Data snapshot: eGrocery investment rollercoaster leads to 73% funding decline in 2022, still biggest category

Data Snapshot is a regular AFN feature in which we analyze agrifoodtech market investment data provided by our parent company, AgFunder.

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eGrocery is still the biggest subsegment in agrifoodtech investing, attracting a cool $5.1 billion in funding in 2022 (17% of the total). But that pales in comparison to the jaw-dropping $19 billion raised by grocery ecommerce startups in 2021, according to AgFunder’s new global investment report.

Back in the halcyon days of 2021, the sector experienced four billion-dollar funding rounds, with a whopping $3 billion going to Chinese online ordering platform XingSheng Youxhan, $1.15 billion going to US ecommerce site Gopuff, $1 billion to US food delivery firm Gorillas, and another $1 billion to Gopuff.

In 2022, funding for eGrocery slumped 73% year-on-year, with a closer look at the data showing that the three biggest rounds—$768 million for Turkish rapid food delivery co Getir, $425 million for California-based eGrocer Weee!, and $240 million for Indian hyperlocal delivery startup Dunzo—all closed in the first three months of the year, before funding across the industry started to dry up.

To place this in context, overall agrifoodtech funding fell 44% in 2022 to $29.6 billion.

Rising inflation, lifting of pandemic restrictions

So what changed?

Conditions vary by market, but several eGrocery startups have recently announced layoffs (Zapp, Getir, Alerzo, Gorillas, Swiggy Dunzo), with some pruning staff after aggressive hiring in 2021, and others citing a drop off in demand as pandemic restrictions lifted and consumers tightened purse strings amid rising inflation.

Speaking at the launch of AgFunder’s new global agrifoodtech investment report in San Francisco on March 14, Winnie Leung of Shanghai-based agrifoodtech VC Bits x Bites said: “With eGrocery there have been supply chain challenges and cost management issues, and we’ve seen that the grow-at-all-costs model just does not work.”

Investor focus shifting upstream

That said, she added, the data for 2021 was skewed by the XingSheng  Youxuan megadeal: “I feel like every year we have to say ‘the funding this year is really skewed by mega deals,’ and 2021 was no exception. $3 billion went to one eGrocery company and it’s clearly not going to be sustained year after year. ”

From the investment perspective, she said, the focus in China—where food delivery companies have been fighting for survival in an overcrowded market—is shifting further upstream.

“We’re pleased to see a bigger push for upstream investments [further up the food supply chain]. China right now has basically two mandates that dictate all the investment: One is food security and self-sufficiency, and the other is sustainability.”

Download the 2o23 AgFunder Global AgriFoodTech investment report HERE.