There’s been a wave of investment in food tech. According to a new Deloitte report, the value of deals in the space saw its largest year-over-year increase to date, surging from $6 billion in 2020 to $13.1 billion in 2021.
Key drivers included the rise of plant-based and dairy alternatives, more innovation surrounding lab grown meat and fish, as well as a greater push for sustainability and health-conscious options.
“Investment has gone up significantly because of the huge global opportunity,” Heather Gates, national audit & assurance private company growth leader at Deloitte & Touche, told Yahoo Finance in a recent interview.
Gates, who co-authored the report, added that she sees huge upside potential for value amid the influx of capital, which has, in turn, led to higher valuations.
According to Deloitte, the median expansion-stage figure notched an all-time high of $130 million in 2021.
“The high valuations in the post-IPO performance are really good predictors for additional investment in the segment,” Gates revealed, noting how successful public debuts from companies like Beyond Meat (BYND) and Oatly (OTLY) have helped boost foodtech exit values overall.
The analyst added that non-traditional investor participation has been on the rise with hedge and sovereign wealth funds partaking in $5.9 billion worth of foodtech deals in 2021 — an indication of the sector’s maturation as nontraditional investors tend to focus on businesses at the expansion stage.
“I think the level of hedge fund and sovereign wealth fund investments in this segment is substantially due to the fact that this can be a global problem solver. If we get the efficiencies ironed out, food product production becomes a lot easier,” Gates said.
Looking ahead, market volatility remains a top concern as companies weigh exit strategies.
“I do think that we are in a place of flux right now with a war going on, and crazy times trying to get through COVID. There’s just been a ton of volatility in the past few weeks, and we know that volatility is the number one deal killer of IPOs,” Gates explained.
According to data from Dealogic, just 21 companies listed via traditional initial public offering in the U.S. for the year-to-date March 11.
That’s down 69% from the 68 companies that went public domestically over the same period in 2021, and the total deal value for companies going public via IPO this year has come in at just over $2.3 billion, a fraction of the $32.6 billion in the same period last year.
For now, the growing segment of foodtech is opting to stay private, but the expectation is for exits and M&A to rise over time.
Other key hurdles facing the space include competition from incumbents, as well as establishing a strong brand and sufficient market penetration, Deloitte noted.
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193
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