KANSAS CITY — Investments in early-stage food technology companies continued to shrink through the third fiscal quarter of 2023, according to data from Pitchbook.

Food tech funding reached $2 billion in the quarter through 205 venture capital deals, an approximately 14% decrease in funds versus the previous quarter, marking the eighth straight quarter of declining investments across the category.

“We attribute the decline in venture-growth-stage funding to the pullback of nontraditional investors, which have limited capital availability for startups, particularly those in late and venture growth stages,” said Alex Frederick, senior analyst in emerging technology at Pitchbook. “These mature startups may need to explore costly, nondilutive financing options such as venture debt or seek new equity investors at reduced valuations.”

Alternative protein companies, particularly those focused on plant-based and fermentation innovations, and online grocery platforms accounted for the largest deals in the quarter. Notable investments included a $73.3 million Series A round for plant-based dairy producer Oatside, $50 million in Series C funding for fermented protein manufacturer Meati, $26 million in seed funding raised by plant-based seafood brand Konscious Foods and a $35 million round for cultivated meat company Meatable. Key market exits in the third quarter involved the Target Research Group’s acquisition of Spoonshot, a food intelligence and development company, and plant-based protein developer Shore Seaweed’s acquisition by Scotland-based Aquascot.

Despite the overall downturn in investments, Pitchbook found that food tech deal sizes and valuations reached all-time highs in 2023. The median deal was worth $4 million in 2023, an increase of 33% compared with 2022, and median valuations were up 58% to $23.6 million over the same period.

Eric Weiner, partner at Lowenstein Sandler’s Emerging Companies & Venture Capital Group, sees the current food tech and consumer packaged goods market as the result of previously overly generous investment attitudes.

“The market was very, very founder favorable for a long time and reached a high point around nine quarters ago,” he said. “Where it was probably too founder favorable for a while, I think it’s now swung too far in the other direction.

“Valuations were driven up very high by some of the bigger later stage investors … and it sort of put everybody behind them to go up to (those valuations), and the market really couldn’t bear that.”

With valuations returning to more realistic figures, and investors likely feeling less cautious than previous quarters, Weiner said he is bullish about the market in 2024.