Considering Foodtech Startups For Sustainable Investment IPOs in April 2022

4 min read

Whether it be crypto, IPO or established company stocks you’re looking to invest in, EcoVestIt’s goal is, as always, to bring attention to opportunities that provide you the option to put our money into assets whose economic activity supports both social and environmental good. One sector to consider looking into, which is in a growth phase, is Foodtech.

Venture investors continue to show a hearty appetite for startups creating new types of food and ways to produce it, particularly those companies developing alternatives to animal-based meat and dairy products.

Investment into foodtech—ranging from beef grown in petri dishes to indoor urban farms—reached a record $12.8 billion in venture investment globally in 2021—double the amount a year earlier, Crunchbase data shows.

Of that, $5.8 billion—nearly half—went into companies creating alternatives to traditionally produced meat, seafood and dairy products, including startups working on lab-created protein and plant-based meat and dairy substitutes.

Despite that record-setting dollar volume, foodtech investment is poised to grow further, investors in the space say.

“The dollars are still small compared to what’s needed to IPO or what’s needed to be a sustainable unicorn company,” Philip Erlanger, managing partner at Santa Monica-based Pontifax AgTech, which invests in food and agribusiness startups, said Friday at the Future Food-Tech Summit in downtown San Francisco, where Crunchbase News presented data on global investment trends into the foodtech industry.

The vast majority of the nearly 1,000 investment deals into foodtech companies globally last year went into the angel, seed and early stages, a review of Crunchbase data shows.

But a number of outsized deals means that late-stage companies grabbed 53 percent of all dollars invested into foodtech last year.

The Three Largest Foodtech Startup Investments In 2021 All Went To China-Based Companies

They include:

  • A 10 billion yuan (~$1.54 billion) investment in Beijing-based Guanyun Liquor, a distillery making and marketing baijiu, the traditional Chinese liquor, to a younger crowd of consumers;
  • A 3.6 billion yuan (~$558 billion) investment into Chinese snack-maker Weilong Foods; and
  • HeyTea, a Chinese tea company that specializes in cheese-topped and fruit tea, received a $500 million Series D.

But many of the other top-funded startups last year were focused on the animal-alternative meat and dairy space, including Impossible Foods, Perfect Day, Nature’s Fynd and Motif.

Investors say the alternative protein space has plenty of runway to grow, with both younger startups developing real technology and established companies that are looking to scale needing investment capital.

“There’s still going to be a tremendous wave of investment in alternative proteins because there’s still an opportunity to improve on the technology that’s out there,” said Chuck Templeton, managing director at Chicago-based S2G Ventures, a venture firm that focuses on the agriculture and food sectors.

Other foodtech sectors receiving investor interest include areas like vertical farming, which aims to grow crops more efficiently and sustainably, healthier and lower-calorie snack foods, alcohol alternatives and solutions to extend produce shelf life and reduce food waste.

“The amount of capital seems high, but when you compare that to cybersecurity, to fintech, to battery tech, we’re still in the early innings of this investment sector,” Matt Spence, managing director at Chicago-based Guggenheim Partners, said at the Future Food-Tech conference.

So far this year, notable foodtech investments have also gone into companies including:

  • Vertical farming startup Plenty, based in South San Francisco, raised a $400 million Series E led by new investors One Madison Group and JS Capital, underscoring investors’ continued interest in agtech;
  • Remilk, a Tel Aviv-based startup making dairy alternatives via a fermentation process, raised a $120 million Series B investment led by Hanaco Venture Capital; and
  • Plant-based meat maker Next Gen Foods last month raised a $100 million round that it says is the largest-ever Series A round for a foodtech company.

Asia Gains Market Share

As with venture investment generally, North America’s foodtech sector receives the lion’s share of investment deals and dollars globally.

While North America’s share of foodtech deals has remained relatively steady, Asia is gaining ground against Europe. Investment into Asian foodtech companies increased from about 15 percent of deal volume in 2017 to nearly 25 percent last year.

Europe, meanwhile, saw its share of deals fall from 25 percent in 2017 to 17 percent last year, Crunchbase data shows.

Foodtech Unicorns Line Up

Foodtech is a relatively new startup sector that has experienced tremendous momentum in just a few short years, going from about $2.2 billion in total venture investment in 2017 to almost 6x that amount last year.

As such, the sector has yet to produce a large group of unicorn companies, or startups valued at $1 billion or above in a private financing round.

But of those unicorns, many are very well-funded and could be poised for public debuts when the IPO markets open back up.

They include Impossible Foods, the Bay Area-based maker of plant-based meat currently valued by private investors at $7 billion. Earlier this month, it replaced founder Pat Brown as CEO with former Chobani executive Peter McGuinness. The company is reportedly eyeing options to go public at a valuation of $10 billion or more.

Rival Beyond Meat went public in 2019 at a $1.5 billion valuation. The company has secured partnerships with major brands including McDonald’s and Yum Brands, the parent company of KFC, Taco Bell and other fast-food chains. Southern California-based Beyond Meat is currently valued on the Nasdaq at about $3.6 billion after seeing its shares decline almost 70 percent in the past year.

Two other foodtech unicorns are also working on plant-based meat and dairy substitutes: San Francisco-based Eat Just and Santiago-based NotCo.

Investors say they expect more late- and growth-stage investors to step into the foodtech sector in years to come.

“There’s going to be more and more corporate capital that’s going to flow alongside the risk capital,” Erlanger said.

Innovation Opportunities Abound

It remains to be seen how foodtech will fare in 2022 compared to last year’s record investment totals. Startups in general this year are experiencing a dip in global venture funding and a nearly shuttered IPO market. Venture-backed startups are also facing lower valuations than they were just a few months ago, and founders say deals are taking longer to close as investors show new hesitancy.

But foodtech could be well-positioned to buck some of those trends.

Farmers in 2022 face a host of challenges that could spur even greater urgency for startups to help innovate new sources and ways to feed the world.

For one, Russia’s invasion of Ukraine has rattled global food supply chains: The two countries combined produce a third of the world’s wheat and barley and large amounts of other commodities including sunflower oil. But producers in other parts of the world are also grappling with drought, pandemic-induced supply chain disruptions, and high fuel costs. All that means companies working to make more food cheaper, faster or easier could continue to attract large amounts of investor interest.

The foodtech sector also has a robust crop of funded seed and early-stage startups with growth potential—which could be particularly advantageous as more investors pivot away from late-stage investments and hunt for deals among younger companies.

“There’s no lack of interest and it’s our judgment there will be plenty of capital to support the winners,” Erlanger said.

Illustration: Dom Guzman

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