3 Food Startup Signals Investors Should Look for (+ the Trifecta Signal)

If you’re a startup investor, what’s the first thing you look for in a startup?

You ask yourself, “Does the startup have product-market fit?”

“How scalable is it?”

“It’s SaaS, right?”

And that all makes sense. You want to invest in a high-signal, high-margin business to maximize your ROI.

But if 2020 and 2021 taught us anything, the future is about sustainability and strong supply chains (especially in food security and our food systems).

Spending trends show us consumers are willing to pay a premium for food tech innovations. They want convenience, healthier options, and low environmental impact.

And by mid-2021 suppliers, distributors, and food-related tech startups had raised more than $16 billion worldwide, according to PitchBook data.

That’s why food innovation is essential—from how we produce and process our food to how we package and deliver it.

These are the 3 signals to look for in startup investments, plus a bonus rocket ship signal.

3 Food Startup Investment Signals to Look for (and Beyond)

Ingrid Fung, an investor at Finistere Ventures, wrote about the present and future of food tech investment opportunity:

“There are three key areas in which food tech innovations are beginning to deliver completely new and novel approaches along the value chain.”

Fung said these sectors will experience significant growth and investment attention.

When you’re considering an investment in a food startup, look for innovators like DoorDash and Dumpling—and the hard tech innovators impacting the following key areas...

Signal #1 — Better Products, Better Planet

Consumer food tech is the segment of food technology investment focused on, you guessed it, the consumer. Think plant-based meats and nutrition-based tech.

Look for companies making great products with real environmental impact.

Alternative proteins like Impossible Foods taste great and reduce CO2 emissions (you can measure your CO2 impact).

Oatly makes alternative milk (goes great with coffee, by the way). It’s one of the most transparent food companies detailing their climate footprint.

And unlike traditional package ice production, we make better ice that reduces CO2 emissions by up to 90%, with zero water waste.

These examples are appealing to consumers because they innovate food itself while building brands that align with consumer desire for healthier, low environmental impact food.

For investors, Accenture research shows us there’s also real business impact with environmental, social, and governance (ESG) factors:

“Companies with consistently high ratings for ESG performance had operating margins 3.7x higher, on average, than those of lower ESG performers. These strong ESG performers also generated higher annual total returns to shareholders, outperforming lower ESG performers by 2.6x.”

Retailers understand this and are increasingly looking for suppliers and products that will enhance their ESG performance.

At Relocalize, our goal with our Better Ice brand is to provide a better packaged ice experience for people without harming the planet.

Signal #2 — Less Waste, More Taste

Industrial food tech isn’t focused on the food itself. Instead it invents ways to process, package, and distribute food more sustainably. It’s in this segment where we see innovative business model design and solutions to B2B pain in the food industry.

Food waste innovation for businesses is critical, and it’s become a critical consumer topic too. Food waste represents roughly $18.2 billion annually in lost value for retailers.

The waste has environmental impacts as well. An estimated 63 million tons of food annually in the US is either sent to the landfill or left to rot in the field.

While the amount of food waste in the U.S. alone is stunning, we have an opportunity to reduce business costs, increase consumer savings, and create major social and environmental benefits.

That's why we designed waste reduction into our processing technology. We waste zero water, while other products waste more than 1.5L per package.

And with less waste, we can impact food security so people can reliably access affordable, nutritious food.

Signal #3 — Supply Unchained

Agency and autonomy for retailers' supply chains will be the two major themes.

Agency—Direct effect on one's supply chain.

Autonomy—Freedom from external control, influence, dependence.

86% of convenience stores reported that at least 10% of their orders were disrupted in Q2 2021, with 39% reporting "significant" levels of disruption, according to Convenience Store News.

Our own market intelligence indicates packaged ice pricing increased by over 30% in some key geographies, with many stores dealing with frequent stock-outs during this period.

Securing supply chains is now a major priority, and it’s possible with innovation.

Here’s what CS News said about mitigation:

"...strategies to increase resilience include testing new distribution models, such as establishing smaller, more local distribution centers, increasing the frequency of supplier deliveries, or shifting more product deliveries to direct-to-store."

Naturally, we see distributed industrial automation technologies playing a major role in overcoming supply chain disruption. Our fully automated food micro-factories eliminate medium and long-haul transportation to save money (10-50% for retailers) and CO2 emissions (up to 90% reduction).

Bonus Signal — The Trifecta Rocket Ship Signal

You can probably guess what we mean by the trifecta signal. The strongest signal is the combination and intersection of all three signals described above.

Food startups focused on the consumers and the retailers—impacting food, sustainability, and supply chain—stands to make the most impact on people and the planet. And we need more.

Our mission at Relocalize is to feed humanity sustainably without harming people or the planet. It’s why we wake up every day to innovate in food tech. We’re starting with packaged ice, and we’ll keep inventing the future of food.

After all, 7 billion people and our planet are counting on us.

---

Follow Relocalize on LinkedIn as we design the future of food.

Charbel Simon is the CPO/CMO at Relocalize. Previously, he designed new products and programs with startups and enterprises like Google, LinkedIn, 500 Global, and Stanford University. Follow him on Twitter and LinkedIn for insights on designing the future of food.

3 Food Startup Signals Investors Should Look for (+ the Trifecta Signal)

Continue reading

Learn more about RELO