We recently released DigitalFoodLab’s yearly report on the state of the European FoodTech ecosystem (download it for free here). We are now releasing the data for the first quarter of 2023.

The data is not definitive, but we have a clear picture of where it will land. In a word: it’s bad, but it’s not the end of the world.

Compared to the first quarter of 2022, at the end of the “peak of excitement” experienced by the global tech ecosystem, investments are down by 80%. However, if we compare it to the pre-covid situation, things look normal. Now, there are two questions:

1 – where will it go from here, and will investments keep declining?
This will depend on events that far exceed the FoodTech ecosystem: primarily inflation and the reaction of central banks. Incidentally, it shows how much tech ecosystems, even when raising billions, are fragile and are dependent on the global macroeconomic and geopolitical environment. Depending on the horizon:

• Short term:  all else being equal, we think that we are not far from the bottom. Funds are still deep-pocketed and have investment targets to reach. Due to this, we even expect investments to bounce by Q3 or Q4.
• Medium-term: we are getting slightly worried by the deep decline in investment in funds. We have observed a surge in the number of investors specialised in AgTech or FoodTech failing to raise new funds. While this is not a problem, if the situation doesn’t evolve, it could become one in a year.
• Long-term: we are still mainly optimistic. So many aspects of the food value chain remain to be disrupted. Again, it is the best time to invest your time, energy and money into the FoodTech ecosystem!

2 – what will happen to the startups funded during 2021 and Q1 2022?
Here we can see three categories:

• Those with a real business model and a “path to profitability” which may have a hard time raising money, may face a downturn (a decrease in the valuation of the company)
• Tech-driven companies in areas that are still “hot” are still rising, even if the conditions are also tightening.
• Those without any viable short-term business model: as we see in these notes week after week, startups that spent their funds recklessly are already going bankrupt. We expect them to be followed by many that have seen how the environment evolved and adapted their spending.

Lastly, a positive note: from the point of view of large corporations and other well-funded startups, there is an opportunity to buy assets at a discounted price.