Dive Brief:
- Food and beverage startup accelerator AccelFoods has launched a $20 million fund to provide capital assistance to startups from pre-seed through Series B stages.
- AccelFoods focuses on producers of foods without allergens and gluten, foods classified as ethnic, foods that contain natural ingredients and targeted to the on-the-go market, The Wall Street Journal reported.
- The first investments from the new fund are six companies from the accelerator's fourth round of cohorts and include foods that seem niche but are in high demand, including at retailers, co-founder Jordan Gaspar told The Wall Street Journal.
Dive Insight:
The first six companies include makers of on-trend ingredients; from all-natural bone broths and gluten-free noodles (Nona Lim) to salty and savory snacks made from mung beans (Crunchsters) in addition to products like brewed ice coffee (Wandering Bear), compressed tea that dissolves in water (Tea Drops) and a coffee and cocoa butter bar (Il Morso). Hot cereal made it into the first six investments too (Purely Pinole).
The question is whether these on-trend ingredients will become widespread and permanent or enjoy limited time before the next wave of ingredients breezes through the industry. Even with additional capital and business support, startups usually don't become legitimate competitors to major manufacturers, though they can leach segment market share.
A key element is often whether major manufacturers take note of the startups' featured ingredients and adopt those themselves. Larger companies are slower to do so, but if they commit to an on-trend ingredient, it may turn from trending to staple.
Venture firms have increased food and beverage investments in recent years. The record segment investment total for 2015 was $603 million across 48 deals, an increase of 60% over the $377 million raised across 46 deals in 2014, according to Dow Jones VentureSource data. That number stands to increase still further in 2016 with the recent debuts of food and beverage investment groups like General Mills' 301 Inc., Edible Ventures, and CAVU Venture Partners.