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The Spoon

Daily news and analysis about the food tech revolution

Pitchbook

Report: $8.37B Invested in Food Tech During First Three Quarters of 2020

Venture capital flowed into both ag tech and food tech investments during the first three quarters of this year, according to a new report out today from Finestere Ventures.

Created in collaboration with PitchBook, the report found that AgriFood tech startups raised a total of $11.6 billion as of the end of Q3 2020. AgTech investment totaled $3.07 billion during that time (up from $2.7 billion invested in all of 2019), and food tech investment totaled $8.37 billion through Q3 (up from $7 billion in all of 2019). Finestere said that the majority of capital invested in both sectors went to later stage deals, illustrating market maturation.

Like everything else in 2020, the COVID-19 pandemic was a big influence on where investments flowed. Finistere said in its report that indoor farming was a big beneficiary of funding as demand for fresh produce increased along with insecurities around food supply chains. On the food tech side, the pandemic spurred investment in startups in e-commerce delivery and meal kits.

Finestere’s analysis correlates with the more general back-of-the-envelope-style tracking we at The Spoon have been doing around food tech investment. Just between May and June we tracked more than $699 million in funding announcements from food and ag tech companies. More recently, we reported on nearly $1 billion in food tech funding just in the month of October.

“With more than $46B of venture capital flowing into ag and food advances over the past decade, AgriFood tech has become a focus of tremendous investor interest. As COVID shone a light on some of our food and agricultural production system fragilities that need strengthening, capital flowed in to support the trend to dine at home,” Arama Kukutai, co-founder and partner, Finistere Ventures said in the press announcement. “While substantial progress has been made, there is still a long way to go. The investment trend we are seeing is long overdue in a massive sector that has been under-invested, and there is a lot of room for further growth. Building a sustainable ag and food ecosystem is absolutely critical, and it will take a lot of time and more capital.”

Juicero, Sprig and Teforia Among 2017’s Notable Startup Failures

PitchBook, the financial data and software company, released its 2017 Startup Graveyard list today, highlighting eleven companies that raised more than $1 billion combined in VC funding, and all of whom shut down this year.

Of the eleven notable startup failures, three were in the food tech space: Juicero, Sprig and Teforia. Together, these companies had raised $197 million and had a valuation just shy of $700 million. That they all met an untimely demise should serve as a cautionary ghost story for any company looking to get into, or get more funding for, a high-end drink device or meal delivery service.

Juicero, creator of the connected (and expensive) juice machine, raised $121 million in funding and had a very Icarus-like valuation of $459 million. That is, until word got out that you could squeeze the juice packets with your hands, decimating the company and any value it had created.

And just last week Teforia, the maker of the $1,000 tea infuser, reached a bitter end after raising $17 million (for a tea maker) and reaching a $35 million valuation.

Then there was Sprig, which waded into the competitive world of on-demand food delivery. The service raised $59 million and hit a valuation as high as $169 before shutting down in May, with the company noting the challenges of scaling meal production and delivery.

While the food tech startups on the list raised their fair share of VC funding, its not like the sector was that egregious. Juicero, Sprig and Teforia almost seem frugal compared with Jawbone, which raised a whopping $542 million and was worth $1.5 billion at one point before crashing and burning.

Nor should this list be interpreted that food tech is dead or on life support. Far from it. There are a number of successes to celebrate this year such as InstantPot, Anova and PicoBrew. And the meal kit companies… well, to be honest, there will probably be more hardships to endure as the space matures, and its likely only a company like Amazon has the level of infrastructure needed to truly make it work.

Food tech has a lot of promise (everyone eats and drinks), and its share of pitfalls. Earlier this week, Mike Wolf here at The Spoon wrote a great piece examining why some smart kitchen companies fail while others succeed. Two of his takeaways were that products should offer consumers new capabilities that would otherwise be too difficult or time consuming without it, and a product should be either affordable or provide immense value.

If you can fulfill those criteria, it’s less likely anyone will dance on your company’s grave.