Negative sentiment stirring around food tech startups

Food Innovation

The New Year brought a new reality for food tech startups. The pullback by global venture capitalists from food tech startups continues with investors dialing back deals and funding for the second consecutive quarter.

In Q1’16, global food tech deals dropped to 27 – from a record high of 78 in Q4’15, according to a new KPMG/CB Insights report. Further, food tech startups raised just $684 million in the first quarter – the lowest point for funding since Q4’14.

“It’s harder to get financed at all stages, harder to raise massive rounds of financing, and harder to get the much coveted unicorn valuation," said Anand Sanwal, CEO and co-founder of CB Insights.

Negative sentiment weighs heavily in the New Year. Investors are skeptical of sky-high startup valuations, a non-existent IPO market, public market uncertainty, and have larger macro-economic concerns – all contributing to the continued slowdown of investment and deals into venture capital-backed companies. Concern over rising valuations, pressure in public tech markets, and broader macroeconomic concerns in Asia further contributed to the slowdown in deals and investment to VC-backed companies.

According to the KPMG International and CB Insights Venture Pulse Report, in Q1’16, a total of $25.5 billion was invested in 1,829 deals, marking the second-straight quarter in which investors dialed back VC funding and activity.

Interestingly, despite the pullback of food tech funding, the research found that food tech innovation is increasing – from products to partnerships to business models. For example, 2016 saw early-stage rounds to insect protein companies , and the New York Times announced a partnership with meal kit delivery startup Chef’d. Read more