Less waste, more fed – Start-ups and VCs are changing the way food waste is handled
It’s no longer news that world population is on pace to grow from 7.3 billion to 8.5 billion by 2030 (United Nations). With this projected growth, each year will welcome roughly 85.7 million new people, and with that, 85.7 million more mouths to feed in a time where the current population cannot adequately feed itself.
In many countries like the U.S. that are relatively food-secure, individuals rarely hesitate when disposing damaged or recently-expired foods, and often supermarkets choose to destroy surplus produce to avoid financial penalties instead of actively donating it. Because of this inefficient business-as-usual behavior, it is estimated that “about one-third of all food produced worldwide, worth around $1 trillion, gets lost or wasted in food production and consumption systems” (WRI). The need for a solution to this food inefficiency and waste issue – one that has a direct economic consequence of $750 billion annually – is clear, and start-ups and investors alike are beginning to see an opportunity to capitalize (FAO).
We are seeing an increasing deployment of capital
Although it is early, corporate and venture capital activity focusing on start-ups within the food efficiency and waste management space has been gaining traction. This space is comprised of start-ups that provide innovative ways of increasing the amount of food reaching customers, reducing the amount of food needlessly wasted and finding new use in true organic waste, whether that be through improved packaging, optimized shipping methods or extended produce shelf-life.
In the past eight years, there has been a large deployment of capital in this sector, through both early and late-stage investments, and we are seeing an upward trend in both the size and quantity of deals. In 2014 alone, the sector attracted $149.1M in venture equity, a 6-fold increase from $22.2 million in 2008.
Although the growth from 2014 did not carry into 2015, venture equity investment dollars of 2015 still doubled those of 2008. One reason for the drop in 2015 can be attributed to the typical cycle of follow-on investing, where investors want to look for progressive milestones before committing additional capital.
New players with promising solutions
Enter Spoiler Alert, a start-up with a B2B marketplace platform that enables businesses to save money and ensures surplus food goes to people before the landfill. It provides the infrastructure necessary for food businesses to easily and quickly donate surplus product to non-profits for consumption or other companies for new use based on physical proximity, eliminating the need to wastefully destroy or dispose. Other start-ups are entering this market as well with different approaches to the issue.
Winnow, a start-up based in the U.K., is a new player focused on eliminating food waste within the hospitality sector. The start-up’s platform automatically identifies, measures and records all food waste to encourage more efficient behavior. Winnow has already saved its customers £2,000,000 and eliminated 1,090,909 meals worth of waste.
Hungry Harvest, a Maryland-based start-up, is connecting unwanted, B-grade produce that otherwise wouldn’t sell on the primary market to those in food-scarce areas. All surplus produce is donated to charitable organizations and those in need, effectively reducing the amount of organic waste flowing into landfills.
There remains a need for start-ups and VCs
Population growth is not slowing and neither is food waste. With access to new capital, start-ups such as Spoiler Alert, Winnow and Hungry Harvest, should be able to develop more advanced products and expand their operations. As the upward trends show, it is likely that investments in this space will continue to grow in size and quantity and exceed the activity of 2014 in the coming two to three years.