While foodtech and innovation faced a difficult 2022 due to both a general slowdown in venture capital funding and inflationary pressures on food prices, Chicago remains poised to become a global leader when it comes to food bioengineering and production.
With a history in meat processing and candy making, Chicagoland is now home to at least 23 alternative protein manufacturers and 46 bioengineered and novel-ingredient food products, according to research from World Business Chicago.
Among them are companies like Nature's Fynd, which has already started to reshape Chicago's food scene by creating its meatless products, such as its fungi-based meatless breakfast patties and dairy-free cream cheese, at what was once a hog production facility.
Chicago's food production subsector of other food (i.e., not beverages, dairy or meat) and alternative protein ranked first among U.S. metros with $2.1 billion GDP in 2022, though future growth is projected to slow compared to past performance, according to World Business Chicago research.
In the meantime, foodtech companies are already tapping into Chicago's growing talent pool. The city gained 292 tech jobs in April and remains a top-five metro for tech job postings behind Washington, D.C., New York City, Dallas and Los Angeles, according to the Computing Technology Industry Association.
"We've been really gratified by how easy it is to recruit in Chicago," said Virginia Rangos, CEO of Clever Carnivore, during a panel discussion at the Chicago Venture Summit Future-of-Food last week.
Although one of her executives had warned about how hard recruiting would be for certain positions, she said that not being in the Bay Area, as many of her competitors are, has meant less competition for talent.
"I think people are really attracted to Chicago," she said.
Foodtech funding on its way
Growth capital investment in Chicago's food ecosystem saw a steep drop-off from from $689 million in 2021 to just under $307 million in 2022. But there were more deals in 2022 — 76, marking a 27% increase from 2019. Deal count remains steady to begin 2023, according to World Business Chicago research.
More than 60% of Chicago's startups receiving seed funding were developers of alternative protein or dietary-specific food options created through biotechnology.
Still, Michelle Ruiz, CEO of Hyfé Foods, a Chicago biomanufacturing startup that's looking to take wasted nutrients from food manufacturing wastewater and convert them into fermentation feedstock, thinks that startups may want to approach fundraising a little differently given the current macro environment.
"You're going to hear so many more nos and so many more slower nos in these times," she said during the same panel at the Future-of-Food summit. "That means that if your original pipeline of people you're talking to 100 [investors], you should be going for 250."
PitchBook research shows that after three quarters of decline in 2022, foodtech VC funding is finally "on the road to recovery." Bioengineered foods was the only segment to see positive year-over-year growth in Q4, though analysts expect investment across foodtech to recover as conditions improve.
Despite the slow market, Ashley Hartman, managing partner with Bluestein Ventures — which focuses on high-growth consumer brands, proprietary foodtech, next-gen commerce and value-add digital tech — thinks that current consumer trends will only help these submarkets grow further.
"It's moving towards convenience, it's moving towards health outcomes, it's moving towards sustainability, and those things aren't going way," she told Chicago Inno. "So we feel privileged that we have dry power and fresh capital that we can invest in now."
