The meals tech sector navigated tough waters in 2023, as enterprise capital funding skilled a big downturn for the second consecutive yr. Based on Pitchbook’s This autumn 2023 report, meals tech funding noticed a steep drop of 59% in annual VC deal values, plummeting to $9.2 billion from $22.5 billion in 2022. This contraction is in line with an total deceleration in enterprise investing because of a mixture of macroeconomic challenges and sector-specific headwinds.
Alex Frederick, the report’s creator, spoke with The Spoon about a number of the components driving the decline.
“We’re seeing high-interest charges and a closed IPO window persevering with to constrain VC exercise,” Frederick explains. “Moreover, annual meals value inflation, though slowing to 2.2% this yr, has cumulatively pushed meals costs to document highs for customers. This presents a big problem for progressive startup CPG merchandise making an attempt to enter the market at a premium.”
Based on Frederick, the deceleration is especially pronounced in particular subsectors of meals tech. “The entire e-commerce house, together with on-line grocery and restaurant supply, is down 67% by way of {dollars} in only one yr, and 87% because the peak in 2021,” Frederick stated. “This main deceleration is essentially because of an investor shift from progress to profitability and optimistic unit economics.”
Funding in expertise for eating places and retail has additionally confronted a pointy decline, dropping 71-72% over the previous yr and 85% over the previous two years. Equally, the choice protein house, as soon as the darling of meals tech, has seen a deceleration, with buyers more and more specializing in firms that may exhibit a path to profitability.
I requested Frederick about picks and shovels sort of investments, and he stated whereas the numbers don’t essentially present up within the combination funding, he’s seeing some elevated exercise by firms who’re constructing out inputs and manufacturing for various proteins, together with a deal with alternate options to progress serum and constructing fermentation bioreactor infrastructure.
“There’s simply extra consideration, a progress of stakeholders, and a deal with constructing out the entire inputs and infrastructure they would want to develop that trade.”
You’ll be able to see my full interview with Alex beneath and may obtain an excerpt of the report on the Pitchbook web site.
