The 2024 Bread and Butter Ventures’ Food Tech Thesis
We are entering our 9th year in investing in food tech companies. Historically, I’ve always defined food tech as software, robotics and biotech that has applications to the food system, from on-farm to supply chain and manufacturing all the way to the future of food retail. Back in 2017 “full stack food” became our cheeky name for the space and since then our portfolio has grown with an amazing array of startups. Just a few examples of the breadth of our interest:
Science On Call — Tech Support for restaurants
Traive — AI models that are revolutionizing risk decisions for agriculture
Clean Crop Technologies — Combining electricity and food-grade gasses to remove contaminants from seeds and foods
Dispatch Goods — A supply chain company removing single-use plastics from the food system
Our interest in the food system was born from insights gleaned through our relationships with the major food enterprises headquartered in our home base of Minnesota. Companies like Cargill, General Mills, Ecolab, Target and so many others, who have since become formal members of our Innovation Circle. By 2016 we were obsessed with what seemed like an underinvested/underfunded vertical that was, is, and will continue to be a pillar of the world economy — food. Everyone needs to eat right? The global industry of food and all it’s layers and systems is probably worth north of $14 trillion dollars annually. If food was an economy it would be at least the third largest in the world.
It has been exciting to watch the vertical grow and change. When we first started investing, everyone pitched something with block chain. Then protein alternatives exploded on the scene. Next, there was a rush of money to help build a more sustainable food system, and most recently, everyone is pitching how AI will impact how we grow, make, and eat our food.
Just a decade ago, venture investments in food tech passed a billion dollars1 for the first time in a single year. Like most verticals, it recently peaked in 2021 when investment into the space surpassed $40 billion. In 2023 investments came back down to earth and $10 billion was put into food tech3.
The initial wave of venture interest was in food delivery & grocery which drove growth from 2016 through 2018, including deals like Instacart and Doordash. 2019 was the beginning of mass investment into the protein alternative & vertical farming worlds, and with COVID in 2020, a spotlight was put on the food sector, helping it peak at over 1,300 deals with the aforementioned $40b raised! This record year was largely driven by online grocers, apps & marketplaces, with robots and alternative protein startups also contributing to the boom. Funding and valuations across all venture sectors dropped in 2022, and multiple companies who had planned on going public delayed those plans (Instacart, Impossible Foods, etc).
Despite this crazy rollercoaster, venture capital dedicated to food tech startups has grown 10x in the last decade to where it sits today and yet is still a vertical that is in its infancy. What I’ll call the modern era of food tech started after Climate Corp was acquired by Monsanto in 2011. This exit helped open entrepreneurs eyes to the opportunity to build in Food and since that period more founders have moved into the space. But because of the recency of this discovery the majority of the entrepreneurs working in the vertical are still series B or earlier.
We remain steadfast in our belief that over the next 5 years, food tech will justify the continued deployment of capital into early stage companies through an increased number of outsized liquidity events as companies move to growth stages and start having realizations. It takes time. Venture capital requires a high level of patience. It is tough to have dozens of multi-billion dollar exits to talk about when only $1b was invested in the space 10 years ago! The food system needs to be digitized, modernized and made more sustainable because it is good for business. Talk to the CIO of any large food enterprise and “digitization” is a core part of their objectives or 5 year plan. Startups will drive this change and create value for the food system.
Over the past several years we’ve shared our thoughts and specific interests in the world of food tech, what’s really excited us at that specific moment in time. It was a fairly straightforward thesis until last year when we flipped it and published an Anti-Thesis where we outlined four areas we were not interested in. While we will continue to invest across the entire food system, for this year’s thesis we’re going to highlight one specific area that hasn’t come up in the past but is very popular in the venture community right now: Vertical SaaS for the food industry. These are often businesses you don’t think about until you see them. Most of the entrepreneurs leading these companies come from the space and have lived the pain they are now solving.
Not only are there real, valuable problems to solve, but for many, the focused go-to-market should enable rapid early growth and can provide a strong platform that will enable these companies to take a leap to new revenue opportunities, which can unlock the potential for traditional venture-style returns.
A Few Examples from the Portfolio
Here are a few examples from the Bread and Butter portfolio that help define what we’re thinking of when we talk about vertical saas for the food industry:
Milk Moovement is a dairy supply chain software company. Their products are used across all stakeholders in the dairy supply chain including: Dairy cooperatives, haulers, producers, labs, processors, suppliers, and more. Milk Moovement’s software tracks and traces the movement of dairy so that these organisations can make smarter, faster decisions.
First Bite is a vertical SaaS platform for foodservice manufacturers with the mission of bringing efficiency to the foodservice market. First Bite makes it easy for manufacturers to find menu and location data for every foodservice location in the country, forecast revenue opportunity for specific products, and manage efficient sales and marketing workflows.
Pantry wants to simplify wholesale sales and operations. We believe AI process automation can help brands and distributors scale without adding headcount. Our initial product automates the sales order process. We can extract the contents of an email, send an acknowledgment, and enter it into the ERP.
Niche Isn’t Scary
Vertical SaaS can be scary when it comes to market size. It is hard to jump from one vertical to another and most niche verticals aren’t big enough to support venture style returns with just SaaS revenues. On the flip side, Vertical SaaS companies that are solving a real problem should be really focused and thus able to grow to moderate sizes relatively quickly with fewer resources. The problem of scale is a little less scary in food tech. First, there are a tremendous number of “niche” verticals that are gigantic! As mentioned above, we are talking about a $14t industry. Second, the food system needs help in a lot of different ways. If you start a Vertical SaaS company there are likely fintech, data, and other opportunities that will be as large as your SaaS revenue opportunity.
Moving Forward
The journey of investing in food tech over the past decade has been both an incredible opportunity and learning experience. Despite market fluctuations and economic challenges, the foundational importance of food tech remains steadfast.
Vertical SaaS, especially within large niches of the food industry, represents the next frontier. These specialized solutions address real, significant problems and offer focused go-to-market strategies that enable rapid early growth. The examples from our portfolio, such as Milk Moovement, First Bite, and Pantry, are just three that demonstrate the immense potential and scalability of these ventures. They highlight how vertical SaaS can thrive within their specific niches and open up new revenue opportunities, including fintech and data applications, further enhancing their value proposition.
As we move forward, our belief in the potential of food tech and vertical SaaS remains unshaken. The digitization and modernization of the food system are not just trends; they are necessary transformations that will drive efficiency, sustainability, and profitability across the entire industry. We remain committed to supporting early-stage companies that are poised to lead this change, confident that the next wave of innovation will bring about significant advancements and outsized returns.
For us, niche isn’t scary; it is the starting point for a gigantic, world-changing opportunity.
