Funding Bites: Investors’ Appetite for Food Startups in Investment Crowdfunding

CHART OF THE WEEK 📈

By Léa Bouhelier-Gautreau | Read

Thanksgiving is a time to appreciate food, surrounded by loved ones. On equity crowdfunding (ECF) platforms, investors also seem to appreciate food, as numerous food startups have raised funds online. This got us wondering: which types of food attract the most investment? We analyzed the amounts raised by food startups that began crowdfunding in January 2023 or later.

• The Meat, Seafood, and Dairy category tops the charts, with startups raising a combined $5 million since 2023. Notable contributors include Porter Road (raise open) and Plainview Beef (raise open), which offer high-quality, sustainable meat, and Painterland Sisters (raise closed), an organic yogurt brand. While these products aren’t groundbreaking, they cater to the growing segment of health-conscious consumers who prioritize sustainability and animal welfare.

• Snacks & Desserts lead in diversity, with 17 startups raising funds since January 2023. While many healthy snack brands emerged, indulgent options stole the spotlight: Scream Truck (raise closed), an ice cream startup, and Doughp (raise closed), a cookie company, each raised twice as much as their peers in this category. This suggests that, despite the health trend, investors still have a sweet tooth.

• Once a darling of the investment world, plant-based foods raised only $1.3 million since 2023. The decline reflects a shift in consumer interest, as many startups in the space have struggled to maintain momentum following the initial craze in 2020-2021.

• Among the startups analyzed, Pacha (new raise open), a company producing healthy bread with minimal ingredients, stood out by raising $721,352 in 2023. While bread is a staple, Pacha’s success highlights the demand for healthier, ingredient-conscious innovations in everyday food products.

INVESTMENT ROUNDTABLE

By Sam Fiske / Watch

This week on the Investment Roundtable, we explore Qnetic, a startup developing flywheel-based energy storage systems to tackle key issues with lithium-ion batteries. With long-term reliability, eco-friendliness, and significant cost advantages, Qnetic’s technology could reshape the renewable energy landscape. Join Léa, Teddy, and Scott as they discuss the market need for sustainable energy solutions and whether Qnetic has what it takes to lead the charge.

WEBINARS

Join us on December 4th at 4pm ET for an exclusive webinar with RedCrow and Alira Health! Discover how RedCrow’s platform makes investing in healthcare innovation accessible, from exciting opportunities in medtech and biotech to overcoming the complexities of healthcare investing. Don’t miss insights from industry experts Aishlin Harrison and Dan Pastore on current trends, portfolio companies, and how to get started. Register now to secure your spot.

PITCH REVIEW 💸

By Teddy Lyons \ Deal Report

Brief: Hylio is a pioneering American company revolutionizing precision agriculture with its innovative autonomous drone systems. Founded in 2015 by Arthur Erickson and fellow University of Texas at Austin students, Hylio designs manufactures and provides cutting-edge crop treatment drones to farmers and agribusinesses worldwide. The company's drones, including the large-scale AG-130 model, offer a non-invasive yet extremely precise solution for applying agricultural inputs such as fertilizers, pesticides, and seeds. Hylio's technology allows farmers to target problem areas with unprecedented accuracy, minimizing drift and soil compaction while maximizing efficiency. In a significant industry breakthrough, Hylio recently secured FAA approval to operate swarms of heavy-duty drones, enabling a single pilot to manage up to three 55+ pound UAVs simultaneously, dramatically increasing productivity for large-scale farming operations. The company previously raised over $1.07 million on StartEngine in 2021 when the company had just $1 million in revenue.

Key People: Hylio is led by CEO Arthur Erikson, who has been building the company for nearly a decade. He holds a B.S. in Aerospace, Aeronautical and Astronautical Engineering from the University of Texas at Austin. Joining him is CTO Nikhil Dixit, who has deep engineering experience and has previously worked for NVIDIA and Qualcomm. He holds a Master's in Architecture, Computer Systems, and Embedded Systems (ACSES) from The University of Texas at Austin. He also holds a B.S. in Electrical and Computer Engineering. Nick Nawratil (COO) heads up operations, another UT-Austin alum with a degree in Aerospace, Aeronautical, and Astronautical Engineering. Lastly, Mike Oda (CFO) has over 30 years of experience working in his family wholesale business, Pacific Arc.

Summary

Here's what we like: Financially, Hylio has demonstrated robust performance with revenue growing $3.2 million in 2022 to $8.3 million in 2023, and achieving profitability with a net income of $285k in 2023. This financial health, combined with a stable cash position of $742k and no immediate cash flow concerns, provides a solid foundation for sustained growth and investment in innovation. Additionally, the company has secured the first-ever FAA approval for swarm operations with a single drone pilot. Given the potential for expanded use cases, this expands the total addressable market to include the $100B overall drone market. The equity crowdfunding industry has seen countless drone startups that have failed to materialize into a stable business. However, Hylio has successfully commercialized its product with a clear use case and remains on course to be a major player in the drone industry overall.

Here's what we don't: The obvious downside of Hylio is the $150.03 million pre-money valuation. To achieve a 10X multiple, the company will need to become a $2B+ company, given the likely effects of future dilution. Additionally, manufacturing drones at scale is an extremely capital-intensive task. While Hylio has done a great job managing this, the big question is whether the company can scale manufacturing effectively to expand its revenue to the $25M+ mark. Any issues with product quality will likely be very expensive to manage and fix, particularly as the company continues to expand its product line. 

LAST WEEK’S POLL RESULTS

Would you invest in Bizly?

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24 Votes

INSIDE STARTUP INVESTING 🎙️

In this episode of Inside Startup Investing, Chris speaks with Justin Giuffrida, the co-founder and CEO of Citizens Coffee. With over $27 million in lifetime sales, Citizens Coffee is not just a café but a burgeoning lifestyle brand. Justin discusses the uniqueness of Australian coffee culture, which he is transplanting into the U.S. market with an emphasis on quality and community. Their rapid expansion in New York and Texas, coupled with a strategic approach to new markets, showcases their potential within the U.S. coffee scene.

STAFF PICKS 🌶️

Health Care Originals

Health Care Originals is transforming respiratory care with its AI-powered virtual platform, providing personalized, always-on support for individuals with asthma and chronic obstructive pulmonary disease (COPD). Backed by a robust patent portfolio, the company has signed contracts projecting $5.5 million in annual recurring revenue and has a waitlist of 12,000 members.

• Pre-Money Valuation: $13 million

• Minimum Investment: $100

Biscuit AI

Biscuit AI enhances in-store retail operations with AI-powered solutions like mobile devices, kiosks, and future robotics to improve customer experiences and streamline business processes. Targeting retailers facing labor shortages and rising consumer expectations, Biscuit AI provides personalized, data-driven support in physical stores, currently being tested in select locations.

• Pre-Money Valuation: $6 million

• Minimum Investment: $101

SynergyMed Devices

SynergyMed Devices is advancing cancer treatment with its non-invasive technology that has successfully eliminated tumors in mice and dogs within three days. The company plans to enter the veterinary market by late 2024 and pursue FDA approval for human use by 2026.

• Valuation Cap: $16 million

• Minimum Investment: $100

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