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Food tech funding slumped again last year as venture capital investors shifted priorities.

Why it matters: Market volatility, a constrained IPO market and inflation contributed.

By the numbers: Venture funding in food tech declined to $9.2 billion in 2023 from $22.5 billion in 2022, per PitchBook. There were 1,393 deals last year compared with 2,052 in 2022.

On a quarterly basis, values fell about 40% from the prior quarter, tallying in 279 deals, a 9.7% drop from the same period.

The big picture: "Food prices remain painfully elevated for many consumers," which is affecting demand for premium services, PitchBook senior analyst Alex Frederick tells Kimberly.

Additional fees for online ordering and premium-priced foods have fallen out of favor with consumers.

Price-sensitive consumers may opt to shop in-store instead of pursue a delivery service, or they could turn toward private labels and lower-cost goods, Frederick says.

Zoom in: Investors are focusing away from growth-oriented businesses toward profitability.

This has hurt many online food delivery companies — whether it be for groceries or restaurants — which were built on growth-focused e-commerce models, Frederick says.

What they found: As a result, Frederick says the market is seeing consolidation as well as more flat and down rounds.

Yes, but: Some bright spots include fermented proteins, which have seen a 20% increase in year-over-year deal values.

Interest in this type of technology could be fueled by government funding, similar to Tesla, Frederick says.

The market has shifted from a period of "over-exuberance about the alt-protein space" to a more realistic view of the challenges facing the tech, which is very capital-intensive to develop, he says.

"Investors need to be realistic about which companies can have a path to commercialization and viability to market," Frederick adds.

State of play: Categories that saw an uptick in Q4 funding included companies exploring novel ingredients, molecular kitchens, and ghost kitchens, according to PitchBook.

Bonumose, a company that develops healthy sugar alternatives, raised $36.7 million in late-stage funding, per PitchBook's figures.

Voyage Foods, a food company developing alternatives to nuts, cocoa and coffee, closed $22 million in new funding earlier this year.

Wonder Group, Marc Lore's ghost kitchen startup, closed a $100 million late-stage round from Nestlé.

Food tech venture funding falls again

Investment in the segment declined to $9.2 billion in 2023 from $22.5 billion in 2022, per PitchBook.

Illustration of a knife and fork next to a plate in the shape of a grimacing emoji.

Venture capital funding

Food tech funding slumped again last year as venture capital investors shifted priorities.Why it matters: Market volatility, a constrained IPO market and inflation contributed.

Food tech venture funding falls again

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