Cultivated foodPlant-based food

Food Tech Funding Drops 21.5% in Q2, But Alt-Protein Proves Resilient With Only 9% Decline

According to a new report from Pitchbook, total food tech venture funding declined by over one-fifth in total deal value in the second quarter of 2022, dropping from $6.9 billion in Q1 2022 to $5.6 billion in Q2 2022.

The drop in deal value corresponds with a decrease in the total number of deals, which declined in the second quarter by 23%, going from 359 funding deals in Q1 2022 to 275 deals completed in Q2 2022.


Q2’s decline marks the fourth straight quarter in which food tech funding has dropped. Total investment is down 45% ($4.5 billion) from the sector’s high water mark of $10.1 billion reached in the first quarter of 2021.

Food tech isn’t alone in its pullback. The sector’s quarter-over-quarter decline in funding is just slightly less in relative terms than the overall venture capital market, which dropped 23% from the previous quarter. At $5.6 billion in total funding in Q2 2022, food tech represented about 5.2% of total venture capital in the quarter, compared to 7.6% of total funding in the first quarter of 2021 when food tech funding had reached its high point.

As usual, the total funding for the sector was dominated by a handful of mega-rounds, including Wonder’s $350 million series B. Other big rounds include Upside’s $400 million series C and Gopuff’s $1.5 billion, which Pitchbook says closed on May 18 (though the word of the forthcoming round leaked late last year).

Gopuff’s funding comes at a time when many investors and industry watchers were reevaluating the business model for the ultra-fast grocery business, a sector responsible for many of the mega-rounds that pumped up the food tech sector’s total deal value over the past year and a half. Gopuff, like many of its peers, announced layoffs over the past few months and that they would shut down a good chunk of its distribution network. Essentially everyone in the ultra-fast-grocery is attempting to slash costs as they look to extend runways as they recognize they’ve seen their last big funding round for a while.

So will food tech investment continue to decline? My guess is yes, at least in the near term, in large part due to recessionary fears, the continued tightening of monetary policy in the US, and broader geopolitical uncertainty. The absence of future investment into ultra-fast grocery may also lead to near-term drops compared to previous quarters over the next year, but the good news is that as the inflated valuations from the ultra-fast grocery recede into the rearview mirror, overall declines quarter over quarter should decelerate.

One particular sector I am keeping an eye on is the alternative protein segment, which has held up better than the overall food tech space. According to the Good Food Institute, alt-protein funding declined only 9% quarter over quarter, a much smaller decline than both the broader food tech industry and the overall venture market. Alt-protein has seen its share of stage high-value deals (like Upside, Impossible, Eat Just, etc), something which looks to have continued into the most recent quarter.

It’s also seen continued investment across all three major sub-segments (plant-based, precision fermentation, and cultivated/cell-based), which may have contributed to its relative resilience. If any of the three might be susceptible to potential pullback, it’s plant-based meat, a market that is proving to be both competitive and highly saturated.

Long-term, I expect investors in the alt protein to continue to be bullish, especially as we start to see government money start to enter the alt protein market. Globally, governments are beginning to view future food as an important part of national security strategy, and while the US is lagging a bit in that regard – food was not a major part of the recent climate change-centric Inflation Reduction bill that just passed – we are beginning to see state governments start to invest in the space. While the alt-protein space has lacked the same type of government taxpayer support as that of alternative energy, a moderate amount of future growth in government support should catalyze future private investment in the space.

the spoon

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button