The foodtech investment landscape has faced significant challenges over the past few years, often scrutinized through the lens of high-profile alternative protein companies that have struggled to deliver substantial returns despite substantial capital inflows. At the Future Food-Tech Innovation Summit held in London last week, industry leaders convened to dissect the current state of the sector and explore the path forward.
James Caffyn, a partner at Lever VC, highlighted a critical disconnect between consumer intentions and actual purchasing behavior. He pointed out that while surveys may suggest a willingness to pay a premium for products that promise environmental or societal benefits, the reality in retail environments tells a different story. “There’s a vast chasm between what people say they will pay a premium for and what they do when they walk into the store,” Caffyn remarked. He emphasized that only a small subset of consumers is genuinely inclined to pay extra for products that offer societal benefits without immediate personal advantages. This insight underscores a significant challenge for foodtech companies aiming to justify higher price points based on ethical claims alone. For products to command a premium, there must be a clear and tangible value proposition that resonates with individual consumers.
Mary McCarthy, a partner at Sofinnova Partners, added that the current stagnation in the foodtech investment landscape is tied to a lack of successful exits. “What we need is exits… not only for food but for agriculture,” she stated, noting that the absence of liquidity has left capital trapped within existing investments. This stagnation creates a cycle where limited partners cannot reinvest, further constraining the flow of new capital into the sector. Caffyn echoed this sentiment, explaining that much of the capital influx in 2021 and 2022 came from generalist investors who have since retreated after experiencing losses. The need for demonstrable profitability and successful exits has never been more pressing.
Despite these challenges, some industry experts see signs of hope. Laurent Vermer, a partner at Kharis Capital, described the current situation as a “period of cleansing and resetting.” He indicated that while the funding winter in agrifoodtech may be tough, it is not permanent. Vermer noted that there remains a strong deal flow and sufficient capital reserves, suggesting that the sector could begin to recover in the coming years. Bodil Sidén, general partner at Kost Capital, observed a shift in market dynamics, with a correction in valuations and a move towards more specialized, deep-tech ventures that promise higher margins and stronger intellectual property.
Andrew Ive, founder of Big Idea Ventures, urged foodtech firms to focus on the fundamentals during this downcycle. He emphasized the importance of delivering significant value and solving real problems for consumers. “If you can do that, you’ll survive,” he asserted. Ive also pointed out that large food corporations are actively seeking innovations that can enhance efficiencies in the food system, creating opportunities for startups. His firm has established the Global Food Innovation Fund, which has attracted interest from several major food corporates, highlighting a continued appetite for investment in promising technologies.
Furthermore, government support is emerging as a crucial factor in the growth of foodtech. Ive noted that various governments are enthusiastic about scaling the technologies developed over the past decade, particularly in regions like the UAE and Japan. This governmental backing could provide the necessary impetus for startups to thrive amid the current investment climate.
As the foodtech sector navigates its way through this downturn, the emphasis on collaboration between traditional agricultural players and innovative startups is paramount. The future of food will likely hinge on how effectively these entities can leverage emerging technologies to enhance productivity and sustainability. The insights shared at the Future Food-Tech Innovation Summit suggest that while the road ahead may be challenging, there are opportunities for growth, innovation, and renewed investment in the agrifoodtech space.