The 2023 UK Private Capital Breakdown provides insights into investment trends across private equity, venture capital, and other private capital strategies in the UK. While not focused specifically on food and agriculture, the report contains valuable data points and analysis relevant to companies and investors in these sectors.
Key highlights include:
PE deal value in the UK increased 13% in Q2 2023, signalling a potential recovery in M&A. However, caution remains with smaller add-on deals dominating.
PE exit value rose for the 4th straight quarter, lifted by several large exits over £1 billion. But exits lag investments, indicating firms are holding assets longer.
At £30 billion raised across 22 funds, UK PE fundraising could set a new record in 2023. However, middle-market fundraising slowed.
VC deal value fell 58% versus last year, though Q2 saw a slight uptick. Deal count proved more resilient than value, suggesting lower valuations.
VC exits declined 82% in value, but only 49% in volume, pointing to weaker exit valuations impacting returns.
Early-stage VC funds accounted for 70% of the top 10 VC funds closed in H1 2023, benefiting from lower valuations than late stage.
For food and agriculture technology companies, these trends underscore the importance of capital efficiency and path to profitability amidst a selective investment climate. While still robust compared to other regions, reduced UK VC deal activity suggests startups may need to extend runway. However, this cooling could benefit strong companies able to differentiate themselves to investors focused on resilient models and lower entry prices. Within food and agritech specifically, subsectors like precision agriculture, novel proteins, food safety, and online groceries may be best positioned given their secular growth drivers. Sectors tied closely to discretionary consumer spending could face greater scrutiny in the near term.
For PE investors, carve-outs and add-ons in food production, distribution, and retail may be likely as corporates streamline. And demand for PE exposure could benefit experienced mid-market funds specializing in the food value chain.
UK Food & AgriTech Sector Trends
Broader investment trends will impact the UK’s FoodTech sector, which McKinsey estimates could grow 10x to £74 billion by 2030. The UK has already produced some major VC-backed food unicorns, including vertical farm Ocado (£8.5 billion valuation) and food delivery app Deliveroo (£3.6 billion). However, 2022 saw several UK food startups like Dija and AllPlants collapse amidst curtailed funding. This reinforces that while the UK provides strong food & agritech talent, startups must hone efficient models and clearly demonstrate value to survive amidst greater investor selectivity. Areas such as online groceries, alt-protein production, IoT farm technologies, and food waste solutions align well with consumer and ESG priorities. Companies like OmniPork (alt-protein), Afresh (AI for food retailers), or Karma (food waste app) exemplify resilient UK subsectors.
At the growth stage, UK food delivery, restaurant, and meal kit companies still attract VC and PE interest, evidenced by investments in Deliveroo, Gousto, and Dishoom. However, profits remain a widespread challenge, putting emphasis on consolidation, automation, and self-funding growth.
For PE, UK food production, distribution, and ingredients present acquisition opportunities. The £880 million acquisition of bakery group Finsbury Food Group and sale of distributor HG Group indicate ongoing M&A activity across the value chain.
Implications for the UK Food Industry
In summary, the 2023 UK private capital breakdown points to a more discerning but not closed funding environment. For UK food & agritech firms and investors, key implications include:
Pursue business models that demonstrate resilience, capital efficiency, and ability to achieve profitability
Highlight how solutions directly address structural changes in consumer behavior, climate impact, and nutrition
Focus on core products and markets; streamline peripheral initiatives and avoid overexpansion
For startups, extend runway and strategically use funding; bootstrap where possible
Leverage data and technology to strengthen operations, supply chains, and competitive moats
Prepare diligently for investor meetings; be ready to justify valuations and field tough questions
Evaluate M&A and consolidation opportunities that maximize synergies and scale
Consider commercial partnerships with retailers, CPG companies, or ingredient suppliers to expand reach
The current investment climate rewards preparation, flexibility, patience, and prudent capital allocation. But for mission-driven UK food and agritech companies delivering real value, funding avenues remain open from investors looking to back resilient models.
Targeting profitable niches, neglected segments, and emerging consumer/sustainability trends can help UK food ventures stand out. While PE and VC activity has tempered, firms able to improve the health, sustainability, and accessibility of food at scale will continue attracting capital in the long run.
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