“What is your opinion on the current situation, notably with the decline in investments in FoodTechs startups?” This is one of the questions I get asked most by corporate clients. My answer is simple: “You have a giant Black Friday. Enjoy it”. What do I mean by that?
First, startups are now super cheap. As we often say here, valuations have been slashed in the last 18 months. It is possible to invest in a startup for the same amount of money to have a larger chunk of its equity. And, as a larger shareholder and probably the only one able to reinvest soon, a large corporation also gains more weight in the decision process.
Second, many offer great value. As we all know, there are good and bad deals when we buy products on sale. Hundreds of billions have been invested in FoodTech startups in the past decade. Some of this money has been wasted, some has built great businesses, and a good share of it has helped to develop interesting technologies, services and products that have not yet found their market. These companies will have difficulty finding capital in a world where capital is more expensive. They can be your targets.
Third, it won’t last. When these startups run out of money, they will shut down, and the opportunity will end.
Large agrifood companies have understood that well. Indeed, as you can see in the graph below, the number of investments in European FoodTech startups by corporate venture capital funds (CVCs, in short) has never been higher.
It keeps rising in large deals (median series A are around €2.5M in European FoodTech). In a quarter of deals, one or more CVCs are investors (they can be the lead investor or just a minority shareholder). Even more interesting is the jump in participation of CVCs in earlier deals, including seed and pre-seed. Before 2022, the share was quite small, but CVCs were much more part of seed deals last year (and also in Q1 2023).
So, there is an opportunity, and many companies benefit from it. There are even setting up funds that now invest in early-stage (young) startups. However, that’s only a tiny minority of Europe’s large agrifood companies that are doing so. Investing not only requires money, but it also requires the means to follow the deals, to actually “do something” with them, notably finding ways to make them relevant other than financially for the company.
Beyond the opportunity, investing or acquiring startups now is also a way to support the local ecosystem, generating more valuable innovation for your business. So, if you have not yet set up a CVC or contacted them to raise money (if you are a startup), do it now!
