example, ThisFish is a French startup that develops software for tracking the origin of seafood and fish, monitoring their quality, etc. In April, it raised €1.1 million.

Another example is the American startup BioVeritas, which through fermentation processes various food waste, primarily broken pasta, into a baking inhibitor that slows down molding. Late last year BioVeritas attracted $65 million

American company Afresh last year attracted $115 million. It helps stores not to recycle food waste, but simply throw away less food. The company has developed an AI-based system that allows it to more accurately predict demand for items that spoil quickly, such as fruit, and avoid over-ordering. Afresh operates from more than 3 thousand stores in the United States, and, according to the company itself, thanks to its activities, almost 20 million kg of food have already been avoided.

Another foodtech sector is food bioengineering. These are a variety of new products, functional mixtures that replace conventional food products, and molecular developments in this area. Investments in this area exceeded $1 billion (120 transactions).

German startup Yfood in April attracted $230 million, a significant part of this amount was invested by the Nestle corporation, which now owns almost 50% of the company. The creators of Yfood came up with a kind of food drinks that contain various vitamins and other necessary substances. The company emphasizes that these are not protein drinks for athletes and that their invention should not replace an entire diet – rather, it can replace one meal when a person is in a hurry, but does not want to snack on snacks.

Finally, another area is various services for reviews, selection of restaurants, food personalization, etc. Companies in this area have attracted investments 80 times for $407 million. In March, the British startup Zoe raised $2.5 million – it launched an application that evaluates the food consumed by a person and gives him nutritional recommendations.

Yana Rozhdestvenskaya