At first glance, the financing environment for European food tech start-ups appears to have deteriorated. But is this really the case?
Venture capital activity in the food tech sector has cooled significantly since the coronavirus pandemic. At least, that is what one might assume at first glance. According to figures from DigitalFoodLab, European food tech start-ups raised EUR 9.2 billion in venture capital financing rounds in 2021, but this amount has fallen to EUR 4.2 billion by 2023 and will remained at roughly the same level as the previous year at EUR 4.1 billion in 2024.
What does the term FoodTech actually mean?
The umbrella term FoodTech covers many different areas. Starting with innovative technology for agriculture (Agricultural Tech or AgTech/AgriTech), alternative proteins, technologies for restaurants, pet food and home kitchens, as well as delivery and logistics models, FoodTech covers a broad spectrum.
What is the financing environment for FoodTech start-ups?
Looking at the different areas in terms of financing volumes, it is striking that the financing volume of FoodTech start-ups outside the delivery model sector actually grew in 2022, remained at the 2021 level in 2023, and only fell below that level in 2024. The delivery model sector in Europe had experienced strong growth previously, probably partly due to special effects related to the pandemic, and after the pandemic, the venture capital environment for this sector in Europe cooled down again, although investments in Germany in the delivery model sector remained very strong compared to other European countries. However, there is no sign of a general, strong slowdown in the FoodTech sector so far.
After the pandemic, the technical and scientific aspects of the FoodTech sector have once again come to the fore. The main topics are human health and planetary health. There is a significant trend towards a more sustainable and responsible approach to food and healthier nutrition.
FoodTech is therefore a promising sector that has the potential to grow as quickly as, and in some cases even faster than, other tech start-ups. AirUp, for example, recorded revenue growth of over USD 100 million in less than four years, while N26 only reached this mark after more than six years.
As part of the alternative proteins sector, which recorded well above-average growth in financing volume at 26 percent between 2021 and 2023 according to figures from Dealroom, start-ups specialising in fermentation, for example, enjoyed strong financial support. Infinite Roots, a Hamburg-based start-up focusing on the use of fungal mycelium, formerly Mushlabs, raised USD 58 million in a Series B financing round at the beginning of 2024. In addition, Berlin-based food tech start-up Formo, which specialises in the production of animal-free cheese alternatives, raised EUR 61 million in a Series B financing round. The Hamburg-based start-up MicroHarvest specialises in the production of sustainable proteins using microorganisms. Their aim is to produce an alternative to animal protein in order to replace it in the long term. To move closer to this goal, MicroHarvest recently raised EUR 8.5 million in a Series A financing round to build its first production facility.
What are the special considerations when investing in food tech start-ups?
Certain special features must be taken into account when financing start-ups operating in the food tech sector. As part of the due diligence process, it is particularly important to check compliance with relevant and sometimes complex food regulations.
These and any other special features must also be taken into account in the investment and shareholders' agreement (ISHA). In particular, the specific features of the individual business model are reflected in the guarantees given on food regulatory issues.
