What a difference a year can make.
Last year, it seemed a day didn’t go by without word of a big new funding round in food tech. Alt proteins, restaurant tech, food robotics, food waste, and other sectors benefited from the combination of low-cost capital and a newfound urgency among investors to reinvent our antiquated food system post-pandemic.
But as the economic outlook darkens and investor eagerness gives way to caution, some startups and publicly traded companies in food tech find themselves in situations where they need to pare back their ambitions, tighten their belts to extend their capital runways and, in some cases, shut down altogether.
Here are some examples of bad news from the last couple of weeks:
Ghost Kitchens & Restaurant Tech: NextBite, one of the high-flyers in the virtual restaurant and ghost kitchen space, has laid off employees for the second time this year. The news comes a couple of months after Reef laid off 5% of its workforce. Restaurant payments app startup Sunday is shutting down operations in a number of its markets and laying off a large percentage of its team.
Food-Making Robots: Doordash, the publicly traded food delivery startup, is shutting down Chowbotics, the food robotics startup it acquired last year. The shutdown of the salad-making robot kiosk comes just a couple of months after we learned that Basil Street Robotics, a maker of pizza-making robotic kiosks, had put its assets up for sale.
Delivery Bots: Speaking of robots, the original sidewalk delivery robot startup Starship (which we started covering back in 2016), has recently laid off 11% of its workforce.
Alt-Protein: Last week, we learned that Motif Foodworks, the well-funded alt-protein ingredient spinout of Ginkgo Bioworks, has laid off an undisclosed number of employees.
Fast-Grocery: The ultra-fast grocery business has fallen further from its 2020-2021 highs than perhaps any other sector, as investors realize how much more capital is needed to build out their hyper-local dark store and delivery networks. Over the past few months, we’ve seen startups Buyk and Fridge No More shut down and others, like JOKR and Gorillas, pare back and exit some markets to preserve capital.
While some sectors (like alt protein) seem less impacted than others, the overall food tech market is recalibrating to a new normal after a year where post-money valuations were too high, and capital was still relatively cheap. In 2022, the rising cost of capital and pessimism about the economy has resulted in investors becoming more cautious, meaning new investments and follow-on rounds are harder to come by.
It also means investors are putting much more pressure on their existing portfolio companies to cut costs and get to profitability quickly. That can mean layoffs, bringing in professional manager types (as with NextBite), or exiting from new markets. For publicly traded companies like Doordash, which face the quarterly pressure of reporting to Wall Street, it means experiments that are not a part of their core business (like automated food kiosks) get dropped.
The question facing the food tech industry (and, let’s face it, all tech-adjacent industries) is whether things get worse before they get better. My guess is the answer is yes, as some startups that benefited from the abundance of capital over the last few years will have a harder time raising their next round and will have to work hard to lengthen their runways. In some cases, those runways will run out.
Despite all of this, I remain optimistic about the future of food tech. There are too many inefficiencies and problems with the current food system, and, because of this, innovative companies will always find opportunities to reinvent an industry. And much like we saw with the first dot-com downturn, those companies that find ways to survive in moments of austerity emerge stronger and built for long-term survival.
But before we get to the other side, we would all be wise to prepare ourselves for a rocky year or two.
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