This less-than-optimistic prediction follows a severe 70% slide in food and drink start-up investments last year compared with 2021, according to Forward Fooding’s FoodTech Data Navigator.
But just €4.3bn is set to be invested in Europe’s food and drink start-ups and scale ups this year, a 30% drop on 2023 levels, the same data shows.
“The food tech market is more challenging today than it was several years ago,” says Rabobank equity private placements executive director Guus Hovius.
“There have been fewer IPOs, acquisitions and other major exits. Successful exits can attract more investors to the sector and help drive deal activity and valuations,” he continues.
Peak food and drink investment
Activity has increased this year on the back of a difficult 2023, Hovius explains, but adds the levels are nowhere near as high as those seen in previous years.
“Venture capital funds continue to show interest in the food tech space, but deal activity is slow. Investors are expressing more cautions and taking their time aligning with a business,” he explains.
How to accelerate food-tech through later stage investment:
Rabobank’s Guus Hovius will be leading a roundtable discussion at this year’s Future Food Tech event in London (2-3 October).
The discussion will centre around the intricacies businesses need to consider when seeking investment at later stages.
A full event agenda and tickets are available to view and purchase.
Globally, the industry saw peak food tech investment in 2021, where €35bn was raised. Rising interest rates and queries over the long-term viability of food and drink businesses has dampened the market’s attractiveness since the investment spike. This led to investments slumping by 50% the following year and further still to last year.
But all is not lost for would-be start-ups, as investors remain keen on developing businesses with specific features.
“When it comes to business investments, investors are increasingly focusing on environmental impact, sustainability and health,” continues Hovius. “At Rabobank, we’re seeing more venture capital funds set up to focus solely on impact and sustainability.”
Key food and drink investment trends
Health – as a food and drink trend – also remains important to sector investors, and Hovius was seeing more food products emphasising sugar reduction and higher protein content, for example.
“All these trends are important, but taste and price are equally important,” he continues.
Business basics should also be up to spec, as cautious investors sought opportunities that were or approaching profitability.
“Generally, it’s important to create the right business partnerships from the start. Think about the long-term future of the business. Sometimes startups give away certain rights to partners or don’t have the right board representation, which could harm the business in the long term,” he advises.