After years of big bets and bold promises, food tech is facing a funding reality check as investors pull back, timelines expand and startups discover that growth alone isn’t enough anymore.
According to Pitchbook’s most recent quarterly report, venture capitalists invested $2.5 billion across 128 deals in the fourth quarter of 2025, which may sound like a lot, but is 8.6% less capital and 16.3% fewer deals from the same time the previous year. And it is significantly lower than the peak of 709 deals in the fourth quarter of 2021.
At the same time, “the exit environment remains muted,” Pitchbook adds, noting there were only 85 transactions worth $287.7 million in 2025 – down from the 118 exits worth $12.8 billion the previous year.
Despite the downturn, capital is still available, according to Martin Davalos of McWin Capital Partners. But, he adds, it requires a different playbook.
The reset
In the food-tech investment hey-day in 2021, companies could secure funds simply by “selling the vision” and showing the R&D advancements, Davalos said. But, he added, “if you fast forward to today, what investors like myself are looking for is, what are the revenue metrics? What is your path to profitability? When are you going to break even? And who are you selling to? Are those repeat orders?”
In short, companies were executing on technology proof points rather than financial metrics, and that will no longer cut it.
Part of the shift is because many investors who followed this playbook were burned by low or no returns. The other contributing factor is significantly higher interest rates that make capital more expensive today than five years ago.
As a result, fewer companies are securing funds – but the ones that do are “much better companies,” Davalos said.
What’s getting funded?
The companies securing funds today tend to be later stage, which “indicates a disciplined, thesis-driven market where capital increasingly flows to category leaders and enabling platforms rather than broad early-stage experimentation,” according to Pitchbook.
Davalos agreed, noting mature companies with “a lot of proof points” are more appealing, even though they are achieving lower valuations.
Their secret, he says, is simple: They execute on their plan.
“A lot of companies did not execute, and companies that executed on their plan are still good companies,” he said.
Red flags for investors
That raises the question: What are founders getting wrong now?
The most common mistake is not solving a real problem.
Many founders that are not securing financing “usually mix the vision, the challenge, with the real need of a product,” Davalos said. “It is really important to understand if there is a real need for a product.”
The second mistake is missing margins.
“No longer do investors want to invest in companies that are burning cash for 10 years and still don’t have a product,” Davalos said. “It is okay to grow and to burn cash, but you need to be realistic about how long and for how much and basically who you’re going to be selling to.”
Where opportunity still exists
Despite the challenges, there are still clear opportunities for food-tech and CPGs.
“We are most excited about food traceability, supply chain visibility and automation and robotics in 2026,” notes Pitchbook, which adds it is “much more cautious about cultivated meat and ghost kitchens, which struggle with challenging economics.”
Davalos adds he is most excited about the intersection of food and health, which includes functional ingredients and technology to more effectively deliver functional benefits.
He affirmed Pitchbook’s assessment, as well, noting that McWin is investing in supply chain solutions, as well as technology that “will have a huge impact on the future,” such as gene-editing, of which he says his firm is “quite fond.”
Looking forward
As the food tech sector matures, the shift from grow at all costs to disciplined execution is becoming unavoidable for founders.
The message is clear: capital is still available, but only to those who can prove it works.
