The meals tech sector navigated tough waters in 2023, as enterprise capital funding skilled a big downturn for the second consecutive 12 months. In accordance with 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 as a result of a mix of macroeconomic challenges and sector-specific headwinds.
Alex Frederick, the report’s creator, spoke with The Spoon about a few 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 12 months, has cumulatively pushed meals costs to document highs for customers. This presents a big problem for progressive startup CPG merchandise trying to enter the market at a premium.”
In accordance with Frederick, the deceleration is especially pronounced in particular subsectors of meals tech. “The entire e-commerce area, together with on-line grocery and restaurant supply, is down 67% when it comes to {dollars} in only one 12 months, and 87% because the peak in 2021,” Frederick mentioned. “This main deceleration is essentially as a result of an investor shift from progress to profitability and constructive unit economics.”
Funding in know-how for eating places and retail has additionally confronted a pointy decline, dropping 71-72% over the previous 12 months and 85% over the previous two years. Equally, the choice protein area, as soon as the darling of meals tech, has seen a deceleration, with traders 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 mentioned whereas the numbers don’t essentially present up within the mixture funding, he’s seeing some elevated exercise by firms who’re constructing out inputs and manufacturing for different proteins, together with a concentrate on alternate options to progress serum and constructing fermentation bioreactor infrastructure.
“There’s simply extra consideration, a progress of stakeholders, and a concentrate on constructing out the entire inputs and infrastructure they would wish to develop that business.”
You’ll be able to see my full interview with Alex beneath and might obtain an excerpt of the report on the Pitchbook web site.
