Startups targeting food waste reduction raise $125M this year

  • Startups aiming to reduce food waste in the U.S. have received $125 million in venture capital and private equity investment up through October, according to a report from ReFED. ReFED is a collaboration of more than 50 business, nonprofit, foundation and government leaders committed to reducing food waste.
  • Foundation grants for food waste reduction groups hit $134 million from January through September 2016, a 70% jump over five years, ReFED reported.
  • “We’ve seen tremendous momentum around food waste reduction,” Alexandria Coari, ReFED’s capital & innovation director, told AgFunder News. “Consumer awareness has increased, major food businesses have made commitments to food waste reduction, sound public policy continues to emerge, and, as shown by this report, investment in food waste solutions has increased significantly.”

The U.S. Environmental Protection Agency has reported more food reaches U.S. landfills and incinerators than any other type of waste. Of the total, 20 billion pounds of produce is tossed yearly due to surplus or cosmetic reasons. The United Nations’ Food and Agriculture Organization estimates one-third of all food produced globally is lost where it is grown or wasted in retail, manufacturing and consumption.

As awareness of the problem has increased, so has the market for reclaiming waste food. Byproducts from the beer-making process and from juice companies, as well as “ugly” produce and other items, are being diverted from the waste stream and made into new products many consumers find intriguing.

Ingredient and packaging innovations have included converting fermentable sugars from juice processing waste into bioplastic beverage packaging, using wheat and barley to make biodegradable and compostable six-pack beer rings, taking mushroom waste and turning it into natural taste enhancers and reusing almond waste to produce sugar or beer. Tyson even created a protein crisp called ¡Yappah! that incorporates Tyson chicken trim with ingredients that would otherwise be left behind, including vegetable puree and pulp from juicing, as well as spent grain donated by beer giant Molson Coors.

More products using food waste and more methods to limit it in the first place are likely to continue to develop with the $125 million in investments so far this year. But whether the market for waste products is large enough to handle these newly funded startups — even with all the interest in sustainability — is another question.

So far, the major recipient was Apeel Sciences, which attracted $70 million in a Series C round in August, AgFunder News reported. The California-based company makes a formula from agricultural byproducts and food waste such as orange peels that extends the shelf life of fresh produce. It isn’t surprising that Apeel is leading the pack given that it has gotten attention for its unique methods and partnered with Kroger earlier this year to sell its avocados.

Another successful money-raising startup was WISErg Corp. of Redmond, Washington. WISErg makes a self-contained digester for retailers called the Harvester that turns food waste into fertilizer. The company raised $19.2 million in January from a Series C round, bringing WISErg’s total to $56.6 million, according to AgFunder News.

Food Maven, a startup based in Colorado, brought in $8.6 million in January to continue buying excess food items from retailers and distributors and selling them through an online marketplace to restaurants and commercial food preparers. Participants in the initial funding round included the Walton family, which owns about half of Walmart. Full Harvest, a San Francisco-based company, received about the same amount in a Series A round. It runs an online marketplace for excess or imperfect product that might otherwise be thrown out. The companies raising the most each seem to have a unique take on how to handle food waste.

On the foundation side, AgFunder News reported The Rockefeller Foundation has a $130-million initiative from which it provides grants, and the Walmart Foundation had also given funding. CalRecycle, part of the California Environmental Protection Agency, gave $10 million in 2016 to promote food waste prevention.

The startups with the best chance of succeeding may be those marketing themselves most effectively to potential funders or those showing the most promise. Applications to extend the shelf life of fresh foods, a self-contained food digester for retail operation and two online marketplaces selling excess food have so far captured investors’ attention. The degree to which these startups illustrate staying power and manage to scale up and accomplish their goals will be key when and if they seek additional funding for the next phase of food waste reduction.

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