Illustration: Aïda Amer/Axios

The way people eat is changing, which means there is a giant market ripe for disruption and money to be made. However, most investors won't profit from the disruption because very few of the companies driving the change are public and that's unlikely to change anytime soon.

Why it matters: The lack of public opportunities to invest in food disruption despite the ravenous demand is the latest example of the broken U.S. capital market structure SEC chair Jay Clayton bemoaned at the annual Investment Company Institute meeting in May, noting that around 98% of American households have no access to private markets.

What’s happening: Attitudes about food — from how it's delivered to how it's produced — are evolving, which is forcing a rethink of every part of the industry.

  • Increasing demand for organic produce, the spread of vegan and gluten-free diets, and the shift away from foods with added sugar or animal meat mean changes for farmers, transportation and businesses.
  • New technologies like cellular agriculture (lab-grown meat) and cellular aquaculture (lab-grown seafood) as well as online food delivery, seed treatment and science have all piqued investor interest.

Wall Street's desire for access to the sector can be seen in plant-based burger company Beyond Meat's 600% share price rise in less than 3 months since its IPO or Americold Realty Trust's and Lineage Logistics' ostensible takeover of the American cold storage industry.

The intrigue: Investors clearly are clamoring for opportunities, but as Andrew Lee, UBS’ head of impact investing in the Americas, tells Axios, "direct investment opportunities are often not in the public markets."

Background: In the past, small companies with big ideas would typically need to go through an IPO to raise money to scale and expand. In exchange, the public got access to their financial records and the opportunity to invest.

  • Today, more companies are staying private longer and going public after multiple rounds of private funding that drive up valuations. With more than enough money from private investors or big companies that can acquire them, these companies can hold out on going public until they are billion-dollar behemoths.
  • The number of public companies in the U.S. has fallen by 50% over the last 20 years.

The big picture: As more disruptive companies eschew IPOs, a smaller and smaller subset of wealthy investors are yielding more of the gains from U.S. industry and innovation, leaving scraps for everyone else.

  • "We have to do something about that," said the SEC's Clayton.

Go deeper: Automating food from farm to front door

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