7 Reasons Why Food Startups Are Getting Major Funding

June 25, 2016

2:00 pm

Major corporations and venture capitalists (VC) are investing in food startups more than ever. Society’s eating habits are changing and with that, the food industry needs to make changes as well. Some major corporations, such as breakfast cereal brands, are removing unhealthy and undesirable ingredients from their products to meet society’s demands for healthier food options. Startups benefit from connecting with major brands just from the affiliation and ability to reach larger audiences because of it.

Catering to Society’s Demands and Needs

The way that society eats is changing. More consumers are purchasing more fresh ingredients and less-processed foods. Major food industry names are noticing this and have started making investments into food startups. More than just the food brands you see in your local grocery store changing ingredients, fast food chains are following suit to offer healthier options and healthier preparation tactics.

Chemical-Free Foods

Society is rather unhappy about the chemicals placed in foods for preservation and color purposes. Major companies like Hormel and The Hershey Co. are purchasing smaller companies like Applegate Farms, who produces antibiotic and preservative-free luncheon meats. The Hershey Co. bought a nitrite-free beef jerky startup, Krave Pure Foods, that had $35-million in sales for $300-million due, in-part, to the exclusion of nitrites in the product. Purchasing organic may not be an option for every family, so major VCs and big food producers are finding startups that offer healthy, natural foods to purchase.

Food Product Evolution

This move by major corporations and investors shows consumers that the brand is moving in a healthier direction and sees the big picture. Consumers take more time to read labels and ingredients these days. Even making packaging changes helps. Consumers like to be able to pick up a package and clearly read nutritional information/ingredients rather than having to search and squint for information. The ever-evolving food industry is making the necessary changes to cater to society and healthier lifestyles.

Social Media Branding

A social media presence is a must for all businesses, including startups. Startups, including those in the food industry that are associated or affiliated with an inter-industry leader have a better reputation from the start. Consumers are more likely to ask questions, engage and anticipate food product releases.

Branding via social media takes time. A complete company profile needs to be created on each platform. The information should match on all avenues and the startup should respond swiftly to consumer inquiries. Startups and entrepreneurs must realize that being on social media alone is not enough to properly brand a business, it takes being social, engaging and maintaining an approachable status too.

New Brand Discovery

Major food corporations are discovering new brands every day. Food industry giants like Kellogg, Coca-Cola, General Mills and PepsiCo, as examples, are funding these startups to refresh their own portfolios and help startups build theirs. Updated and current brand profiles help maintain longevity, positive brand reputations and display the ability to sustain themselves while building new, next-generation brands.

Brings Sales Leads In

When a startup is connected to a major brand or corporation, it can generate business-to-business (B2B) sales leads to come in on their own. Authority figures within an industry gain more attention and have more desire from other businesses to develop a business relationship. Startups in the food industry have spent time and money researching their products and the benefits that the new offerings will have to consumers.

Other brands in the health and wellness industry may want to sell products or commission a startup to manufacture a new product for exclusive sales rights. These B2B leads are invaluable as they can help establish a startup well.

Consider Hiring an Industry Influencer

When food companies fund startups and assist them in brand building, quality control and turning a profit other areas may become neglected. New brands, especially food industry brands, need to get a jumpstart on marketing. An industry influencer can be brought in to help build an audience, begin a positive reputation and inform consumers about the new food startup.

The influencer should be tasked with displaying the benefits of the ingredients used, added convenience and who the startup is affiliated with to get the public ready to purchase the new products.

Food startups are popping up more frequently. While major brands may not have the time to take-on the process of developing a new food product, startups do. Their time is spent perfecting their product, making sure it lives up to the promise the startup makes and does provide real value for consumers. Investing in startups is an ideal way for major food makers to create a legacy, increase revenue and build the industry.

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AJ Agrawal is an entrepreneur, speaker, and writer. He is the CEO and Co-Founder at Alumnify Inc.

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