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Foodtech

Market Map: Foodtech serves up big ideas as deals shrink

Although VC funding levels are the lowest they’ve been since 2017, there have been several notable advances in foodtech, especially in the alt-protein segment.

There have been several mouthwatering breakthroughs in the foodtech industry in recent months.

California-based Upside Foods and Good Meat became the first companies approved to sell lab-grown meat to the public by the US Department of Agriculture, a watershed moment for the growing cultivated meat sector.

It’s not just lab-grown chicken, beef or pork that these startups are making. Vow, an Australian cultured meat startup, recently made what it described as a “woolly mammoth meatball.” While the meatball is not meant for human consumption, the company is also looking into creating edible meats from unconventional animals like peacocks and kangaroos.

Despite these breakthroughs, investors have not had much of an appetite for foodtech: VC funding levels are the lowest they’ve been since 2017.

The market map below explores the alt-proteins segment and shows which startups are attracting capital. Click on the blue tile to see more information.

 
 
  
To go deeper, read our Q1 2023 Foodtech Report. PitchBook subscribers can also explore the full market map with details on nearly 6,900 companies.

Spotlight: Alt-proteins

PitchBook has broken the alt-proteins segment into four subsegments:
 
  • Cultivated protein: Protein-rich foods like meat, seafood or eggs that are made by growing animal cells in a lab.
  • Fermented protein: Animal-free protein that is made through fermentation. Fermented proteins can be developed as stand-alone offerings or used to improve plant-based and cultivated protein products.
  • Plant-based protein: Food that mimics animal products like meat or dairy by using vegetables or other vegetarian foods.
  • Edible insects: Insects that have high protein content and could be used as an alternative and sustainable food source.

Trends: Deals and exits

 

In the first quarter of the year, there were 197 foodtech VC deals worth $2.3 billion, a decline in both deal count and value from Q4 2022, according to PitchBook data.

While the quarterly decline in deal count was stark—decreasing by nearly 40%—the drop in deal value was much smaller, dropping around 18%.

Median deal size grew by 87.5% quarter-over-quarter, reaching $6 million. This increase is a sign of investors' focus on larger, less risky deals, as opposed to spreading money across smaller ventures, according to PitchBook analyst Alex Frederick.

Notable deals in the first quarter of the year included meal replacement provider YFood's $230 million late-stage VC round and a $133 million Series C for online grocery operator Nana.
 

There were 15 exits for VC-backed foodtech startups worth less than a combined $1 billion in Q1, continuing the trend seen in Q4 2022. There were no IPOs and only one buyout, leaving M&A deals to make up the majority of exits during the quarter.

The M&A market remains bearish due to higher interest rates. Until there is a decrease in rates and the IPO market heats up again, exit activity is expected to be subdued, according to Frederick.

Notable exits in Q1 2023 included meal replacement provider Soylent's acquisition by Starco Brands and The Arena Group's acquisition of digital food platform developer Fexy, both for undisclosed amounts.

More market maps:
Featured image courtesy of Upside Foods

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