Food tech is back on the Menu for VCs

Food tech startups, just like those fun breakfast cereals for kids, come in different shapes. From online restaurants to restaurant delivery partners, food tech in India seems to be defined as any technology that helps satiate hunger. In fact, it remained a buzzword throughout 2015, attracting over $463 million in investments across 50 deals.

Unfortunately, things took a dramatic turn early this year. Many startups found themselves starving — for funds. They couldn’t get seconds.
The all-you-can-eat-buffet got over a little early and the founders found themselves in a pickle. Quite unpalatable indeed.

But what happened?
For the investors, it was a fad diet — one that showed results in the short term, but caused much harm(shutdowns, lay-offs and distress sales) in the long run with unhealthy and unbalanced habits.

In retrospect, it wasn’t all that surprising. In the fad diet phase, the recommended daily allowances of investment and valuations were based on fishy business models and research data, smudged beneath globs of ketchup.

Many food tech startups were focused exclusively on tackling different challenges in the supply chain (minus the production). The most important part of the experience— food, and food quality, was never the focus.

Companies didn’t realize that packaging, logistics, delivery and customer acquisition count for nothing if the quality of food is found to be lacking. That it was far more important to own the entire experience.

Is there a Secret Sauce?
Virtual restaurants will need to build out the logistics network to win in the long run, because they can understand eating preferences better, optimize logistics and reduce delivery times. The problem is the high capital costs. But that also presents a massive opportunity for startups that blur the line between freshly cooked meals and packaged foods, using a subscription model to reduce their barriers to entry in this highly competitive market.

What’s Cooking Now?
There’s a new crop of startups focusing on food production, and whose offerings are based on cutting edge studies by some real smart cookies (aka top scientists & university researchers) backed by business models that Pepsico would have been proud to call their own.

This year is seeing quite a few innovative core food tech companies mushrooming with healthy valuations in the US — the likes of Impossible Foods, Soylent, Nootrobox and Chapul are whetting our appetite and leaving investors craving for more.

Perhaps food tech is back on the menu for many VCs. And why not? Who wouldn’t want a piece of a $40 billion pie? There is a considerable market for health foods and food services and it is growing fast. Plus, the nutritional content of these new age food startups is quite high and investors are happy to put their money where their mouth is.


Some food for thought…
People want to lead healthier lives, and are actively prioritising their well-being. People also know their onions when it comes to fitness — thanks to an explosion of information on the web, coupled with countless fitness apps/devices to egg them on. This trend is definitely not a fad. Indeed we are witnessing a cultural shift. And it’s there for the taking.

However, although people are more aware, it doesn’t necessarily mean that they are more active. People look for shortcuts. Meaning they want to exercise smarter (workout for smaller duration and expect the same benefits) or when they don’t exercise, to not feel guilty about the calorie intake. Food tech can address both use cases and plenty more.

Proof of the pudding is in the eating!
There are a few core food tech companies in India in this space — mostly limited to fitness bars with the exception of SupermealX — which claim to be a solution (quite literally!) to help you stop skipping breakfasts, address hunger pangs healthily, and avoid empty calories.

The problem with fitness bars and Soylent-type solutions is that it’s a crowded market, and it’s difficult to stand out. That model needs a constant push to delight customers with newness (flavours) and improved technologies. And liquid diets might not be everyone’s — you & I — cup of tea.

Here’s another use case. Hardcore meat-eaters who want to go on a vegan diet but are looking for high-protein substitutes. For these folks, there is a need for an engineered product that sounds like, “Wait, a plant-based food bar that has the texture and flavor of chicken/ pork/ beef and is environmentally friendly?”, that makes them go, “Shut up and take my money!”. That solution will also work for the 29% vegetarian population in the country, who can finally know what meat tastes like and also end all the fuss.

And then there is 3D printed food and vertical farming technologies that come under food tech, but is relatively unexplored in India.
Whatever the use case, the time is right to spice things up in food tech! But the recipe for success will always remain the same — providing quality food, coupled with amazing service and a superlative experience.

Nom nom.


(Image: Indiatimes)