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Forget Software. VC’s Turn Their Eyes Toward the Food Industry

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hampton creek foods

Yesterday Hampton Creek Foods announced a Series B round of $23 million, led by Horizons Ventures and including previous investors Khosla Ventures and Collaborative Fund as well as several individual investors.

rsz_incontentad2Hampton Creek is looking for alternative, plant-based solutions to meat and meat products. Eggs, for example, are one target for a new, plant-based alternative from Hampton Creek.

Let’s forget for a moment that we’re still talking about processed food, which have been proven to be harmful to the American diet. I get that with the growing global population, we already have unsustainable methods of growing and raising our food. Something has to be done about this problem.

What’s interesting about this story is not the growth of processed food. (Okay, well not interesting for our purposes.)

Rather, it’s interesting to see to such traditionally tech-focused VC firms throwing money at a decidedly expensive, potentially unscalable venture. The whole thing about tech startups is that the cost to entry and scaling is so much lower, which allows for great returns for these investors.

According to CB Insights, that’s a growing trend. In 2013 funding deals to food companies (note: not web/mobile-based food apps or platforms) hit $146 million. This was a 123% increase from their earliest data from 2009.

Investments in food and beverage companies include everything from food tech, like Hampton Creek, to retail outlets, like the recently IPO’d Potbelly Sandwich Shops.

Khosla Ventures is a large backer of early stage food startups. Founder Vinod Khosla had this to say a couple of years ago about investing in food startups:

“As part of our sustainability effort, we’re doing a lot of investing in food.”

“Saving the world” and “sustainability” are awesome goals to shoot for. Without a doubt the pace at which we live life is fast, and it’s hard for the planet to keep up.

We’ve seen this song and dance before in the shape of cleantech. It’s not that cleantech was ever a bad idea. Few thoughtful people will say we need to continue to strip the planet of its natural resources without replenishing them.

But, no amount of knowing it’s a good idea makes development inexpensive. Or makes the outcome profitable at a level to please LPs.