Food- and drink-tech VC deals slide – research

Venture-capital deals in food-tech are likely to decline sharply this year in both value and transaction terms, Pitchbook research has suggested.

Presenting its latest food-tech VC trends report, which includes deals in the beverages segment, Pitchbook painted a tough picture for the investing environment from both the buy and sell sides, with valuations still proving to be problematic.

While the data set only covers the first quarter, the numbers look bleak for the rest of 2025 if extrapolated out over the full year, with the slope of the declines suggesting a substantial recovery would be needed to gain ground on 2024.

Food-tech venture-capital deals slid 49.6% quarter-on-quarter to $1.4bn and the number of transactions fell 15.1% to 202, according to PitchBook, which provided perspective on previous years as a whole: 2024 at $10.3bn and 1,127 deals; Covid-19 “era highs” in 2021 of $49.8bn/2,721; and pre-Covid figures in 2019 of $22.4bn/1,591.

“Investor caution remains elevated, with a marked shift toward more mature start-ups boasting proven business models. This has led to a sharp reduction in seed and early-stage funding,” PitchBook noted in the report commentary.

PitchBook indicated VC investors remain selective, although it highlighted the functional foods sector “emerged as one of the strongest near-term opportunities in food-tech amid the broader funding downturn”.

PepsiCo’s sizeable deal for US beverage group Poppi in March was singled out as one that “could spur further acquisitions as major brands look to expand their functional food portfolios”.

Valuations continue to be a headwind, with VC funds more demanding when it comes to the investment criteria.

“For investors, the sharp rise in median valuations signals a flight to quality, with capital being concentrated in fewer, more mature start-ups that can demonstrate proven business models and scalability,” the report, led by PitchBook’s senior research analyst for food-tech Alex Frederick, suggested.

“For start-ups, the environment is increasingly challenging, especially at the early stage, where median valuations have dropped to $6.1 million from $12.1 million in 2021, reflecting tougher fundraising conditions and elevated expectations from investors.”

The insights report added: “Start-ups must demonstrate not only innovation but also clear market traction, operational efficiency, and alignment with major trends such as sustainability, health, and supply chain resilience to stand out.”

Despite the ongoing challenges in alternative proteins – Beyond Meat being one such example given by PitchBook – there are some areas in the space that are grabbing investor attention.

“Early-stage dealmaking in alt-proteins remains robust, particularly in fermentation,” or what PitchBook refers to as “enabling infrastructure” in the development of the category.

M&A benefited as stock market swings “kept the IPO window closed” in the first quarter, PitchBook said, adding a note of optimism.

“As public markets begin to stabilise, IPO momentum is building across the broader VC ecosystem. While no food-tech IPOs are imminent, successful listings in other sectors will serve as important market tests.”

Besides the cited PepsiCo deal being a bright spot in functional food and drinks, Frederick said: “Alt-proteins, particularly fermentation, remained active as well despite broader headwinds for the space.

“Meanwhile, strategic M&A continued to dominate the exit landscape. With the IPO window beginning to open, companies like Trax Retail, GrubMarket, and Apeel are positioned as potential candidates for public listings.”

With the growing interest in AI overall, PitchBook also suggested the food-tech sector may be losing out as interest is overshadowed from elsewhere.

“PitchBook data shows that 71% of all venture capital deployed in Q1 went to AI and machine learning (ML) start-ups. Food-tech, by contrast, has seen fewer AI-native start-ups close major rounds,” according to the report.

“As capital increasingly gravitates toward AI, generalist investors may be overlooking attractive food-tech opportunities to get AI exposure.”