Food Startups are Riding a Venture Capital Gravy Train

Editor’s note: This is a repost of a TechCrunch article written by Jon Shieber.

Investments in food-related startups, from delivery services to new restaurant chains to new types of foods and additives, have raised unprecedented amounts of cash in the most recent quarter, as investors dug in to the food business.

Food companies raised $89 million in the second quarter of this year alone and have raised nearly $350 million since the second quarter of 2013, the strongest performance for the category over the past five years, according to CrunchBase data.

What’s happening in the food business mirrors venture capital interest in other sectors that were traditionally outside of the startup purview. As software is eating the world, it was only a matter of time before it began to nibble on the industries that make, process, ship, prepare and distribute what we eat.

Earlier this month Steve Case’s Revolution Ventures invested $30 million into school-lunch company Revolution Foods. And Eric Schmidt’s Tomorrow Ventures is also finding itself in the food business through an investment in Lyfe Kitchen.

Founded by the former global president and chief operating officer of McDonald’s Corp., Mike Roberts, and staffed with a team of ex-McDonald’s executives, Lyfe Kitchen has raised at least $21 million this year alone, according to a filing with the SEC.

“Lyfe fits into the trend of healthy solutions,” says Brad Holden, a principal and investment counsel at Tomorrow Ventures. “More and more people are focused on their health. [They’re] focusing on nutrition, and diet is one of the biggest impacts on your health. In the long term we definitely look at companies that are in the space, although some of them tend to be pretty out there.”

Holden may be referring to Hampton Creek, the vegetarian egg substitute, which raised $23 million from Horizons Ventures, the investment fund of Hong Kong billionaire industrialist tycoon Li Ka-shing.

Investors are even launching early-stage accelerators for food and beverage companies. AccelFoods joins the growing food investment movement at its earliest stage. Founded by Lauren Jupiter and Jordan Gaspar, AccelFoods has a dedicated investment fund of $4 million to invest in new food brands. The accelerator commits up to $400,000 in its portfolio companies and typically takes in about eight companies per class.

“This was born out of the desire to bring more structured support to this industry,” says Gaspar. “A lot of support comes to the tech companies graduating from Y Combinator, 500 Startups, and TechStars. By offering a program loosely based on the successful models from the tech industry, we thought we could do the same for food businesses.”

The AccelFoods model is essentially mirrored on what Techstars had done and built in other components that are more relevant to the food industry, says Jupiter. “The challenges in this space are very real for inventory management and getting foods from point A to point B.”

Helping with initial delivery and distribution, AccelFoods has a partnership with FreshDirect, which is distributing products from four companies from the accelerator’s first class.

The food phenomenon isn’t just isolated to the U.S. Globally, investments in food companies are gaining traction. In fact, new startups in the food business span the world from Boston to Beijing, according to CrunchBase data.

Photo via Flickr user Jeffrey

  • Originally published June 10, 2014, updated April 26, 2023