What’s Cooking in Venture Capital Food & Beverage?

We will have to see what 4Q holds for Food & Beverage investments, but year-to-date the deal numbers are lagging last year and the values are far less than 2015. With a total 644 deals in the overall industry for 2015, the 2016 deal count is only at 58% of those deals for the year as of late August. There has been a real slowdown in the value of deals for all the sub-industries with the most significant drop in value for the Brewers sub-industry deals.

 Source: CapitalIQ, Bizologie

Source: CapitalIQ, Bizologie

Restaurants have had the smallest drop in deal value for the year. Of the 239 restaurant deals in 2016, it is a food delivery company that received the largest investment. DoorDash raised $127mm from 6 firms: Kleiner Perkins Caufield & Byers; Sequoia Capital; Wellcome Trust, Investment Division; Khosla Ventures; and Y Combinator. Not too shabby for a company formed in 2013 in a dorm room at Stanford.

Functional beverages fall in the Soft Drink sub-industry. According to Citi, the functional beverages category consisting of energy drinks and isotonics (sports drinks) is worth $14.8b. Even with soft drink investment values down 79% for the year, BA Sports Nutrition raised the highest amount with $6mm this year from Dr. Pepper Snapple. Their BodyArmor Super Drink has vitamins, electrolytes and all natural flavors and sweeteners.

Interestingly, pet food falls also under the general Food & Beverage industry in the packaged foods sub-industry. According to IBISWorld, Pet Food is a $25b market. The market is dominated by huge brands like Purina (Nestle)  and Cesar (Mars), but little guys are moving in and finding investment. One company to watch is Prairie Dog Pet Products.  The 2 year old, Grand Prairie, Texas company manufactures treats and antler products for pet dogs. The company received almost $10mm this year in private placement.

In addition to the corporate investing, corporate venture capital is growing and you can definitely see the influence in the Food & Beverage industry. Two examples are General Mills 301 Inc. and the newly launched Eighteen94 Capital from Kellogg Company.

Some venture capital firms just focus on this industry. CAVU Ventures is an Austin/NY based firm and their partners bring experience from Sweet Leaf Tea & Coca Cola.  Boulder Food Group is looking to partner with Food & Beverage companies that are making positive environmental and social contributions, both locally and globally. 2X Partners in Chicago partners with consumer brands with revenues between $2mm and $25mm.