CHICAGO — Investment in emerging brands and food and ag tech startups continues to decline, with today’s numbers falling further away from the peak investing years of 2020-2022. Industry experts say those pandemic-era numbers are unlikely to be repeated, while several current factors are keeping the market from fully rebounding in 2025.

Speaking at the recent Future Food-Tech conference in Chicago, Alex Frederick, senior analyst, emerging technology, Pitchbook, said investment in alternative ingredient startups, for example, reached a peak of $4.9 billion in 2021, spread across 292 companies. In 2025, those metrics are $0.1 billion, with only 25 companies seeing investments.

“It’s very difficult to acquire a company these days,” Frederick said. “It’s very difficult to go public and this is due to market volatility. This is due to public or tech companies that have gone public and perhaps underperformed. What we’ve seen is that investors are looking to other asset classes. In many cases we’ve had a lot of non-traditional investors such as hedge funds and other very late-stage investors who had been investing in alternative ingredients and other spaces they don’t normally play. Many of those investors have left.”

Frederick added that according to Pitchbook data, a 54% decrease in unique venture capital (VC) investors playing in alternative food tech happened between 2021 and 2024, with a 67% decrease in non-traditional investors. “So, investors – largely those who are not dedicated to food tech – are looking outside of VC entirely,” he said.

Following Frederick’s presentation, a panel of investors specializing in food and ag tech startups detailed further why the market has dried up for emerging brands.

“We have to be realistic that there’s a good reason for a lot of this negative sentiment,” said Rosie Wardle, co-founder and managing partner, Synthesis Capital. “There’s been a lot of bad news stories and a lot of high-profile failures in this space. We have to prove that there’s value here and there’s returns to be made as well as impact.

“We’re definitely in the midst of a food-tech winter. I don’t think any company is having an easy ride right now. The value that we can get as investors is definitely there, but as we’ve all seen, there’s been a kind of withdrawal of capital across the space, which is strange, and it really is the irony of the situation.”

Nadav Berger, founding general partner, PeakBridge, added, “There is this perfect storm outside that affects all of us. There are tariffs. There is geopolitical stuff. There is a storm that we can’t take huge bets.”

Sustainability doesn’t sell

Another area the panel detailed was the decline of investing in food and ag startups that are environmentally focused as their main selling point, rather than tying sustainability directly into measurable cost savings or another financial metric.

“When we invest in sustainable technologies … we’re very careful not to over-index on the sustainability factor and that being the unique selling proposition,” said Michael Lavin, managing partner, Germin8 Ventures. “There has to be cost savings or some other significant benefit, not by a marginal percentage, but by multiple, felt by all the stakeholders in that value chain and the ones that we’re counting on to make this successful.

“My best example right now in terms of sustainability is in agriculture. There are benefits to being sustainable that are directly tied to using less nitrogen. If we can actually use less nitrogen, the farmer has a lower input cost where you don’t have to make a significant promise on yield outcomes that are uncertain. We can say you achieve the same with fewer inputs.”

A panel of investors discuss current funding struggles for emerging brands at the recent Future Food-Tech conference in Chicago.

| Source: Sosland Publishing Co.

Berger added that many startups focus on replacing an existing ingredient framed around sustainability, for example, rather than trying to maximize the cost savings and yield of an existing ingredient.

“We always speak about replacement, (such as) bringing in an alternative at price parity,” he said. “Maybe we should take a different approach and say, ‘What if we can take one of your ingredients and actually bring it with better pricing?’ (For example), we’re involved with a company that successfully grows natural vanilla with a 250-times better yield per acre. Pure technology, natural vanilla. It’s a different approach.”

Future forecast

Despite the current funding struggles for startups, those on the panel say the bottom of the market may already be here, and that an upturn in investment may be on the horizon.

“Even though we might have reached the bottom, I think at this point, the only way is up. I do think there are good deals out there right now,” said Guus Hovius, executive director, Rabobank. 

“My view is it’s obviously ticking up,” Wardle said. “The numbers are showing that already, but we’re not going back to those 2021 numbers, at least in the near term or in a timeline that’s relevant for our fund life, for example.”

Lavin added that “when you look at the past 20 years of venture capital vintages and their returns, the candlestick chart that goes (up and down), we are now in a part of that cycle where it would show that this could be the best time to invest. Valuations have corrected, and this has been a very healthy correction,” he said. “I think in 2021 there was a lot of irrational exuberance, and now buyer/seller expectations are much more aligned in a good way.”