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VC backing for foodtech startups slumps but ‘new ingredients’ attract interest

Agrifoodtech investments slumped this year to levels not seen since 2015, with “little hope” they will increase significantly by the end of the year, a report has found.

Foodtech startups raised $16 billion in 2024, a 25% increase compared with the $12.7 billion raised the previous year – but investments slumped in the first half of this year to $5.5 billion, with “little hope” they will increase significantly by the end of the year, according to DigitalFoodLab, an innovation consultancy.

“Agrifoodtech investments have just gone back a decade in terms of volume and returned to 2015 levels,” it wrote in its Global FoodTech Investment Report 2025.

Startup funding declines by almost one-third

The sharp decline in pre-seed and seed funding – that is, investments in emerging startups – is a particular cause for concern: while investments increased overall in 2024, they declined by more than 31% for early-stage deals.

The average deal size is also shrinking, and there has also been a “steep decline” in the number of deals. All categories are feeling the pain, the consultancy reported, noting the high-profile problems felt by those in the alternative protein space.

Not all regions are finding funding hard to come by, however. The share of investments going to US-based startups reached its highest point ever in the first half of 2025, for example, at 59%. US foodtech investments increased in the first half of 2025 and could surpass last year’s numbers.

At the same time, Europe’s share has been cut to 12%, effectively “erasing” all the progress made in the past three years or so.

Private funders pull back as public bodies boost budgets

Vestbee, a startup funding platform, also noted in a analysis that the number of active venture capital (VC) backers in foodtech is down 54% from the highs of 2021, while many generalist VCs have “pulled back” from sector, “reallocating capital to sectors perceived as more insulated from consumer demand volatility”.

“The investment capital tends to gravitate toward companies that have already achieved meaningful revenue traction and built business models aligned with long-term market themes such as sustainability, health, and supply chain resilience,” Vestbee explained.

Despite the slowdown, numerous new foodtech initiatives have emerged – from specialised VC firms that grasp the regulatory and operational nuances of categories like cultured meat to accelerators and public bodies that foster innovation.

For example, EIT Food is this year supporting a cohort of 65 startups involved in everything from regenerative agriculture and sustainable packaging to new ingredients.

Indeed, DigitalFoodLab said the current decline in private funding for agritech was “partially compensated” by a stronger involvement of public players (notably through large investment plans in biotech) and large agrifood companies through partnerships.

In the past year there has been more than $10 billion in acquisition volume, with more than $6 billion spent on “innovative brands. In all cases, these had a wellness or healthy ageing element attached to them, showing the great appetite of larger companies for this topic,” wrote DigitalFoodLab in its report.

More recent examples include Danone’s acquisition of Belgian gut microbiome-based health ingredients brand The Akkermansia Company and the launch of “cow-free” dairy products by Israel’s Strauss Group with precision fermentation startup Imagindairy.

As for the coming year, DigitalFoodLab predicted: “The purge of the 2021/2022 excesses is still not over yet.”

It added: “We still expect large companies to continue investing in medium- and long-term innovation in areas as diverse as sustainability, digitisation, and healthy ageing (and new ingredients in general).”

Funding for startups continues to flow, if not flood, the sector.

Alice Mushrooms, a US startup, has just raised $8 million (from Unilever and celebrities) for its functional vegan chocolate, which is packed with nootropics and adaptogens, while in Singapore, Terra Oleo raised $3.1 million for its palm oil and cocoa butter alternatives.

Perhaps more significantly, French startup NxtFood has just raised €49 million to scale its plant-based alternatives.

“It’s nice to see a sizeable deal in an otherwise depressed plant-based ecosystem,” noted DigitalFoodLabs in a weekly roundup published in September.