Four-fold jump in funding in first half 2018 draws investors back to food tech sector

Food-tech has emerged as an investors' favourite with the sector managing to raise almost four times more investment till June 2018 than the whole of last year.

Compared to investments of $134 million throughout the entire previous year, the sector saw 15 rounds of investments raising $473 million during the first half of 2018, according to data shared by data tracker Tracxn with Moneycontrol.

Bengaluru-based Swiggy raised a major chunk of this amount. The startup reported two simultaneous funding rounds. Last month, Swiggy announced a fundraising of $210 million led by existing investor Naspers and new investor DST Global. This round happened barely three months after the company raised $100 million from Naspers and Meituan-Dianping.

Rival Zomato also raised $152 million from Ant Financial, the payment affiliate of Alibaba, according to Tracxn, which only tracks primary rounds. However, besides $152 million, $50 million was also raised by Zomato as part of a secondary transaction. The round valued the company at over $1 billion giving it a unicorn status.

The rest of the money was raised by startups such as HungerBox, HipBar, and Biryani By Kilo.

The rise in the sentiment of the investors shows a sharp U-turn from the slowdown of late 2015-2016 when they had started shying away from the food-tech and hyperlocal delivery sectors.

From being investors favourites during 2014 and early 2015, the two sectors were left untouched in 2016 which saw dozens of startups in this space shutting shops. The sector also saw consolidation. RoadRunnr which had common investors in rival TinyOwl acquired the later and rebranded itself as Runnr.

Foodpanda India eventually got acquired by Softbank-backed cab hailing firm Ola, last year.

The data shared by Tracxn also shows 2018 is witnessing big ticket funding rounds unlike 2017 which saw 44 rounds to raise just $134 million.

The food-tech segment is expected to only further grow from here with horizontal e-commerce companies such as Amazon and Flipkart with heavy pockets also eyeing the sector.

"The financial market has affirmed on the maturity of the sector. Now there is a clarity in the minds of both the market and the investors that in India, the delivery piece is very important and relevant," said PN Sudarshan, Senior Director at Deloitte India told Moneycontrol.

According to analysts, investors were into spraying and praying mode in 2014 and early 2015 investing across multiple companies. Now the market has evolved and the leaders are decided.

This sector will gain more momentum once companies such as Amazon and Flipkart finalise their expansion plans. Also, until now most of these companies are concentrated in the Tier 1 cities. There will be further growth once they expand to smaller towns where too, the opportunity lies albeit a little smaller.