Murielle Gonzalez takes a closer look at venture capital deal flow in Europe in the past 12 months to identify the start-ups with unicorn potential, disruptors to keep an eye on, and the categories to tap into
Investment activity in agrifoodtech remained strong last year despite the restrictions of Covid-19. Ivan Draganov, lead foodtech analyst at market data firm Dealroom, revealed that a total of €17.1 billion in venture capital was poured into backing companies in the sector – a 3.6% increase over 2019. The total deal value excluding rounds of more than €250 million is €11.4 billion, a 4.5% increase over 2019.
On a closer look, Asia was the only region in the world to see an increase in venture capital investments in agrifoodtech last year. Dealroom recorded a total deal value of €6.8 billion, a 15% increase compared to 2019.
While deal activity in North America declined by 8.6% to €7.8 billion, Europe registered a double-digit dip – investments in agrifoodtech dropped from €2.7 billion in 2019 to €2.4 billion last year.
However, the venture capital that landed in European agrifoodtech companies was invested in the so-called next-generation food industry – businesses from seed to fork that emerged following the market hit of big food delivery giants such as Deliveroo. Funding in this sector has increased at a compound annual growth rate of 33% since 2015.
Meal delivery, farming technologies, and novel ingredients such as edible insect protein are among the most invested categories last year. Packaging has emerged in the pick-and-shovel investment play alongside cellular agriculture technologies providing fat and scaffolding for cell-based meat producers.
Investment trends by category
The 2020 Dealroom data show €552 million invested in primary production in the agriculture space, while deal value in food transformation (companies with a business-to-business model, including processing and packaging technologies, food waste and food safety) totalled €1.2 billion. These are industry verticals on an upward trend, growing by 22% and 80% last year, respectively.
On the consumer-facing front, investments in distribution and consumption declined from €1.9 billion in 2019 to €650 million last year.
In terms of industry verticals, Dealroom recorded €3.7 billion in disclosed funding from food and beverage brands in the delivery segment. Unicorns in this sector are Deliveroo, Takeaway.com, Delivery Hero, flashchenpost.de, Bolt, and Gousto.
Online grocery and meal kit delivery is the second-biggest industry vertical, and Dealroom estimates the segment emerges as a €2.7 trillion opportunity in Europe alone. Companies in this category disclosed €1.3 billion in funding. Picnic, Glovo, and HelloFresh are rising stars in the sector.
Deal value in consumer brands totalled €800 million in disclosed funding. Oatly is the most recognised unicorn in the alternative dairy aisle.
The dark kitchen category is an emerging sector in the next generation food industry, yet it attracted €300 million in disclosed funding. London-based Karma Kitchen is a rising star.
NutritionInvestor believes there are white space opportunities in the dark kitchen category. Unlike traditional restaurants, dark kitchens – also known as cloud, virtual, remote, commissary and ghost kitchens – are professional kitchens producing food for delivery. The business model allows restaurants and foodservice companies to capitalise on the in-house eating demand that exploded since the onset of Covid-19.
Curb Food, a delivery-first dark kitchen provider, is a newcomer in the market to keep an eye on. The company was founded by chief executive Carl Tengberg and chief strategy officer Felipe Gutierrez in Stockholm last year.
Tengberg is known in the market for being keen to minimise waste with smart forecasting of demand. He believes dark kitchens are fertile ground to understand the dynamics of the food delivery supply chain.
The start-up raised €3.2 million from Sweden’s EQT Ventures in December, and according to Dealroom, the deal valued the company between €13 million to €19 million.
Draganov argued there is a pipeline of rising agrifoodtech start-up across the whole value chain. The race for the first primary production unicorn is on.
Agrifoodtech: Alternative protein focus in Europe
Last year, European alternative protein start-ups attracted €599 million in venture capital investment, a 54% increase over 2019.
While cellular agriculture and plant-based solutions are leading segments, insect protein for animal and food products for human consumption has started to attract the attention of investors.
Mosa Meat announced this week that the third close of its Series B raised $10 million, bringing the total round to $85 million. The round closed nine months after the company managed to reduce production costs by 88 times since the first cell-based burger was made thanks to advances in medium optimisation – the nutrient broth that feeds the cells so they can proliferate.
Mosa Meat created its first burger from cells in 2013 for a tasting in London – it cost a whopping €250,000 to make. The company aims to bring the cost down to €9.
Meatable entered the market in 2018, founded by entrepreneurial trio Daan Luining, Krijn De Nood, and Mark Kotter. The company is developing pork products from cells.
This month, Meatable raised €2 million in seed funding from Agronomics, bringing the total funding raised to date to €14.1 million.
The edible insect protein arena is growing as companies are tapping into animal and consumer markets simultaneously.
The market for edible insects for human consumption is complex due to its legal framework. The EU’s novel food regulation came into effect in January 2018. It recognised edible insects as novel food and allows countries where insects were already on the market to continue selling those on a temporary basis. Denmark, Finland, the Netherlands, Belgium, Germany, and the UK are countries where the market is favourable to edible insects.
In January, the European Food Safety Authority (EFSA) recognised yellow mealworms as safe for human consumption. For IPIFF, the International Platform of Insects for Food and Feed, this is an important milestone towards the wider EU commercialisation of edible insects.
Ÿnsect is Europe’s major player in the edible insect space. The company is building what is deemed to be Europe’s largest insect farm.
Agtech: Top five start-ups to keep an eye on
Dealroom estimates the global market size for companies in the primary production space is in excess of €500 billion. In this vertical, there are at least 14 start-ups with the business model, market traction and financials to gain unicorn status.
NutritionInvestor believes the following five companies are rising stars in this vertical to watch out for. They are tapping into booming agtech segments, including crop protection, vertical farming, and edible insect protein.
UK company Tropic Biosciences was formed in 2016 to develop new high-yield coffee and banana varieties. The start-up closed a Series B funding round last June, raising $28.5 million. Emerald Technology Ventures, Temasek, Five Seasons Ventures, Bits x Bites, Pontifax AgTech, Tekfen Ventures, and UK Research and Innovation participated in the round.
In July, the company struck a research agreement with BASF to utilise its groundbreaking GEiGS technology (gene editing, induced gene silencing) to develop traits to address the most critical challenges in protecting crops.
Valuation: between €104 million €155 million as of June 2020.
Formerly known as Agrosavfe, Biotalys is a biotech company that employs a proprietary technology platform to develop crop protection products. It created a new generation of protein-based biocontrol solutions that combine the high-performance characteristics of chemicals with the clean safety profile of biologicals.
Biotalys’s crop protection agents are designed for both pre- and post-harvest applications.
Based in Belgium and operating a subsidiary in the US, Biotalys has raised €61.6 million, including €10 million in a Series C extension that closed in March, and €1.1 million in grant funding from Flanders Innovation and Entrepreneurship, which the company announced in October.
The company reported revenues of €6 million in 2019, representing a growth of 50% year-on-year.
Valuation: between €40 million and €60 million as of March 2020.
French company Ÿnsect was formed in 2011 to grow edible insects as a sustainable alternative to meat protein for feeding animals and for fertiliser production.
In October, the company closed an extension of its Series C, raising $372 million. The funding is intended for building the first carbon-negative and largest vertical farm in the world.
Hot on the heels of EFSA’s opinion on mealworms, Ÿnsect declared its intention to bring its aquaculture-focused protein product YnMeal to the food industry. The company submitted a novel food application demonstrating an allergen profile much lower than using the whole insect.
Ÿnsect also said it will be submitting a generally recognised as safe (GRAS) certification with the US Food and Drug Administration in the coming months.
The company aims to serve the world’s largest market for fitness and sports nutrition, and claimed that commercial contracts within these markets are already signed.
Valuation: €568 million as of October 2020.
German company Infarm develops, builds and distributes highly efficient vertical farms throughout cities to grow fresh produce. Its business model targets grocery stores, restaurants, and local distribution centres.
The company raised €144 million in the first close of a Series C funding round targeted at around €169 million. Led by LGT Lightstone, the first round included participation from Hanaco, Bonnier, Haniel, and Latitude and was supported by existing investors Atomico, TriplePoint Capital, Mons Capital and Astanor Ventures.
Infarm has raised €254 million to date from a mix of equity and debt financing.
With operations across 10 countries and 30 cities worldwide, Infarm claims to harvest 500,000-plus plants monthly and growing. Its operations use 99.5% less space than soil-based agriculture, 95% less water, 90% less transport and zero chemical pesticides.
Adding to its eco-friendly credentials, the company reported that 90% of electricity use throughout the Infarm network is from renewable energy. The company has set a target to reach zero emission food production this year.
Valuation: between €309 million and €464 million as of September 2020.
French company Agricool grows local and pesticide-free fruits and vegetables – strawberries, lettuce mix, coriander, basil, and parsley – by recycling shipping containers into urban farms. Guillaume Fourdinier and Gonzague Gru created the company in 2015, and reported revenue of €2 million in 2019.
The company currently operates in Paris and Dubai, and plans to expand its network worldwide.
The entrepreneurial duo developed a technology that enables the farms to be 120 times more productive than conventional farming, to save more than 90% of water and be run entirely on renewable energies.
Agricool latest funding round was in December 2018, when the company raised €25 million in a Series A with participation from Kima Ventures, XAnge, Bpifrance, Solomon Hykes, Henri Seydoux, Daphni, Danone Manifesto Ventures, and Marbeuf Capital.
Valuation: between €100 million and €150 million as of December 2018.
Food companies with unicorn potential
Based on Dealroom data, NutritionInvestor has selected the following companies as rising stars to keep an eye on.
Munich-based YFood is a foodtech start-up that offers meal replacement drinks, drink powders and bars. Products are lactose- and gluten-free, high in protein and packed with vitamins and fibre.
YFood was founded by Benjamin Kremer and Noel Bollmann in 2017, and the business has grown by more than 300% every year.
The company currently serves 200,000 online customers across Europe, and products are also available at over 13,000 retail outlets.
YFood raised €15 million in a Series B round in April, including investments from Felix Capital, Five Seasons Ventures, and Fonterra Ventures. YFood has raised €19.4 million in total.
YFood told NutritionInvestor that sales tripled in 2020 to more than €30 million. The company argued that as the demand for healthy and uncomplicated nutrition is growing strongly, sales figures are expected to further double in 2021.
While R&D work continues steadt, YFood said the focus this year will be on expanding online and offline sales in Germany and other European markets.
Valuation: between €60 million and €90 million as of April 2020.
Samuel Dennigan founded Strong Roots in 2015 to bring plant-based frozen foods to market. Based in Ireland, Strong Roots now offers a growing range of products, including root vegetables, veggie burgers and cauliflower hash browns, oven-baked sweet potato fries, roasted beetroot wedges, and kale and quinoa burgers.
The company has expanded rapidly, and products are available in the US, Europe, and Asia – it estimates to reach $100 million in global sales by 2023.
In September, Strong Roots secured shelf space in 2,000 Walmart stores in the US, and the company reported that more than eight million SKUs have been purchased since the brand hit the market.
The company raised €18.3 million in a Series A, which it announced in September 2019.
Valuation: between €67 million and €100 million as of September 2019.
Sugar reduction firm DouxMatok launched in Israel in 2014. Led by its founder and chief executive, Eran Baniel, the company has developed a proprietary technology that enhances the sweetness of sugars with no after taste, preserving the full sugar experience customers are looking for.
Incredo, DouxMatok’s sugar reduction solution, is based on cane sugar. Its composition is 99.75% equal to its counterpart, yet it allows bakers and food companies to reduce sugar content by 30% to 50% while retaining the same sweetness. The product innovation was recognised in TIME magazine’s Best Inventions of 2020′.
DouxMatok has targeted the North America market since its inception, and in October revealed a manufacturing partnership with Lantic, owned by Rogers Sugar – the largest sugar refinery in Canada.
In January, DouxMatok expanded its US team by naming former Ingredion executive Lorraine Niba as vice-president of sales North America and Jim Schulok as vice-president of applications. Schulok is a former R&D executive at Mondelez and Kraft Foods.
DouxMatok has raised €27.4 million to date, including €22 million in a Series B round that closed in June 2019. Pitango Venture Capital, OurCrowd, Jerusalem Venture Partners, DSM, FoodLab Capital, btov Partners, Blue Red partners, Singha Ventures, Südzucker International, and La Maison participated in the round.
Valuation: between €80 million and €120 million as of June 2019.
Sweden’s Matsmart was founded by Karl Andersson and Ulf Skagerström in 2014 to tackle food waste. The company buys large quantities
of food products that are about to expire or have the wrong labelling, and sells the items at rock-bottom prices, generally at a 50%-90%
In 2017, it reported saving 2,022 tonnes of food from going to waste, and recurring revenue of 200 million Swedish krona (€19 million).
The company has also expanded to Norway and Finland. In January Matsmart entered Denmark under the brand name Motatos.
Matsmart has raised €38.6 million to date, including €18 million (182 million Swedish krona) in a late venture capital funding round that closed in October 2019 led by LeadX Capital Partners. Ikea, D-Ax Corporate Venture Capital, and Norrsken VC have also invested in the company.
Valuation: between €80 million to €120 million as of October 2019.
While this is a snapshot of the 2020 deal flow in the agrifoodtech across Europe, it’s clear that the UK, France, Germany, and the Netherlands are hot spots.
Seeing that a total of €1.7 billion of venture capital investments went into primary production and transformation, it’s evident that investor appetite for agrifoodtech businesses is aligned with the pressing challenges facing the food industry – the ability to deliver nutritious products sustainably and through an efficient supply chain.
Date published: 23 February 2021