In the ever-evolving landscape of food technology, investment trends have taken a notable turn in 2023. Following the pattern of other tech sectors, foodtech investment has experienced a significant downturn from the explosive growth seen in 2021 and the early part of 2022. This shift reflects a broader recalibration of investor expectations and confidence within the industry.
The most striking decline has been within the eGrocery space, the largest category in foodtech, which has seen its funding plummet from $4.8 billion in 2022 to a mere $1.3 billion in 2023. This steep drop is largely attributed to investor disillusionment with the sector’s unsustainable cash burn rates and an aggressive “growth-at-all-costs” approach. Additionally, the sector has been grappling with operational challenges, particularly in supply chain management, which have further dampened investor enthusiasm.
Rapid grocery delivery companies, such as GoPuff and Getir, have felt the pressure acutely as the market dynamics have shifted. With consumers reverting to in-person shopping post-pandemic and a surge in competition, these players have found themselves in a tight spot. In response, many have scaled back their operations and are reevaluating their business models to adapt to the new reality.
Another area facing a downturn is the innovative food category, which encompasses alternative proteins. Funding here has taken a sharp dive from $3.2 billion in 2022 to $1.1 billion in 2023. The decline in sales within the plant-based meat sector and a series of business failures have contributed to this slump. Moreover, cultivated meat, once a media darling, has begun to see more critical coverage, which may have influenced investor sentiment.
Looking back, the foodtech funding landscape has been a rollercoaster ride. 2019 marked a significant year with investments reaching $14.1 billion, fueled by major contributions from heavyweight investors like SoftBank, which injected $1 billion into the Colombian delivery startup Rappi and $940 million into the US-based autonomous delivery company Nuro.
The upward trajectory continued into 2020, with $17 billion in funding. Highlights included substantial rounds for China’s Xingsheng Youxuan and the US-based ghost kitchen provider REEF Technology, which has since refocused its strategy towards profitability.
2021 was the zenith for foodtech funding, skyrocketing to $39 billion. Evidently, eGrocery was the darling of investors, with Xingsheng Youxuan and GoPuff raising multi-billion-dollar rounds. However, by 2022, the tide began to turn, and despite significant raises by companies like Getir and Weee!, the total funding for the year fell to $15.2 billion.
The current year has seen a retraction to levels last observed in 2014, with a total of $4.3 billion in foodtech funding. Despite the overall downturn, there have been some success stories. Germany’s yFood Labs secured a hefty $229 million investment from Nestlé, and Indian startup Zepto achieved unicorn status following a $200 million round.
These top deals of 2023, as reported by AgFunder, indicate that while the foodtech sector is facing headwinds, there are still opportunities for innovative companies to attract significant investment. The full picture will be detailed in AgFunder’s upcoming Global AgriFoodTech Investment report, which will offer a comprehensive analysis of the year’s investment activity.
This recalibration in foodtech investment is indicative of a maturing market where investors are becoming more discerning and cautious, seeking sustainable growth and profitability over unchecked expansion. As the industry continues to adjust, we may see a more stable and resilient foodtech ecosystem emerge, better aligned with long-term market realities and consumer behaviors.