Climate-focused food tech companies in Europe raised $2B last year, accounting for 58% of global investment in the sector and surpassing the US for the first time.
European food tech startups dedicated to climate change solutions attracted $2B in investments in 2023, marking the first time they have overtaken the US. Despite a global downturn in venture capital funding, investments in this sector matched the 2022 levels, when European companies raised $2.1B.
This information comes from the annual Food for Climate report by early-stage VC firm FoodLabs and investment database Dealroom, which evaluated over 1,200 climate-centric food startups across 40 segments to assess the state of the sustainable food and agtech ecosystem in Europe. The report indicates that European food tech companies represented 58% of global funding in the industry, significantly higher than the US, which accounted for around 36%.
Agtech Sector and Sustainable Fertilisers The agtech sector comprised $1B of this total, largely due to increased interest in sustainable fertilisers, with Atlas Agro raising $325M for its renewable fertilisers. Regenerative agriculture startups secured $581M overall, focusing on climate-resilient crops and microbial solutions.
“To address some of Europe’s most pressing challenges, we urgently need to finance and support innovative food solutions that help us adapt to a changing climate and mitigate its effects while securing our food supply,” said Christophe F Maire, founding partner at FoodLabs.
Fermentation Startups and Alternative Cocoa on the Rise in Europe In 2023, European alternative protein startups raised $365M, led by plant-based companies. However, fermentation startups were the real stars, experiencing a 12-fold increase since 2020 to reach $76M in investments last year.
This year, fermented protein players have raised at least $12M, making them the third most-funded segment in Europe’s alternative protein sector, ahead of plant-based startups. Specifically, mycelium protein has seen significant growth in 2024.
Maire anticipates fermentation startups will continue to dominate over the next two to three years. “Driven by the growing maturity of the space, many startups are turning to grownups and raising growth rounds for commercialisation at Series B stage and beyond,” he told Green Queen. “We also see products that are inherently superior to plant-based approaches in terms of taste and texture, and are close to price parity.”
Investment Trends in Alternative Proteins Meat analogues remain the most attractive protein segment for investors, making up over 70% of investments in Europe last year. Their dominance is expected to continue this year, with a projected share of 56%. Conversely, alternative dairy startups have seen a sharp decline, dropping from 60% of the sector’s capital injections in 2020 to a forecast of less than 1% for 2024.
These trends are influenced by the rise in egg substitutes, projected to account for nearly 30% of alternative protein funding this year, and alternative fats and oils (13%). Startups addressing the cocoa and coffee industries have also gained traction in response to rising prices and climate concerns.
Alternative cocoa companies received $69M in 2023, doubling the previous year's capital. “The space has been overlooked but is gaining prominence for three key reasons,” Maire said. These include the environmental impact (dark chocolate is the second most polluting food group due to land use), ethical considerations (due to child labour in the value chain), and price fluctuations (with cocoa prices reaching an all-time high this year).
“We believe that the emerging bioeconomy and scientific breakthroughs have the potential to solve some of the biggest food and climate issues,” said Patrick Noller, general partner at FoodLabs. “Many companies are pioneering efficient, cost-effective, and eco-friendly proteins and alternative ingredients through precision fermentation, biomass fermentation, molecular farming, and cell culture.”
France Leads Investments, but Regulatory Barriers Need Addressing Apart from alternative proteins, European food waste startups attracted $138M in funding last year, a 20% increase from 2022. Sustainable packaging companies received $70M (a 46% year-on-year hike), and biomaterial producers raised $41M (a 238% increase).
Overall, the climate-focused food tech sector was the second-best performing category across European industries in 2023, representing just a 2% decline in investments, behind only the energy industry (which saw a 16% increase). On average, the continent experienced a 37% drop in VC financing.
The UK leads as a climate-food tech hub, hosting 18% of the sector’s startups in Europe, followed by the Netherlands (14%), and France and Germany (12% each). However, French companies received the most capital ($416M), even after a 29% dip from 2022. Switzerland ($354M) and the UK ($239M) followed, with significant gains made by Belgium, Norway, and Iceland.
The EU-backed European Innovation Council Fund has been the most active pre-seed investor since 2016, making 33 investments in the climate-centric food tech space. This is closely followed by Blue Horizon Corporation (30) and state-owned bank Bpifrance (26). Belgium’s Astanor Ventures (18) and France’s Demeter Partners (17) lead in Series A+ rounds.
Despite the successes of 2023, projections for 2024 suggest a return to pre-pandemic levels ($1.1B), with the US expected to overtake Europe again. This is mainly due to the absence of mega-rounds like Atlas Agro’s. “The global venture [capital] industry is still in transition after the outlier years of 2020-21, a shift in monetary policy, and higher interest rates,” said Maire. “We don’t expect global investment to increase in 2024, but we do expect a return to baseline.”
Startups will also have to navigate a reshuffled EU parliament, with the rise of the far-right raising concerns about the bloc’s climate ambitions. “The EU already does a tremendous job of funding innovation through many direct and indirect programmes,” explained Maire. “However, it could simplify and standardise some of the regulatory hurdles – for example, for alternative protein companies.”
The EU’s current novel foods framework has left it trailing behind other governments – the US, Singapore, and Israel have already approved cultivated meat for sale, while the UK is on the verge of doing so after announcing it will break away from pre-Brexit regulations. In contrast, Italy has banned the production and sale of cultivated meat, and France and Romania are considering similar measures.
European food tech startups dedicated to climate change solutions attracted $2B in investments in 2023, marking the first time they have overtaken the US. Despite a global downturn in venture capital funding, investments in this sector matched the 2022 levels, when European companies raised $2.1B.
This information comes from the annual Food for Climate report by early-stage VC firm FoodLabs and investment database Dealroom, which evaluated over 1,200 climate-centric food startups across 40 segments to assess the state of the sustainable food and agtech ecosystem in Europe. The report indicates that European food tech companies represented 58% of global funding in the industry, significantly higher than the US, which accounted for around 36%.
Agtech Sector and Sustainable Fertilisers The agtech sector comprised $1B of this total, largely due to increased interest in sustainable fertilisers, with Atlas Agro raising $325M for its renewable fertilisers. Regenerative agriculture startups secured $581M overall, focusing on climate-resilient crops and microbial solutions.
“To address some of Europe’s most pressing challenges, we urgently need to finance and support innovative food solutions that help us adapt to a changing climate and mitigate its effects while securing our food supply,” said Christophe F Maire, founding partner at FoodLabs.
Fermentation Startups and Alternative Cocoa on the Rise in Europe In 2023, European alternative protein startups raised $365M, led by plant-based companies. However, fermentation startups were the real stars, experiencing a 12-fold increase since 2020 to reach $76M in investments last year.
This year, fermented protein players have raised at least $12M, making them the third most-funded segment in Europe’s alternative protein sector, ahead of plant-based startups. Specifically, mycelium protein has seen significant growth in 2024.
Maire anticipates fermentation startups will continue to dominate over the next two to three years. “Driven by the growing maturity of the space, many startups are turning to grownups and raising growth rounds for commercialisation at Series B stage and beyond,” he told Green Queen. “We also see products that are inherently superior to plant-based approaches in terms of taste and texture, and are close to price parity.”
Investment Trends in Alternative Proteins Meat analogues remain the most attractive protein segment for investors, making up over 70% of investments in Europe last year. Their dominance is expected to continue this year, with a projected share of 56%. Conversely, alternative dairy startups have seen a sharp decline, dropping from 60% of the sector’s capital injections in 2020 to a forecast of less than 1% for 2024.
These trends are influenced by the rise in egg substitutes, projected to account for nearly 30% of alternative protein funding this year, and alternative fats and oils (13%). Startups addressing the cocoa and coffee industries have also gained traction in response to rising prices and climate concerns.
Alternative cocoa companies received $69M in 2023, doubling the previous year's capital. “The space has been overlooked but is gaining prominence for three key reasons,” Maire said. These include the environmental impact (dark chocolate is the second most polluting food group due to land use), ethical considerations (due to child labour in the value chain), and price fluctuations (with cocoa prices reaching an all-time high this year).
“We believe that the emerging bioeconomy and scientific breakthroughs have the potential to solve some of the biggest food and climate issues,” said Patrick Noller, general partner at FoodLabs. “Many companies are pioneering efficient, cost-effective, and eco-friendly proteins and alternative ingredients through precision fermentation, biomass fermentation, molecular farming, and cell culture.”
France Leads Investments, but Regulatory Barriers Need Addressing Apart from alternative proteins, European food waste startups attracted $138M in funding last year, a 20% increase from 2022. Sustainable packaging companies received $70M (a 46% year-on-year hike), and biomaterial producers raised $41M (a 238% increase).
Overall, the climate-focused food tech sector was the second-best performing category across European industries in 2023, representing just a 2% decline in investments, behind only the energy industry (which saw a 16% increase). On average, the continent experienced a 37% drop in VC financing.
The UK leads as a climate-food tech hub, hosting 18% of the sector’s startups in Europe, followed by the Netherlands (14%), and France and Germany (12% each). However, French companies received the most capital ($416M), even after a 29% dip from 2022. Switzerland ($354M) and the UK ($239M) followed, with significant gains made by Belgium, Norway, and Iceland.
The EU-backed European Innovation Council Fund has been the most active pre-seed investor since 2016, making 33 investments in the climate-centric food tech space. This is closely followed by Blue Horizon Corporation (30) and state-owned bank Bpifrance (26). Belgium’s Astanor Ventures (18) and France’s Demeter Partners (17) lead in Series A+ rounds.
Despite the successes of 2023, projections for 2024 suggest a return to pre-pandemic levels ($1.1B), with the US expected to overtake Europe again. This is mainly due to the absence of mega-rounds like Atlas Agro’s. “The global venture [capital] industry is still in transition after the outlier years of 2020-21, a shift in monetary policy, and higher interest rates,” said Maire. “We don’t expect global investment to increase in 2024, but we do expect a return to baseline.”
Startups will also have to navigate a reshuffled EU parliament, with the rise of the far-right raising concerns about the bloc’s climate ambitions. “The EU already does a tremendous job of funding innovation through many direct and indirect programmes,” explained Maire. “However, it could simplify and standardise some of the regulatory hurdles – for example, for alternative protein companies.”
The EU’s current novel foods framework has left it trailing behind other governments – the US, Singapore, and Israel have already approved cultivated meat for sale, while the UK is on the verge of doing so after announcing it will break away from pre-Brexit regulations. In contrast, Italy has banned the production and sale of cultivated meat, and France and Romania are considering similar measures.