Investors Hungry for Food Start-ups

Tuesday, 05 Aug 2014 07:06 PM

By Michelle Smith

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Venture investors used to flock to technology and biotech companies, but now they're hungry for food start-ups, Fox Business reports.

Investors have shown a particular fondness for delivery services, such as HelloFresh and Blue Apron, which have attracted a lot of attention and a substantial amount of funding. Described as “meal-kit businesses” these companies offer subscription services for home delivery of “kits” of pre-measured ingredients for recipes subscribers prepare at home, The Wall Street Journal reports.

This week Square, a payment and commerce software company, spent $90 million to acquire Caviar, a company that offers deliveries from a curated list of 50,000 restaurants in several cities across the nation, the San Francisco Business Times reported.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

Same-day grocery delivery also has piqued investors' interest, with services like Instacart and Postmate luring significant funding, while commerce giants including Amazon and Google look for ways to cash in on the sector, Fox reports.

Home-delivery and mail-order food markets have been growing since 2000 and now total about $25 billion a year, the Journal says, citing research from the U.S. Department of Agriculture.

Investors are expecting the results for delivery based food companies will keep getting better. Meanwhile, they are also making bets on other types of food and beverage startups, as demonstrated by the interest in snack-box subscription services, restaurants and this year's IPO for food-ordering company GrubHub.

According to PitchBook data, $617 million has been invested in food-related businesses so far this year, placing 2014 on track to be the best year on record, says Fox Business.

But U.S. investors aren't the only ones with an appetite for food investment; it's a global trend, notes the Journal. During the first half of the year, the Journal says, food and beverage-related businesses have attracted $1.1 billion in venture capital around the globe, according to Dow Jones VentureSource.

And this follows heightened interest in 2013, when food and beverage startups attracted $1.59 billion, a 39 percent increase from 2012.

Investor and tech entrepreneur Ali Partovi told the Journal although competition is getting thick, angel and venture investors will continue doing deals in saturated segments of the food market because “the gains available to the winners are so large.”

Techstars CEO David Cohen also sees vast potential. “People gotta eat,” he told Fox. “If there's a bigger market, I don't know what it is.”

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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