Investors appear to have lost their appetites for new food companies
There has been $1.5 billion less for companies to fight over worldwide early this year.
IT LOOKS LIKE investors’ appetite for pumping their cash into food-focused startups is finally becoming sated.
According to data from CB Insights, venture capitalist funding in food companies has plunged nearly $1.5 billion globally between the last quarter of 2015 and the first three months of this year.
The analysts tracked $684 million in funding for food startups across 27 deals in the first quarter of 2016, the lowest amount in the sector since late 2014.
The figures covered early-stage food companies spanning online ordering services, prepared food and grocery delivery, and those experimenting with next-generation food development.
CB Insights projected, based on current trends, that total deals in the sector for the year would be down nearly 60% by value on the 2015 tally.
Click here for a larger version
Bumper 2015
The drastic drop in funding in the food startup sector has been partly put down to a lack of so-called ‘mega funding deals’ being struck.
In the final few months of 2015 alone, a flurry of big funding splurges pushed the total raised by food startups to over $2 billion.
Four mega funding deals involving Ele.me, Womai, Grofers and Impossible Foods accounted for over three-quarters of total investment in food startups during the fourth quarter of last year.
London-based restaurant delivery service Deliveroo, which has been on an expansion drive in Ireland, also contributed to the total when it announced Series D funding worth $100 million.
A global slowdown
While the figures might ring a few alarm bells for those in the sector, it’s not necessarily time for food entrepreneurs to hit the panic button just yet.
The decreased investor interest comes as part of a global trend that has seen many venture capitalists squeezing their pennies throughout 2016.
Click here for a larger version
Over the past six months, funding in the entire startup sector has gone down by 34%, according to KPMG and CB Insights, and significantly fewer financing rounds have been completed.
Another area that is also feeling the squeeze is the overall on-demand services sector, which has experienced a $6 billion drop in funding since the third quarter of 2015.
