VC funding in foodtech startups soared to over $10bn in Q1

A report put together by data specialist PitchBook showcases the key events and trends in Q1 of this year as well as emerging trends shaping the food industry.

Venture capital funding in foodtech startups leapt in the first quarter of 2021 to over $10 billion (£7.1bn) across 241 deals, a quarter-on-quarter jump of over 120 per cent, according to a new report.

The investment jump was largely driven by investment in e-commerce platforms, the report compiled by PitchBook, the private market data specialist, says.

The report, which can be downloaded here, highlights the industry’s key events of the quarter and emerging opportunities shaping the future of food.

Key highlights include deal activity in the foodtech sector growing in Q1 as the world came out of the lockdown, after falling significantly in Q2 last year at the onset of the pandemic.

In total, investors deployed $10.1bn (£7.14bn) of funds across 241 startup deals, an uplift of 122.3 per cent quarter-on-quarter.

As well as the VC deals investing in e-commerce providers, small scale online grocery outlets, food apps and convenience providers also garnered significant VC money in the quarter.

The biggest deal in the period was a $3bn (£2.12bn) late-stage VC investment into China-based online grocer Xingsheng Selected.

Other noticeable investments in the period included Spain-based convenience delivery service Glovo raising $535.7 million (£378m), while Germany-based startup Gorillas closed a $290 million (£205m) deal.

The main benefits of these services include rapid delivery, automated order fulfilment, and hyper-local product offerings tailored to the smaller service area. 

Noticeable exits in the period include London-based restaurant delivery service Deliveroo, marking the largest exit of the quarter, recording a $7.9 billion (£5.6bn) IPO while Tata Group acquired India-based online grocer BigBasket for $1.3 billion (£920m).

The report includes technology-driven startups developing products and services that are changing how food has traditionally been discovered, purchased, delivered, prepared, and consumed.

It includes examples such as Eat Just’s cultivated chicken to emerging e-commerce solutions such as Gorillas’ hyper-local dark corner stores. 

The report highlights that the “intermediaries & delivery segment is expanding rapidly, and we expect to see further acquisitions in this space as large providers look to consolidate market share".

The food suppliers segment is another area of turbulent growth, the report points out.

It says incumbent bricks-and-mortar grocers have been playing defence since Amazon’s purchase of Whole Foods in 2017, which catalysed the expansion of online grocery capabilities. 

This expansion, along with the COVID-19 pandemic, has driven more investment into e-commerce capabilities and partnerships, the report adds.

It says that it expects exits via consolidation may start to ramp up in the near term as smaller providers find it difficult to compete with Amazon and other large, tech-enabled incumbents such as Kroger.