VCs share why health and beverages are hot investments in 2020

VCs share why health and beverages are hot investments in 2020

  • DTC investors see huge opportunity in companies with a health and wellness bent, like 8Greens, Daily Harvest, Kin Euphorics, and Talea Beer.
  • People are increasingly health-conscious and seeking beverages with benefits, said investors from Forerunner Ventures, Torch Capital, and others.
  • The investors have also been encouraged by high-profile exits in these categories and a decline in alcohol consumption.
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Despite WeWork’s implosion and newly listed public companies including Uber and Lyft underperforming in 2019, venture capitalists will pump nearly $100 billion into startups in 2020. Some of it is going to direct-to-consumer startups in categories from alcohol to beauty to home security.

DTC investors from Forerunner Ventures, Torch Capital, and others told Business Insider they especially see huge opportunity in companies with a health and wellness bent, like 8Greens, Daily Harvest, Kin Euphorics, and Talea Beer.

We asked five investors why health and wellness are hot categories and which companies they’re betting on.

People are becoming more proactive about their health 

Kirsten Green, a founding partner at Forerunner Ventures, said she’s backing Oura, which makes rings that track health and sleep, because people are getting increasingly health-conscious and incumbent companies have been slow to catch up.

She said Oura meets this pent-up demand, provides a utility, and is less bulky and easier to use than other fitness trackers. She thinks Oura could become a hub for all things sleep.

“As people become more proactive about their own health, there is considerable opportunity to introduce new products, services, and ways of conducting business,” she said.

There is a new market for health and wellness brands

Health and wellness startups are catering to a new audience, said Neda Daneshzadeh, a partner at Prelude Growth Partners, which has invested in food startups including chickpea pasta maker Banza and plant-based supplement company 8Greens.

“They really care about what they put in their bodies, on their bodies and how they strengthen their bodies,” she said of that audience.

Products that are easy, convenient and affordable will succeed, she said.

Investors are attracted to convenience

M13’s cofounder Courtney Reum said investors are drawn to food and beverage startups that promise convenience.

“Whether it’s 8Greens offering veggies in effervescent tablets or Daily Harvest’s quick meal-replacement smoothies and bowls, it’s about the form factor and efficacy of convenience,” he said. “Beverage startups today check all the boxes.”

People are drinking less alcohol 

Factors fueling new beverages are the decline in alcohol consumption, the growing popularity of spiked seltzer, non-alcoholic beverages, and interest in sobriety, said Byron Ling, a partner at Canaan Ventures.

“You can see a really strong shift in consumption patterns, and a continually accelerating decline of people drinking alcohol,” he said. “It’s super clear that consumers are clamoring for new and more modern ingredient profiles, and products that deliver on a function versus a lifestyle.”

The global beverage market is expected to reach $1.8 trillion in market size by 2024, and it’s led by upstarts, not the big conglomerates, he said.

There have been high-profile exits

High-profile beverage exits in recent years have sparked interest in the category, said Torch Capital’s Jon Keidan, pointing to Nestle’s acquisition of Blue Bottle Coffee and Coca-Cola’s acquisition of Honest Tea.

“Food and beverage typically saw late-stage investments, but these success stories have meant that investors are beginning to invest a lot earlier,” he said.

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