Investment into European food tech set to worsen in 2024

Declining investment in European food tech is set to worsen in 2024, amid ongoing geopolitical uncertainties and a more cautious VC landscape.

According to projections from Forward Fooding’s FoodTech Data Navigator, just $4.7bn (€4.3bn) is set to be invested into European start-ups and scale-ups by the end of this year, a 30% decline versus the $6.8bn invested in 2023 – and a 70% drop compared to the $14.7bn raised in 2021.

Against a backdrop of market volatility, “VCs are currently struggling to raise capital, and fewer are deploying capital,” explained Forward Fooding co-founder Max Leveau. “They are surely pickier when it comes to making investment decisions as well.

“We’ve seen a lot of companies phased out in the past couple of years as a result,” he added. “And I think it’s not going to stop. I think the next couple of years are going to be quite tough because companies are struggling to raise funding, and many of them will run out of cash.”

One of those is the way in which funds are being distributed, points out Leveau. “Historically, if you aggregate ‘food delivery’ and ‘alternative proteins’, those categories represent more than 50% of all AgriFoodTech investments. In fact, if we look at just these two in 2021, which was the peak year of investment in total, they represented 68% of all the capital that was going into the sector. And now in 2023, it’s 38%. The landscape is definitely changing, and investments are going towards a broader range of solutions, such as ag biotech, solutions to fight food waste, precision farming, and functional foods amongst others.”

A big reason for this is an evolution in the typical investor persona within food tech, he believes. “Many generalist investors, perhaps more inclined to invest ‘on hype’ without having the full picture, have now left the space, in favour of specialised investors who are still actively investing but are more discerning in where they put their money and how they evaluate investments too.”

It follows some high-profile hiccups at leading food tech companies in the US, with cultivated meat company Upside Foods announcing its latest round of layoffs earlier this month in a bid to conserve capital and alt-meat brand Beyond Meat reporting an 18% plunge in Q1 revenues in May as demand in the category continues to weaken. As a result, “there’s a bigger focus on focusing on high-impact solutions, and also on making sure that companies have healthy economics, in terms of revenue and cash flows, and that they have solid foundations to grow the company in a ‘healthy’ way rather than relying on VC money.”

“Commercial traction and price competitiveness have become more important than, for example, IP,” agreed Maire. “Investors expect start-ups to be leaner and more resilient in order to operate with less capital.”