After a record year for U.S. private funding toward food waste in 2021, the total amount of investments in 2022 has seen a leveling off, primarily driven by the challenging macro environment. Most notably, the decline in venture capital activity relative to 2021 has made a dent, but it’s important to note that it is closer in line with historical averages. Private equity has followed a similar trajectory to VC, while mergers and acquisitions are down globally but not to the same degree.
In fact, according to PitchBook, 2021 is being viewed as an aberration due to a combination of fiscal and monetary stimulus driving significant deal activity, in addition to the effects of the pandemic recovery.
The data point missing to get a full picture of 2022 food waste investment is the deal value for the Misfits Market and Imperfect Foods merger, whose size remains undisclosed. Current levels of private investment into food waste solutions this year are at ~$1.4B, whereas we saw ~$1B in 2020. Including the Imperfect Foods deal, we estimate that the 2022 level of investment is likely in between $1.5B and $2B – making this year’s amount of food waste investment in-line with historical trends.
As ReFED has digged deeper into the composition of that number, we have seen some themes emerge:
- Momentum has shifted to new solution types. We talk about certain solution categories historically attracting more capital than others – that was the case this year with Enhanced Demand Planning solutions leading the way with large venture rounds for Afresh and Crisp, which help retailers optimize their inventory through proprietary, AI-enabled software. Additionally, startups that help foodservice businesses optimize their operations and reduce waste, such as Galley and Odeko, attracted funding. These four companies alone made up for ~20% of funding in 2022 or $260M total dollars. It’s worth noting that the largest deal this year was Vanguard Renewables (anaerobic digester operator for both manure and food waste) was acquired by BlackRock for ~$700M or 50% of total investment in 2022. Separately, insect-enabled recycling attracted $125M in funding.
- Platforms are acquiring food waste solutions. We have a thesis that food waste business models tend to be targeted to a specific sector or waste stream – and by the nature of being niche, there is potential that organizations may need to expand to other categories or be acquired into a larger platform. For instance, FoodLogiQ (supply chain traceability software) was acquired by ESHA Research (private equity-owned), and TeleSense (remote solutions for grain storage and transportation monitoring for farmers) was purchased by DECCO US Post-Harvest (postharvest Division of United Phosphorus Limited (UPL)). Additionally, certain business models benefit from scale, leading operators to consolidate, such as Atlas Organics being acquired by Generate Capital. Misfits Market committed to consolidation (acquiring Imperfect Foods) as a means for scale in order to compete with incumbent offerings. These are all positives for potential and current funders of the space, as we have more examples of exits in the space.
- Food waste organizations are gaining public attention, and we’re now eagerly watching execution and adoption. We are excited to see Do Good Foods and Too Good To Go receiving broad attention for their expansion plans. Do Good has demonstrated volume numbers; as of now, we are unsure of the results of Too Good To Go’s expansion in North America. Meanwhile, edible coatings company Apeel Sciences is launching an ad campaign as part of their continued push in groceries (moving away from stickers to paper bands) – the spots are running on social and streaming platforms, and it will be interesting to see how much consumer pull they generate.
Although food waste investment is down for the year, we are still seeing encouraging signs that funding is continuing to push development. ReFED expects these broad themes to likely carry on to next year.
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