FoodTech The New Wave in Startups is Now Emerging in Latin America

Latin America has historically been marked by the production and exportation of raw material to the world, with food playing one of the major roles in trade. Local entrepreneurs, together with their food tech startups are transforming the area into a more powerful industry, through science and technology.

According to an FAO report, in 2028 Latin American food exportation will represent an amount of 25 percent in the world. Having a surface of almost 13 percent of the world, the region includes agricultural giants like Brazil, Argentina, Mexico, and Colombia. Although the primary area of production is on its way, in the last period of time, new protagonists have emerged, seeking to change the agri-food industry: Latin American entrepreneurs and their startups. They have developed different solutions based on science and technology that support and even transform this industry. As Venture Capital investors, we are willing to be part of this boom. In fact, this area, which has been commonly fostered by investors of the same industry, is now catching more and more entrepreneur capital funds that support new-generation FoodTech.

These "second-innovation-wave" startups are characterized by intensifying solutions exhibited throughout the whole value chain. According to the AgriFoodTech Investment Report from AgFunder, in 2020 it was the first time in seven years for the investments in upstream startups, those who provide services for the initial part of the industrial chain with certain innovations like biotech, IoT administration, robotics and equipment, and innovative food, to exceed the investments on downstream, that is to say, those entrepreneurships getting closer to end-users.

This segment -upstream startups- raised $15,800 million in 2020, achieving a growth of 68 percent more than in 2019. Even though the major operation was achieved by the American storage and temperature-controlled logistics company Lineage Logistics; in Latin America, the tendency was similar, with most of the investments placed in NotCo (Chile) and Fazenda Futuro (Brazil), two startups that create meat alternatives., and in Polynatural (Chile), the biotech company that slows down food decomposition.

In Alaya Capital, we have witnessed the expansion of this segment through our investment in Kilimo, a platform that allows efficient use of water resources in food production. This startup had accelerated growth in the last year, influenced by greater use of agricultural technology due to COVID-19 lockdown, which has been the most difficult issue for technological startups to completely own the market and also because of the running out of natural resources, that leads to a more efficient use in the value chain.

Moreover, the segment of downstream startups, as technology providers for restaurants, retail, online restaurants, food kits, online supermarkets, and cooking appliances and tools, raised $14,300 million through 1142 operations led by the U.S. and China. Latin America set milestones with Jüsto (México), dark stores for food delivery, that announced to have raised $65 million. Rappi (Colombia), raised $300 million, and Cornershop (Chile) was acquired by Uber, which is estimated to have disbursed $1400 million for the 43 percent of the shares left to get 100 percent of the company.

In Alaya Capital, we made our first bet on this area in Simpleat, which with its innovative method on frozen food, sustainable and functional eating is possible with less waste. This is a kind of food-tech through which, in only fifteen minutes, a homemade and nutrient-rich meal is taken to your table. This company faces a huge challenge for Latin America as regards feeding: to join healthiness and sustainability with the final-user pace of life. Latin American startups are facing the most suitable moment to benefit from the knowledge and experience of the agro industry to provide innovative solutions transforming the way we produce and consume products. We, as investors, should and want to be part of it.