Why Venture Capital Has Left Food And Will Not Return

There were three institutional rounds with food companies making less than $10M in 2023 (based on my sources): A Dozen Cousins, Belliwelli, and Hero Bread. All three have strong topline and brand health DNA. And, if true, this will be the primary reason moving forward that you will see 90% fewer institutional investments in this low revenue range.

Some believe that the pullback in 2023 is temporary, but the dry powder piling up on Wall Street and at PE firms does not in any way have to deploy itself in high-risk Series A or seed rounds in CPG.

And there’s good reason to believe that Wall Street is done with these investments for the following reasons:

• Experience investing with amateur or first-time food founders has not been good – the bias is toward professional operator/founders (e.g. John Foraker)
• The battle for market share is harder than ever and extends the number of money-losing years – the risk of implosion is much higher in food because it is so unprofitable on a net-net basis in the first five years or longer.
• A VC fund is biased toward haste and spending money to accelerate return timelines. Add this bias to founder inexperience and the failure rate in food is super high.
• Most Phase 1 and Phase 2 brands are not doing well at all from a topline, velocity or brand health perspective. The naive belief in turning around something with ‘potential’ has lost all lustre

Large private equity firms will continue to pick off $50M+ companies with strong demand signals and near-in pathways to profitability, but that’s about it. The 2010s were a decade of irrational exuberance mixed with inexperience and boredom.