There are 2 things that prompted me to write this blog today – 1) Some amazing findings published by Tracxn on the food tech start-up industry, which gave me some ‘FOOD’ for thought, and 2) my very own life saving experience with one of the food ordering platforms.
Hungry as hell, I could only muster up my energy to write this after the company delivered some mouth-watering food.
Digressions aside, some of my key understandings from Tracxn’s Report on the global food-tech market, are as follows:
Number of companies founded: The number of food tech companies founded, have grown from 155 in 2010 to 569 in 2015, a whooping CAGR of 30 percent. If I extrapolate this growth to 2016, 700-750 companies should ideally get incorporated in this year. However, only 45 companies have been founded so far (just ~6 per cent of the expected number). Now, 2016 is otherwise estimated to have a lower number, because after 5 years of solid growth, the number of companies does not matter as much as the overall sustainability and maturity of these companies. But what is bothersome for me is that the number is too low from a global perspective.
Does this mean people are running out of ideas, OR are facing challenges in establishing themselves, OR are unable to get seed funded? This takes me to the next point on funding.
Funding Scenario: Overall funding looks promising in 2016, since H1 numbers for the year has already surpassed 2014’s total funding. Now, 77 per cent of this has come from late stage funding, which has steadily risen its share from 40 per cent in 2011. With huge chunk of late stage funding, start-ups at early/ideation stage seem to have been deprived, which could be one of the reasons for so few companies being founded. What is the panacea for this? The industry clearly needs angel investors, and more so, crowd funding. A conscious effort has to be made to engage start-ups with crowd-funding organizations at incubators/accelerators, national events etc. Even the crowd-funding sites, which are currently available, need to be well organized, so that investors can easily navigate from company to company, read their profiles, understand terms and conditions, and then contribute accordingly. If the amount being contributed is significant, a scheduled meet-up could be arranged, for a personalization. (Now, there’s an idea!) The other reason for lower funding at initial stages could be the presence of too many ‘Me-too’ companies with same ideas and proposition. The investors are waiting to be ‘Wowed’ by novel, yet marketable ideas.
Top investments in last 1 year: Ele.me (USD 1.3 billion; Shanghai), Baidu Waimai (Shanghai), Womai (Beijing), and BigBasket (India), are the start-ups that have each bagged more than USD 150 million in the last 1 year. China, clearly, remains the biggest destination for investments, setting newer standards, particularly Ele.me (China’s biggest meal delivery service), which has become a success story. The company is highly focused on instant deliveries and quality of service, and wishes to make ‘complaint’, a thing of the past.
In terms of investors, Sequoia is on the top, having invested in labels such as DoorDash, Ele.me, Grofers, Ricebook, Zomato etc.
Top Business models: Globally, by funding, food ordering platforms, and groceries, have been the top businesses.
The Tracxn report highlights that across the globe, significant early stage investments have also started in the IoT-enabled kitchen appliances market, with companies such as Juciero, June, and Tovala, having closed multiple rounds of funding. IoT and AI are some of my personal favourites. Across geographies, there is a palpable scope for IoT/AI-enabled kitchen products. That would promote cooking healthy food easily at home, given that life-style diseases have become an integral part of every household. Click here to read about the global food-tech companies that use AI, IoT, and smart technologies. (Tracxn Blog, 2016).
Overall, the sector is expanding, and witnessing significant activities, and scale-up. 2 things would determine the health of the sector:
- How are the older start-ups able to sustain, and scale-up? – By Learning from mistakes and global best practices
- What new market-ready ideas are newer start-ups bringing on the table? – IoT/AI/smart tech/B2B products - where there is still a lot of white spaces with regards to the Indian market.