The cultural and social implications of Covid-19 have accelerated trends in the food tech sector that were emerging prior to global lockdowns. It makes sense to divide the last five to ten years into two ‘waves’ of innovation in the sector; the first being the flurry of new food delivery companies such as Just Eat and Deliveroo, founded In 2006 and 2013 respectively. As Foodnavigator.com recently reported, the former attracted almost $4bn in funding during this initial wave.
The second wave is more nuanced, witnessing an increasing prevalence of digitally native vertical brands (DVNBs) that focus on the distribution of food products direct to consumer. To be ‘digitally native’ is to have roots in a digital business model, while being ‘vertical’ entails the complete control of the entire customer experience, from the factory to the consumer. Entrepreneurs are capitalising on this trend to secure early-stage funding. Ahead of the UK lockdown, Pasta Evangelists, which first launched as an e-commerce business in 2016, raised £3.5 million for its expansion plans across the UK. Alongside Gousto and Mindful Chef, among other food distribution brands, it has reported unprecedented demand for D2C, deliverable recipe boxes.
Another trend within the second wave in food tech is the plant-based sector. This is another example of an investment trend that has been accelerated in within the pandemic, whether due to growing concerns over the environment or personal health. According to thebeet.com, an online platform specialising in plant-based living and news since the start of the pandemic, almost a quarter of Americans are consuming more plant-based foods, a trend associated with increased general interest in healthcare products. Moreover, according to the Good Food Institute the sales of plant-based meat alternatives is expected to top $1 billion.
This is all positive news for the food tech sector, but the market is saturating. The main issue is ensuring that investment goes to the right companies, meaning the companies that will truly benefit the sector with the right investment, bringing genuine unique selling points, new narratives and compelling products to the market. As with most investment sectors, the key to advancing food tech is to avoid investing in ‘me-too’ products, which are competitor products designed to prevent pre-existing companies from maximising market share.
Any investments should be made with a fully informed business plan, an assessment of scalability and with the knowledge that the right person is at the helm. However, each investment I’ve ever made also relies on something less tangible: a real decision-driver for me is gut feeling. Sometimes, faith in a company or an entrepreneur will tip the scales, and I love to watch them soar.