This article originally ran in ReFED's Capital & Innovation Market Update, a monthly report on news, insights, and trends in food waste activity and funding for capital providers and solution providers of all types. To subscribe, please join ReFED's email list here.

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It is safe to say that we have entered a strange and challenging funding environment brought about by inflation and economic uncertainty – the two, of course, are inevitably linked. It is well publicized that in the second quarter of this year, there was a 22% decline in investment in early stage venture (Series A and B) from the prior year period. This is important to note given that many for-profit companies in the food waste sector – particularly those in the Prevention solutions category – are still in the early stages of development and are heavily dependent on this capital. We have seen this trend emerge in our tracking of private food waste investment, and our projections show that this year’s funding volumes are on-track to be lower than 2021.

Uncertainty results in layoffs, hiring freezes, potentially lower revenue opportunities for food waste solution providers, and it creates a more difficult operating environment. On the nonprofit side, organizations in the food recovery and donation industry typically see a spike in demand during periods like this where consumer budgets are squeezed by inflation, while at the same time philanthropic giving declines.

Despite these challenges, significant raises for Afresh and Atomo Coffee were announced over this period. Afresh – which provides an operating system that helps store teams manage forecasting, ordering, inventory, and merchandising for fresh food – is a powerful example of a food waste organization in a scaling phase with a product that could become a standard solution for food retailers to reduce their waste. They are following a similar trajectory as Apeel and Misfit Markets – potentially on their way to becoming a unicorn in a couple of years. Atomo’s $40M fundraise is exciting for a different reason – the company, which creates coffee using upcycled ingredients, is one of the first upcycling names to receive significant funding. The upcycling sub-sector is quite nascent, so seeing a company receive a valuation at this level is something to celebrate – and a good indication that investors are looking at the space and recognizing its growth potential.

There are plenty of predictions as to where the overall economy is going to go. What we can comment on is the current reality, which is that businesses and individuals are being cautious, which in theory would reduce spending and overall investment. Against this backdrop, we have the stubborn reality of the urgent need to address climate goals, including funding food waste solutions, which would contribute substantially to progress toward those goals. ReFED has modeled $14B annually in order to reduce food waste by 50% in the U.S. by 2030. Looking at what we are able to track on the ground through our Food Waste Funder Circle network, we see a total of $764M year-to-date in fundable opportunities (the latest public report can be found here) for food waste solution providers raising money for their work across the full spectrum of prevention, rescue, and recycling solutions – and we know that this number is only scratching the surface.Ultimately, times of caution may be when funders should be more aggressive with seeking out impact opportunities. There’s always a need for food waste reduction, and during harsh economic times when businesses and individuals may be more cognizant of the waste they generate, there can be more interest too. As such, there are opportunities for start-ups to make a louder case for the solutions they offer to overcome hesitation among potential investors. And there’s a greater opportunity for impact investors and philanthropic funders to step in where private investors might show hesitation, since difficult moments like these require more support and funding – not less.