This is true not only food and beverage startups, but also for the quickly multiplying accelerators and incubator programs, Peter Bodenheimer, who also serves as the startup advocate for the VC fund SOSV’s Food-X, explained at the demo day for the accelerator’s 10th cohort demo day in New York City.
As such, he explains in this episode of FoodNavigator-USA’s Investing in the Future of Food, both investors and startups, need to carefully examine how they fit into the changing competitive landscape and whether they are tapping into a long-lasting macro trend or a short-lived fad.
For example, Food-X has fine-tuned where it sits in comparison to other food and beverage incubators and accelerators by walking away from segments that it does not add value, such as ag-tech, and embracing ones where it does.
3 areas for fast growth, and 3 areas that are slowing
In particular, Bodenheimer said, Food-X is interested in investing in companies that are tapping into the trends of food as medicine, sustainability and the evolving commerce landscape for food.
While these areas may be rich in potential, he warns there are many more areas that are becoming saturated and are less likely to catch the attention of Food-X investors, including better-for-you products, alternative proteins and CBD.
Finding the line between a booming segment and one that is saturated can be difficult, Bodenheimer acknowledged. Short of looking into a crystal ball, one way that he says entrepreneurs can tell if they are launching into a space that is saturated or ripe for disruption is to test for traction on a small scale before expanding.
What it takes to win
Beyond the product, Bodenheimer said Food-X is interested in supporting companies that have protectable intellectual property or technology, and founders who have unique knowledge – such as a food science background.
“We have a saying at SOSV that we can help make a scientist a business person, but we can’t make a business person a scientist. So, people who come with real science backing up their product,” are more attractive, he said.
In addition, Food-X looks for companies and entrepreneurs who are under-valued or who have been overlooked, may not have the skills or expertise to execute their business idea but who have an on-trend, competitive concept that – with a little help – can go the distance.