FoodLabs, a European early-stage venture capital investor and venture studio for food, sustainability and health, has joined forces with global data provider Dealroom to launch the first-ever Food for Climate report. According to the report, European food and ag-tech start-ups focused on climate have raised a staggering $1.9B (€1.74B) in VC funding in 2022, increasing by 20% from the previous year. This results in the most active year in this space. This growth is in contrast to the marked decline in wider venture capital investment – according to the CB Insights State of Venture report from CB Insights, global venture funding reached $415.1 billion in 2022, marking a 35% drop from a record 2021.
The latest Food for Climate report highlights a strong momentum for climate tech-focused foodtech start-ups. Even more encouraging is that approximately 30% of VC-backed climate-focused European food and ag-tech start-ups raised funds in 2022, compared to only 18% for the overall VC-backed food and ag-tech start-ups. This result reflects Dealroom’s previous report stating that, including a record 2021, European foodtech start-ups raised $5.6B in VC funding. Although lower than 2021’s results, slight growth was still seen despite the 64% drop in food delivery funding in 2022.
Investors have shown a desire to support start-ups working towards the transition to a sustainable food system, as the global food industry currently accounts for 30% of total greenhouse gas emissions. Over half of these emissions come from livestock agriculture. Livestock farming uses 71% of arable land and consumes 10% of drinkable water while causing 80% of deforestation. To meet 2050 targets, not only does production have to change, but also the food supply chain. Thus, food has been increasingly incorporated into climate discussions both in the public and private spaces.
In recent years, global food production has struggled to keep up with the growing demand as crop yields level off, natural resources dangerously decrease, and ocean health declines. The upcoming generation of technologies aims to tackle these challenges. In the fight against climate change, FoodTech and AgTech play a crucial role in solving future challenges. The companies’ innovative approaches, such as biomass fermentation and precision fermentation, offer potential solutions in reducing food waste, greenhouse gas emissions, and land use while producing vast amounts of healthy proteins.
Europe has exhibited resilience in the climate-focused start-ups space compared to worldwide companies. Specifically, alternative protein companies in Europe raised €579m, almost 24% higher than 2021, and plant-based sectors increased their venture capital deals by 15% and raised €284 million ($305 million) in 2022. By contrast, investment in sustainable proteins decelerated worldwide last year from a record-breaking €4.7 billion in 2021 to €2.7 billion in 2022.
The Dealroom/Foodlabs report identifies over 340 start-ups across 16 segments, including alternative proteins, Food waste & circular economy, sustainable packaging, precision farming, regenerative agriculture, and vertical farming. The report highlights water tech as an untapped industry, as in the last five years, only 1.5% of investment went to water technologies. However, European water-focused start-ups raised $16 million in 2022, with a growth of +300% from 2021. Each method presents unique timelines and strengths in cost, taste, texture, scalability, and regulation, and they promise land-independent, sustainable protein production without the burden of traditional animal agriculture.
In conclusion, the Food for Climate report reiterates that the upcoming decade is crucial in the fight against climate change, and technology and innovation offer a buffet of potential solutions. Traditional agriculture, when executed right, can sequester carbon, preserve biodiversity, and maintain soil health. Hence, we should value these practices while embracing new technologies, and both collectively contribute to bringing about fundamental change and ensure a sustainable future for our planet.
