In 2021, European investment in Foodtech startups reached its highest level, with 10 billion euros invested, 10 times more than the funding obtained by startups in this sector in 2014. Since that level, investment in Foodtech has been decreasing, following the trend of other Venture Capital sectors, although at a faster pace, closing in 2022 at 5 billion euros, down 50%.
How did we get here? One of the factors that have led to this reduction in investment is the runaway inflation that Europe experienced in 2022 and the interest rate hikes necessary to curb it. As interest rates rose, the returns on safer assets such as treasury bills or government bonds increased, reducing the flow of capital to alternative assets, which has led to the collapse of investment in startups.
In addition to these poor macroeconomic conditions, there are food supply chain problems caused by the war in Ukraine, the rise of Artificial Intelligence being the focus of investment appetite, and above all the bad news that comes from some successful Foodtech cases (Beyond Meat it collapses in the stock market, Getir closing its operations in several countries of Europe and the vertical farms sector going through hardships that will delay their arrival at Mass Market).
More and more dissenting voices are emerging about whether the traditional model of investing in startups is right for the food sector, and it's normal for an investor to have doubts about how about the sector.
What is happening with the investment in Foodtech? Where is the sector going? Where will we find the best investment opportunities? These are some of the questions that arise when commenting on the current situation in European Foodtech. Matthieu Vicent, founder of the consultancy firm Digital Food Lab, shared at ftalks Food Summit the first data on investment in the sector in 2023, which stands at 2.5 billion euros for the first 9 months of the year.
These data, although worse than in the same period last year, show optimism since investment has been growing steadily since the last quarter of last year, reaching a higher level than in 2020. Vincent himself stated that “the worst of this contraction is over”, and that from now on, a stabilization of the sector focused on more profitable business models is expected “we will see less exuberance than in times of pandemic and quite a few acquisitions of startups without a clear path to profitability, but investments in Foodtech startups continue and will continue to be”.
Matthieu Vincent was not the only expert to offer his views on these questions at the Food Summit talks. Alexandre Bastos, Head of Startups and Open Innovation at Givaudan, stated that “we are seeing a natural Darwinism in the startups we work with. The reduction in investment means that only the best companies remain in the market, and this is positive for the sector in the long term”. For Bastos, who works at one of the world's leading food ingredient companies, the best investment opportunities are found in precision fermentation and the circular economy, “there is enormous potential to reuse food industry surpluses in the system, and reduce the resources they use.”
Another supporter of fermentation as a great opportunity is Giancarlo Addario, Principal at Five Seasons Ventures, also adding The trend of food as medicine and the creation of new products adapted to market trends. “We are finding more and better investment opportunities, this recession has brought us to a phase of consolidation in the sector that will bring better opportunities for expert investors” said the Italian investor. Another optimistic vision was offered by Olaf Koch, former CEO of GMetro Group and Funding partner Of the fund Zintinus, who indicated the advantages of the entry of new investors “with more experience in food that will reduce entrepreneurial errors and thus unnecessary expenses”.
We don't know if investment will return to its 2021 level, what has become clear is that optimism has returned to Foodtech investors, who see 2023 as the start of a positive trend based on good entrepreneurs, scalable technologies and profitable business models.
