What are investors looking for in F&B startups?

The F&B industry has been through rapid transformation over the last few years. 

Digitisation across industries has pushed F&B to adopt and integrate smart technologies and analytical programs, along with emerging technologies like AI and blockchain to enable transparency at every step of the supply chain. 

The evolution of consumer demand means that F&B enterprises are under more pressure than ever to offer hyper-convenient experiences, and more sustainable products. And challenges to supply chains and labour availability have driven prices up. 

All of this contributes to changes in the kinds of F&B startups that investors are seeking to back. 

So what are investors looking for in 2024? 

The basics still stand

There are some basic elements that remain important to investors in F&B over the long-term. They include: 

• Market awareness and growth potential. Investors want clear evidence that founders understand their market, and that the market they’re launching into is on a growth trajectory – or is large enough to be disrupted by a new, innovative startup.
  
• Sustainability innovation. Sustainability is a major focus for the F&B industry right now and for years to come, so investors are tuned in to startups that offer innovative solutions to cut emissions, reduce waste, and improve the industry’s environmental impact and image.
  
• A strong team. No investor wants to fund a startup that doesn’t have a strong, engaged, passionate and highly skilled team. You’ve got to be able to show why yours is the team to do this thing – and that you’ve got the capacity to ride out the challenges of launching and growing a startup.
  
• Proof of concept. Investors in F&B want to know that your idea really can be more than an idea. That means they need to see proof of concept (ideally proof of sales) to validate the idea’s commercial potential, and/of evidence of the startup’s financial commitments and founders’ sacrifices that show you really believe in your idea. 

Innovative food tech startups have a competitive edge this year

If there’s one category of F&B startup that’s likely to gain increased investor interest in 2024, it’s innovative food tech startups that have the potential to solve food security and sustainability challenges at scale. 

Consumers are voting with their wallets: and they want sustainable F&B options. Simultaneously, supply chain disruptions and extreme weather events are having a serious impact on global food security; so startups that offer resilient food production opportunities are increasingly sought after around the world. 

According to Dealroom, food tech was one of the top VC investment segments in 2023, attracting around USD $13 billion worth of funding – and as of November 2023, startups in the segment had a combined value of $1.4 trillion. In Q2 2023, food tech startups raised $3.4 billion – taking them back to 2019 pre-pandemic levels. And this trajectory is likely to continue throughout 2024. 

And investors need to believe in the founders they back

Specific products aside, investors are always looking for startups with founders who they can really get behind. 

That means that as a founder, you: 

• Are genuinely passionate about your sector and your product, and the problem you’re working to solve.
  
• You have credible experience – you might be an expert in your niche, or you might have a track record of building businesses from the ground up.
  
• Are working tirelessly to bring your product to market and/or scale.
  
• Speak about your startup in an energetic, enthused, and specific way – you can describe its value clearly and quickly. You’re not vague at all, and you’re not launching this business just for the sake of launching a business. You want it.
  
• Are backing your startup yourself. That might mean you’re putting your own funds behind it, or it might mean you’ve quit your day job to devote yourself to your new business; or it might be evident in the time commitments you’ve made to bring your startup to life. You’re all in – so investors can be confident that you’ll work hard to get them a solid ROI. 

But investment isn’t everything

Not every F&B startup raises funds – and not every startup needs to. If you’re at an early stage, consider adopting patience as your central strategy right now. Build your client base, get your users really engaged, build your expertise and experience in your market, and work towards positioning your startup as a solid investment. 

It’s very possible to bootstrap your startup to success if you’re comfortable with moving more slowly. And solid foundations can lead to a more secure future.