Catalyst Has an Appetite for Food Tech

Catalyst Has an Appetite for Food Tech

by Kapil Desai (@kapilpdesai)

M.F.K. Fisher said, “First we eat, then we do everything else.” We agree! Catalyst recently researched the Food Technology sector, and we are interested in pursuing opportunities in the space given the emergence of new technologies that disrupt antiquated methods, processes and business models.

Food Tech focuses on optimizing how we harvest, process, ship, prepare and distribute food and improving the food experience at the consumer level. We developed a Food Tech market map framing the landscape by various business models, including B2B (Agriculture Technology, Supply Chain Enablement, Restaurant Enablement), B2B2C (Dining Services, Local Marketplaces, Online/Mobile Ordering) and B2C (Grocery Delivery, Direct Goods/Meals, Communities, Taste Analytics). Check out Catalyst’s Food Technology Research report highlighting the key trends in Food Tech and see Catalyst’s top three investment themes in Food Tech outlined below:

  • B2B2C Marketplaces – This theme is an extension of the marketplace thesis we developed as part of Catalyst’s Commerce project, and after review of several marketplace opportunities, we are enthusiastic about seeking out prospects in the Food Tech vertical. We identified three types of food­related  marketplaces:- Traditional online marketplaces (e.g. GrubHub) provide a platform that brings together both buyers and sellers with low capital intensity and no inventory risk. These marketplaces are particularly interesting as they typically generate both platform subscription fees from businesses and transaction fees from consumer purchases.- Logistics marketplaces (e.g. GoodEggs) provide a platform that brings together localized buyers and sellers by providing warehouses and logistics networks to facilitate the delivery of goods to the end consumer. Despite the more capital intensive business model, logistics marketplaces operate with a recurring revenue model (logistics/inventory management subscriptions plus transaction fees) similar to traditional online marketplaces.- Services marketplaces (e.g. Kitchensurfing) provide a platform for non­restaurant dining experiences by aggregating service providers. These marketplaces benefit from low capital intensity and have the opportunity to capitalize on consumer adoption of sharing economy models that provide convenient, cost­effective alternatives to traditional B2C solutions (e.g. Uber with cabs, Airbnb with hotels).
  • Restaurant enablement We are interested in restaurant enablement companies because they are similar to the SaaS models with which we are familiar while providing exposure to the restaurant industry’s shift and growth online. As restaurants invest in technology to improve operational efficiency and meet rising customer expectations for convenience and entertainment (e.g. E La Carte), we see a large opportunity given the low penetration and high fragmentation in both the customer­facing and back­end technology segments.
  • Agriculture enablement We are interested in applying our SaaS knowledge to the multitrillion dollar agriculture vertical as the industry adopts new technologies for enabling precision agriculture. We like opportunities to invest in vertically­focused software platforms dedicated to managing, measuring and forecasting farming operations (e.g. FarmLogs).
  • In addition to the aforementioned three themes, we are interested in opportunistically reviewing investments in the differentiated food space. We are interested in companies that are able to carve out a sustainable market niche by providing a unique food offering (e.g. Exo) and/or companies with established branding and successful products (e.g. Hampton Creek).

Catalyst Investors employs a proactive, research­based approach to investing. We target sectors that are experiencing above­average growth. If you are a growth­stage Food Tech company seeking investment, our team would love to start a dialogue. Please send inquiries and business plans to [email protected].

Also, if you are attending the SXSW conference this March or the Bon Appétech conference this April, be sure to let us know!

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