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Daily news and analysis about the food tech revolution

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Video: Do Food Robot Startup Founders Need Restaurant Experience to Be Successful?

Say you’re a VC looking to invest in a company that makes strawberry-picking robots. There are three or four companies in the space, all vying for your capital to get off the ground.

How do you choose where to put your dollars?

That’s one of the questions that we tackled last week at ArticulATE, our inaugural food and automation summit. We closed out the day with a lively panel on the opportunities — and challenges — in the food robotics investment landscape. Our speakers were VCs from the foodtech, hard tech and IoT spaces: Brian Frank of FTW Ventures, Brita Rosenheim of Better Food Ventures, Rajat Bhageria of Prototype Capital, and Avian Ross of Root VC.

The Spoon’s Michael Wolf moderated the conversation on what these investors are looking for in a food automation startup pitch specifically — and where they see significant opportunities in the fast-growing market. (Yes, both Frank and Ross have invested in strawberry-picking robots — and Ross claims he made the right choice.)

It’s certainly an exciting time in the food robotics space: there are tons of entrepreneurs out there with lofty plans to build the next robotic sushi restaurant, the next automated food delivery bot, or the next burrito-rolling robot arm (which, apparently, really hard to do).

However, the panelists seemed to agree that food robotics is a trickier investment space than a lot of other tech areas. Sure, the basic building blocks of food robotics — AI, articulating arms, etc. — are pretty democratized. But Ross (who — fun fact — spent a former life building robots for the Food Network) said that “robotics feels special and different.” He pointed out that the food system is incredibly complex and that a whole host of players have to be involved to deliver even the most basic meal to the consumer. And that’s just logistics: getting a robotic system to reach parity with a basic human fast food experience in terms of taste or customer experience is really tricky.

Because there are so many complexities at play it can require more capital than some other tech investments. It can also take longer to bring food automation technology to market. Which isn’t a problem — unless, as Rosenheim pointed out, you’re working with investors who are looking for “the next shiny thing” and aren’t patient enough to be in it for the long haul.

Investors in food robotics have to be especially willing to take risks and play the long game. However, not all the VCs saw eye-to-eye on what it takes for a food automation startup to be successful. The panelists disagreed on whether or not startups need deep restaurant market knowledge to be successful, how high the capital investment has to be in food automation, and what sets one seemingly identical food robotics startup apart from another.

Check out the video below to see the whole conversation — it was a really fun one.

Articulate 2019: Investment Opportunities in Food Robotics

Look out for more ArticulATE 2019 videos rolling out on our YouTube channel over the next week! 

Video: For Investors, the Food Space is “The Next Big Thing”

“As investors, we always look for the next big thing… and the food industry is the next big thing to get involved in.”

That’s how Brian Frank, founder of FTW Ventures, kicked off the food tech investment panel at the 2018 Smart Kitchen Summit. He was joined onstage by Carmen Palafox, partner at Make in L.A.; Tom Mastrobuoni, CFO of Tyson Ventures; and the Spoon’s Ashley Daigneault.

Indeed, it seems like the time is ripe for investment up and down the food supply chain. Like, for example, the shift towards meat alternatives; a growing consumer demand with which protein giant Tyson Foods is very familiar. But instead of simply staking out their territory, Tyson, which produces 35 million chickens per week, decided to capitalize on this trend and invest in its disruptors: from plant-based Beyond Meat to cell-based Memphis Meats.

“We look at technology from two angles; how applicable is this to our supply chain, or how disruptive is this to our supply chain going forward?” said Mastrobuoni. “We all diversify.”

Palafox agreed that timing is a key aspect of investment. “A lot has to do with cultural shifts and the way that people are thinking about food safety,” she added. For example, her firm, which focuses on hardware, recently invested in Pathspot, a device which scans restaurant employees’ hands to test for pathogens. “They’re trying to change culture from within food chains.”

Of course, not all food innovations work seamlessly (cough, meal kits). During the panel, Frank admitted that he had accidentally stolen a shopping bag from the Amazon Go store. “Amazon spends millions and millions of dollars to develop a system to track you in their store, yet they don’t track the bags,” he said. “And this is where I think that technology as a service for these things is still evolving.”

There are a lot of other really rich observations and smart takeaways in this panel, plus some smart insight into food system investment. Check out the video below to hear what this diverse group of investors is most excited (and worried) about in the food tech space, and how they think we’ll all be sourcing, cooking, and eating food in the future.

Defining Strategies For Investing In Food Tech

For more videos of panels, fireside chats, and startup pitches from the 2018 Smart Kitchen Summit head to our YouTube channel!

FoodShot Global Launches Fund to Land Food Moonshots

We know that there is no shortage of food-related accelerators helping get the next generation of startups off the ground. But FoodShot Global, a new investment platform that launched today, doesn’t just want to get startups off the ground: it wants them to aim for the moon.

FoodShot Global is a consortium of venture funds, banks, corporations, universities and foundations including Rabobank, UC Davis, The Rockefeller Foundation, and Generation Investment Management, looking to fund “Moonshots for Food.” FoodShot Global has a $10 million fund that will be investing in innovative businesses in the form of either equity or debt financing. Those companies accepted into the main FoodShot Global program will also receive industry expertise, mentorship and other resources available through the FoodShot partner network.

At the same time, FoodShot Global will have a separate “Groundbreaker Prize” every year, awarding $500,000 in philanthropic capital to researchers, social entrepreneurs and advocates working in a specific field in food or agriculture. This year’s challenge is “Innovating Soil 3.0,” and they are looking for science and tech projects that “address the crisis of soil deterioration.”

From the press announcement:

Through Innovating Soil 3.0, FoodShot Global aims to identify breakthrough solutions that create the new soil operating system. Though soil began as a mixture of organic matter and minerals that enabled agriculture to take root (Soil 1.0), the advent of synthetic fertilizers and industrialized farming created a soil system (Soil 2.0) that improved global food security but wasn’t designed to maintain soil nutrient integrity, resulting in yields that have not continued to increase at the rate to meet the demands of a growing global population and a resource-constrained planet. A new soil system, Soil 3.0, is essential to nourish and sustain the planet as a whole. Focus areas for the Innovating Soil 3.0 Challenge can include input efficiency, reduced deforestation, improved crop resistance, and carbon sequestration. To develop a 21st century soil operating system, FoodShot is seeking innovators tapping into advances in biology, genetics, and chemistry, and solutions that lean on big data, smart sensors, blockchain and robotics to set the framework for a global food system that can sustainably and equitably produce healthy food for all.

Applications for either investment from FoodShot or the Innovating Soil 3.0 prize are due December 1, 2018, and can be submitted through FoodShot’s website.

The FoodShot website aims “To feed 10 billion people by 2050.” Hopefully finding and funding promising moonshots will give everyone on the planet a shot at more healthy living way before then.

Video: For Big Food, ‘We’re Past Innovation and Onto Disruption’

Tyson Foods produces a massive one out of five pounds of protein consumed in the United States. Barilla isn’t any slouch either, with its 30% dry pasta market share in the US and 10% worldwide.

That’s a whole lotta chicken and pasta, so when execs for the investment arms of these two food giants took the stage last month at Smart Kitchen Summit Europe, you can bet all were listening intently to see what they had to say about the future of food and cooking.

The panel featured Thomas Mastrobuoni, CFO of Tyson Ventures, and Michela Petronio,  Director at Barilla’s investment arm, Blu1877, who took the stage to discuss food tech and connected kitchen investment in our closing panel which was moderated by Beatriz Romanos of TechFood Magazine.

The three had lots to say about technology, the food business and how they are investing in the future as these two worlds increasingly intersect.

Mastrobouni talked about one of their recent investments and how it’s a sign that technology is having the same disruptive impact on food now it had on media and finance over the past decade.

“We’ve said innovation, that boat has sailed, and we’re on to disruption now,” said Mastrobuoni. “The startups that we’re focusing on are, in some ways, out to get us. For the largest protein company in the US to invest in a plant based protein and two cultured meat investments… for us to go out and do that sends a message that the technology is starting to hit the food industry.”

There are lots of other great insights in the video, including discussion of why companies like Barilla and Tyson decided to launch their own investment arms, why they are interested in the connected kitchen and many more, so you’ll want to make sure to watch the entire session below:

If you want to hear more from VC’s and investors in the connected cooking space, join us at the Smart Kitchen Summit in Seattle this October!

Cannabis Edibles Market Is Riding High — For Now

If you have ever had a pot brownie (and we’re not saying you have), more likely than not you don’t remember it as an especially pleasant ingestion experience. The brownie probably tasted bad, was from dubious sources, and might have even been given to you by an unwashed person at a house/frat party.

But today the edibles game has completely changed. Thanks to legalization and technological advances, edibles now come in a huge variety; users can choose not only how they want to ingest their weed, but also its strain and strength. And their popularity is exploding.

According to Arcview Market Research via Forbes, consumers in California purchased $180 million worth of cannabis-infused food and drinks last year, which amounted to 10% of the state’s total marijuana sales. Per BDS Analytics and Green Market report, that percentage rose to 18% in February 2018. And there doesn’t seem to be any sign of slowing.

Edibles are becoming commonplace and democratized. They are no longer a means to an end; consumers want to enjoy the consumption experience itself, not just the resulting high. They also have a wider appeal than smoking marijuana, since they’re less conspicuous to consume and don’t have the same harmful effects on your lungs.

Advances in technology enable edible makers to tweak things like the concentration of THC (the psychoactive element in cannabis) and CBD (the relaxing element) in their goods to produce the desired effect. Cannapreneurs (trademark The Spoon) can now also infuse a really wide variety of goods with marijuana, from gourmet sweets like gummy bears and truffles to stouts and IPAs. There are even marijuana-infused sodas and lattes with cannabis (think of the latte art possibilities!).

Source: Wikimedia

Edibles’ growing appeal is, obviously, a direct result of marijuana’s march towards legalization. So far, nine states plus Washington D.C. have legalized recreational weed for those 21+. This means more open access to cannabis, so producers can not only openly source marijuana, but also select the exact strain they want. As marijuana’s legalization spreads, the stigma that surrounds it is starting to decrease. It’s no longer a drug of hippies or high school dropouts; in fact, millennials increasingly view marijuana as a safer form of relaxation than alcohol.

Of course, there are still some very real obstacles standing in the way of the marijuana industry. Attorney General Jeff Sessions has openly said that he wants to exert federal law that criminalizes marijuana, superseding individual state laws which have legalized the drug. If he goes forward with this, it would have a huge impact on the marijuana — and, hence, the edibles — market. There are different opinions on whether or not this news has affected investments in cannabis/cannabinoids: some sources say investors aren’t spooked, others disagree. We’ll have to wait and see if lawmakers will go the way of former Republican House Speaker John Boehner, whose thinking on marijuana has “evolved.”

While these challenges might make things difficult or unsteady for the marijuana industry going forward, within the industry the edibles market is still booming. The Specialty Food Association named cannabis edibles as one of the top 10 food trends of 2018. In Colorado, BDS Analytics reported that edible sales jumped 67% between February 2016 and February 2017.

Venture Capitalists and Big Food are noticing the growth in this sector and starting to invest in cannabis tech and edibles. Just last week Palo Alto-based marijuana edibles company Plus Products closed a roughly $6 million Series B funding round. The round was led by Serruya Private Equity and Navy Capital, only the latter of which identifies itself as a specific cannabis investment fund.

The edibles market may be in a precarious situation until marijuana is legalized on a federal level, but for now its popularity is riding high.

Bone Broth’s $103M Funding Shows Food Supplements Are A Hot Industry

How would you like to have your bone broth and drink it too?

Ancient Nutrition, a company best known for its bone broth-based protein supplement powder, just snagged a $103 million investment. The funding round was led by private equity firm VMG partners along with Hillhouse Capital and Iconiq Capital. It also included participation from over 100 current and former players in craft food companies such as Noosa Yogurt, The Honest Company, and Stone Brewing.

Ancient Nutrition’s new boost in funding shows that the market for supplements—especially ones that are “natural”—is still booming. The company’s main product is powdered bone broth, a trending meal supplement (which is essentially broth) sipped by health fiends and hipsters alike. Bone broth has particular appeal to people on the ketogenic diet, who believe that we should be eating more like our ancestors: high fat, lots of protein, and minimal carbs. The rising popularity of this and other low-carb diets, such as the paleo diet, have led to a higher demand for protein supplements.

Ancient Nutrition also offers bone broth-derived supplements such as protein powder, which comes in flavors like “French Vanilla” and “Greens.” These can be used in your post-workout smoothies or as a meal replacement, which is another category that has been on the rise lately thanks to veteran Soylent and startups like Bear Squeeze and Ample.

Ancient Nutrition has a serious health food pedigree. Co-founder Jordan Rubin started Canadian dietary supplement and probiotic company Atrium Innovations, which was acquired by Nestlé last year for $2.3 billion. He then took his natural products know-how to start Ancient Nutrition in 2016 alongside Josh Axe, the man behind the popular health & fitness website Dr.Axe.

This funding indicates a strong consumer market for health supplements, especially ones derived from natural products instead of chemicals. Throw the words “superfood” and “whole food” in there, and Ancient Nutrition is capitalizing on three consumer trends: natural, unprocessed foods, miracle health ingredients, and low-carb, high-protein diets. Plus they’ve got convenience going for them; by turning bone broth from a beverage that takes hours to cook into an instant, portable supplement, they’ve made it uber accessible.

Ancient Nutrition plans to use their funds to develop new healthy lifestyle products like fungi, probiotics, and essential oils, presumably all of which will come in French Vanilla.

Reheated: Q1 2017 Shows Food & Beverage Investment Is Hot Once Again

Food and beverage are hot again.

After a sluggish 2016, a strong first quarter of 2017 suggests investment in the food and beverage sector could be set for a comeback on an annualized basis according to CB Insights.  This would be a reversal from the past couple years, which has seen food and beverage sector investment decelerate since hitting a peak of $787 million in the final quarter of 2014.

Food and beverage investment. Source: CB Insights

Not only did last quarter reverse the trend in total annual investment, but also saw an increase in the average funding amount, which has also been on the decline for the past several years, falling from an average of $7.6 million per deal in 2014 to $2.7 million in 2016.  The average deal value in Q1 2017 was $6.7 million, more than double the 2016 average.

But Q1 2017 was an extraordinary quarter. A single private equity deal by Food Union, a Latvia-based conglomerate of food and beverage brands, accounted for nearly half ($225 million) of the total investment for the quarter.  Backing this deal out of the quarter’s total results in a figure much more on par with past quarters ($289M Q1 2017, $265M Q4 2016, $322M Q3 2016). It’s tough to say whether we’re seeing a true reversal in the decline in investment or just an anomaly resulting from a single high value deal.

Who’s backing food and beverage deals?

While deal value has been on the decline the last few years, the volume of deals has risen steadily since 2012.  With the growing activity in food and beverage, several new investment firms have emerged, like CAVU Ventures, New Crop Capital, PowerPlant Ventures and S2G Ventures, that focus solely on this space.

And these funds are growing fast.  AccelFoods, one of the early leaders focused on the food and beverage sector, nearly doubled the value of its fund recently, growing from a $20 million fund to a $35 million fund.

Large corporations in this space are also getting the fray, creating incubator and funding branches to foster growth in innovative start-ups.  Company-affiliated funds include Kelloggs’ 1894 Capital, General Mill’s 301 Inc., and Campbell’s Soup’s Acre Venture Partners.

What are they investing in?

Since 2013 spices and condiments as a product category have attracted the most funding and acquisition deals.  Notable in this sector was the acquisition of Justin’s by Hormel Foods in 2016 for $286 million after raising $48 million.

From a funding perspective, beverages account for half of the top ten most well-funded start-ups since 2013. Cold-pressed juice start-up Suja takes the top spot with $196 million disclosed funding from investors including Coca-Cola, Boulder Brands Investment Group, and Leonardo DiCaprio.

Looking forward, venture capital is seeking out market disruptors for investment.  One of the leading categories currently attracting deals is plant-based protein, which has the potential to significantly alter the beef and dairy industry.  CB Insights has earmarked plant-based protein as a significant investment category based on the high level of activity in this space amongst what they term “smart money” investors, those with a strong past performance and exit history.  Examples of alternative protein are varied and include molecularly engineered meatless hamburgers from Impossible Foods ($183 million raise from Google Ventures, Khosla Ventures, and Bill Gates), dairy-free milk made from peas from Ripple ($43 million raise), and cricket-based snack bars from Exo ($5.3 million raise).

While it’s unlikely that bug based protein is going to overtake the livestock industry anytime soon, the fact that these types of companies are getting funding demonstrates the broad thinking and growth in deal activity in food and beverage.  As early indicators show, 2017 is shaping up to be a very interesting year in the investment community, particularly for food and beverage companies.