In the past week, not one, but two companies have released reports on the state of European Food Tech: one by Five Seasons Ventures called “The State of European Food Tech 2018,” the other from Digital Food Lab titled “FoodTech in Europe: FoodTech Investments from 2014 to 2018.”
We’ve had our eye on the growing food tech scene in Europe for a while. That’s why this June we decided to bring the Smart Kitchen Summit across the pond to hold our first European event at Dublin’s Guinness Brewhouse. Reading these reports filled in some color to what that event already showed us: the European food tech ecosystem is evolving to include more startups, more funding, and more innovation.
Here are a few of the most interesting parts of the reports which shed light on the startups and trends shaping the European food tech market, plus what we can expect in the future.
Where’s the action?
Three countries are currently snagging the majority of the funding: Germany, the U.K., and France. In fact, Five Seasons Ventures reported that in 2017, 63 percent of all European food tech investment was in Germany and U.K.-based startups.
The Netherlands and Denmark have each had one notable food tech startup: Dutch food delivery service Picnic raised €100 million (~115 million), and Danish wine recommendation service/marketplace Vivino raised €56 million (~$64 million). Interestingly, while German and the U.K. led the pack in terms of amount of money invested, Five Season Ventures pointed out that Spain and Italy actually stand out in terms of number of funding rounds.
What are VCs investing in?
There’s a significant amount of investment going into the European food tech market. Digital Food Lab projects that, by the end of 2018, €750 million ($860 million) will be invested in food tech in the continent. Five Seasons Ventures is even more optimistic: they estimate the number at €1 billion ($1.15 billion). And the trends indicate that those numbers will only grow: the VC firm stated that there had been a 63 percent annual growth in food tech investment since 2013.
No question: by far the most food tech investment activity is in food delivery. Five Season Ventures’ report states that VC’s have invested €6.5 billion (~$7.5 billion) in European food tech since 2013, nearly half of which was in companies doing food delivery. In fact, eleven of the top 15 largest food tech investments have been in food delivery companies.
Though delivery may be taking the lion’s share of food tech investment, there are lots of new players emerging in other categories — and snagging funding, too. This year, French Ekim raised €2.2 million ($2.5 million) for its pizza-making robots. Swedish startup Karma raised $12 million for its app which reduces food waste by connecting people with leftover restaurant food. German smart water appliance company Mitte, who won the Startup Showcase at the Smart Kitchen Summit Europe in June, recently raised $10.6 million.
European food tech startups are struggling to raise significant funds — the really big numbers. Digital Food Lab speculates that this might be because investors are “less inclined to trust Europe’s startups with a few million before they have proven their worth,” which definitely plays a role. On the whole, U.S. startups promote the “fail fast” approach, taking bold risks with big gains (or failures). European startups and VCs are generally more cautious, raising and investing money more gradually. At the same time, over $4 billion invested in food tech over four years isn’t small change.
There’s a wealth gap between the more established startups (that is, ones that have been around for more than a few years) and the emerging ones. Digital Food Lab’s report cited €4.2 billion ($4.82 billion) invested in foodtech since 2014, roughly 60 percent of which has gone to the top three startups: Deliveroo, HelloFresh, and Delivery Hero (unsurprisingly, mostly delivery-focused companies). This is partially because first generation food tech startups have become very acquisitive, creating fewer, larger food tech companies and less investment potential for smaller players.
Europe is also a far trickier market to pin down than the more homogenous U.S. It’s composed of many different countries, with different languages, culinary customs, and consumer preferences. Startups that may solve a problem in the U.K. may not be met with the same enthusiasm in Italy, or Portugal, or Slovenia. Plus, each country has its own food regulations, which can be a big hurdle for CPG companies.
Conclusions: room for growth
Both reports ended on the point that the European food tech ecosystem is poised for some serious growth — though it needs more capital to do so. The continent’s share of global investments is only 13 to 17 percent, despite the fact that they have a 25 percent share of the global agriculture and food (agrifood) market.
Here at the Spoon, we’ve also noticed the recent boom in European food tech startups. From 3D printed restaurants to personalized dining recommendations to upcycled food insulation made out of wool to smoothie-blending robots, European companies are capitalizing off of major trends in the food innovation space. Some are even leading the way.
So while Silicon Valley is still the de facto epicenter of food tech — and has the massive funding to prove it — it’s worth keeping an eye on what’s going on across the Atlantic.