The A-Z of FoodTech Investment: 30+ Terms You Need To Know

The A-Z of FoodTech Investment: 30+ Terms You Need To Know

By
Sam Panzer
August 16, 2021

Everything you need to know about investment terminology.

Blockbuster IPOs. High-rolling acquisitions. Celebrity investors. There’s been a perfect storm accelerating investment in foodtech over the past 12-18 months in particular, with foodtech growing 31% faster than general VC activity in 2020. 

Just last week, we saw:

  • Pre-Seed: $675k to Bite Ninja (restaurant HR tech)
  • Seed: $5M to Nitricity (nitrogen fertilizer production)
  • Series A: $14M to WoodSpoon (home chef food delivery)
  • Series B: $160M to 80 Acres Farms (indoor farming)
  • Series C: $106M to Super Coffee’s parent (better-for-you coffee brand)

But dig in past the headlines, and investment starts to sound pretty complicated. Every investment round is unique, and those involved tend to only share the snappy stuff with the public.

So this week, we’re sharing 30+ of the most important terms for founders and advisors looking to understand the mechanisms of foodtech investment. Get out the flashcards, time to study up 🤓

p.s. This is a 7-minute read - Save the guide for later or strap in for a long-read.


The A-Z of FoodTech Investment


💡 Accelerators
: programs that help early-stage startups grow via expert coaching and intros to investors and strategic partners. Accelerators are fixed-term, cohort-based, and mentorship-focused. Read More: Accelerator Database

✅ Accredited Investor: a high-income investor (individual or institutional) who can make equity investments with less regulation and government oversight. This varies widely by country, but equity investment is regulated differently than publicly-traded stocks. In the USA, the Securities & Exchange Commission doesn’t require complicated investment registration if the company is only taking investment from accredited investors. It’s up to the company to make sure investors are accredited if the company wants to avoid government oversight of non-accredited investors.

🤝 Advisors: an outside expert supporting a startup with strategic advice and key introductions. Usually a pro in one area, like marketing, finance, fundraising, or a specific technology. Compensated either with equity (more common) or cash. Read More: Advisor <> Startup Matchmaking

💸 Angel Investors: the earliest investors in a startup, typically individual investors with checks from $10K -$100K. Angels know the space well and often are highly active advisors in the early days. Read More: Angel Investing 101

📉 Anti-Dilution Rights: future investment rounds ideally increase the valuation of the company. But this isn’t always the case. With this in mind, some investors require an anti-dilution privilege that protects them if future investment rounds have a decreased valuation (a “down round”). These are not required, but an investor might request or demand them in negotiations (particularly if the startup might be over-valued). 

📈 Annual Revenue: the sales coming into a company over 12 months. Simple, yes, but a key piece of the valuation puzzle. Startup valuations typically take AR and multiply it to assess a startup’s value (how that AR is reported varies widely -- could be 12 months trailing, 12 month forecast, or a hybrid). This year’s banner trend in funding is that the multiplier for valuation keeps increasing. While 5-10x used to be typical for high-growth startups, 40-50x is now typical. Read More: Valuations in foodtech

🌉 Bridge Round: typically a tactical, smaller round to extend a startup’s runway or achieve a specific goal before the next, larger round. While it sometimes can be a red flag that a startup is struggling, it’s also common that they just need a fast check for a big initiative or market entry. One recent example: cultured seafood co Shiok Meats closed a bridge round on July 21 to open a new production line, and likely used that capital for their acquisition of Gaia Foods just 20 days later.

🔥 Burn Rate and Runway: burn rate is simply the amount of money a startup is burning, inclusive of all the sales revenue against all operating costs. It’s usually expressed as a $ value lost each month. Burn rate is used to calculate the Runway, which is the length of time before a startup will run out of money. Seed-stage startups should aim for 12-18 months of runway to avoid joining the 29% of startups which fail after they run out of money.

🧢 Cap Table: a record of all the shareholders behind a company, including employees, investors, advisors –– anybody who has a piece of the equity pie. 

💵 Convertible Note: a startup’s earliest money is typically raised by the startup selling ‘convertible notes’ to investors that turn to equity later on. This process is simpler than issuing equity, and entitles the investor to a certain number of shares as soon as a future financing event takes place (or once the startup hits a certain valuation). Convertible notes usually include a discount, meaning the holder of the convertible note gets their shares issued at a lower share price. That’s more bang for their (early) buck than investors joining on later when a proper equity setup is established. Read about the related SAFE agreement below.

🕴 Corporate VCs: many corporations have their own investment arms, including Cargill Ventures, Kellogg’s Eighteen94, or Nestle’s Inventages. Why? Sometimes they’re scouting for strategic partnerships (imagine a global meat operator investing in a sustainable animal feed startup). Sometimes they’re just chasing a big return. It’s a growing space (currently around 10% of all foodtech investment) and a huge focus area for the big players. Read More: Investors Database

🔎 Due Diligence: before investing, investors (especially VCs) will comb through your financial plans and ‘kick the tires’ by talking with customers and your core team. This process used to take a few weeks, including several in-person meetings. But due diligence is less and less of a priority as investment velocity increases. Why? First, lockdown: we’re better at connecting over Zoom than we were 2 years ago, and in-person meetings are still often impossible. Second, it’s a founder’s market, so VCs are hesitant to ask too much or delay the process –– largely because of the outsized impact of Tiger Global, which has thrown out the playbook and invests at a velocity never before seen. That means corners being cut to get checks out, fast.

🥧 Equity Crowdfunding: crowdsourcing startups, where the small-scale private investors also get a small slice of equity. Of course, the small guys don’t get the same privileges as proper investors, and the likelihood of returns is slim. It’s especially popular with women and women of color who have historically been excluded from traditional VC. 

🌎 Impact Investing: incorporating social and environmental returns into an investment strategy. While this term remains popular outside of foodtech, it’s almost redundant in our space. Investors in foodtech are generally aware that the only viable, long-term investments address the environmental and social problems in our food system.

🔔 IPOs & SPACs: how companies convert private stock to public stock, and issue shares for trading among the general public. Provides the company with a boatload of capital and a liquidity event for all investors with shares. Read More: Foodtech IPOs and SPACs Explained.

💰 Liquidity Event: something that enables investors to ‘cash out’ the value of their shares. Typically these are acquisitions, mergers, or IPOs

👩‍💼 Lead Investor: the co-host of the financing party, the lead investor issues the first term sheet, agrees on key points (especially the valuation). It’s impossible to negotiate everything with every investor, so the lead sets the table for the round’s other investors. The lead investor usually writes the largest check, but this isn’t always the case. 

📜 Pay-to-Play: a requirement that investors participate in future rounds, or risk losing certain privileges (usually control over the startup like anti-dilution rights or a vote on liquidation events). These are typically not included in Series A rounds.

▲ Post-Money Valuation: the value of a company immediately after a financing round closes.

▼ Pre-Money Valuation: the value of a company just before a financing round closes. The two valuation types matter when determining the ownership share after funding is complete.

📈 Recapitalization: re-balancing a company’s debt and equity to stabilize the company’s financial setup. Companies usually do this by taking on some debt and ‘buying out’ shareholders. The reasons vary, but recapitalization is usually to solve a problem (i.e. too many investors, bad investors, or investors who are sick of waiting for a return and want to get out).

💵 Rolling Funds: a type of VC fund where investors can subscribe to the fund at any time, and regularly pay into the fund via quarterly payments. That’s different from conventional funds, where all investors join up together and nobody’s invited to the party later on. It’s a new type of fund that started in software, and has found it's way into foodtech.


👀 We're polling FoodHack Readers.

Do you currently invest or want to invest into startups?

Fill in our survey here about your investment appetite for a future piece we're putting together about individuals and private markets.


⭕️ Round: startups fundraise in rounds, where multiple investors participate on an agreed-upon valuation and distribution of shares. Each round, the startup has to buff up their business plan, negotiate terms with each investor, sign agreements with each investor, and go through due diligence. Issuing stock also typically requires sign-off from other investors and the chance for previous investors to participate, meaning a company can’t just take a check whenever an interested investor comes knocking. That’s why investment runs sequentially (Series A, B, C, etc), with each round ideally increasing in size and valuation. 

🏃‍♂️ Runway: see Burn Rate

⛑ SAFE: a Simple Agreement for Future Equity. SAFE agreements lay out a future path to the investor receiving equity, but provide the startup with cash immediately. The SAFE agreement will list the event that will issue equity to the investor (typical trigger events include future financing rounds or the sale of the company). Read about the related Convertible Note above. 

🌱 Seed Round: the earliest funding round, typically with a small number of investors investing in a company that doesn’t yet have a viable product. Pre-Seed is an even earlier-stage spin on the same story. These differ from Series A rounds in that investors don’t yet expect a crystal-clear business plan or advanced proof points of the business. Of course, you’ll still need some indicator you’re on the path to success to secure seed funding.

🤝 Syndicates: a special vehicle to fund startups, where a syndicate is assembled with the sole purpose of funding one specific startup. Syndicates are started by a syndicate lead (typically an experienced investor with a lot of capital), after which any accredited investor can join the investment with a small (minimum $1000) investment. If the syndicate investment later yields a return, the syndicate lead gets a commission fee of everybody’s earnings (somewhere between 5 and 25%). One FoodTech syndicate, FoodTech Angels, earns 15-20% interest on the carried gains of their investment.

📊 Term Sheet: the preliminary, non-binding agreement between an investor and the startup. Term sheets define the valuation for the company, the amount raised, share price, and other rights for the investor.

❓ Valuation: the process to determine how much a company is worth. Valuations are agreed upon between the company and the investor. The company often sets their goal valuation they want investors to agree to, while the investor analysts assess the business and come up with their own number. Valuation can be calculated on an absolute (based only on the company’s earnings and growth) or relative (comparing the company to others in the space) bases. Read More: Valuations in foodtech

⏰ Vesting: the schedule by which shares are issued to a shareholder. All equity shares can vest, no matter who’s receiving them: including cofounders, investors, and employees. For founders and employees, it’s a way to keep folks on board and reward them for their service. Sometimes, that’s after a specific event, but usually it’s a set timetable. For employees, it’s typically a one-year cliff after which stock starts vesting on a monthly basis.  

💸 VCs: venture capital firms are the primary investment engine for startups. They tend to join up once the startup is well-validated, with a strong business plan and established product. VC funds distribute a big pot of cash that’s pooled by various wealthy individuals, investment banks, pensions, and foundations. VCs make money in two ways. First, they earn carried interest, often 20%, when investments make a profit (i.e. a $100M fund earns $110M, the VC earns 20% of the $10M return). Second, VCs earn a management fee each year, often 2% of the value of the fund. VC firms often have an area of focus, and that’s especially true in foodtech. Read More: Most Active VCs in FoodTech

💦 Waterfall Distribution: the ‘pecking order’ by which investors are paid out when an investment produces a return. Waterfall distribution often starts by covering initial investments (put in $1M, get $1M back).


👉 TLDR: Don't have time to read everything? Find our guide online to refer to later.

👉 Share this: If you enjoyed the read, forward this email to fellow founders or share this on social and tag @foodhack :)

👉 Poll: Fill in our survey about your investment appetite for a future article we're putting together (takes 2 minutes)

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Everything you need to know about investment terminology.

Blockbuster IPOs. High-rolling acquisitions. Celebrity investors. There’s been a perfect storm accelerating investment in foodtech over the past 12-18 months in particular, with foodtech growing 31% faster than general VC activity in 2020. 

Just last week, we saw:

  • Pre-Seed: $675k to Bite Ninja (restaurant HR tech)
  • Seed: $5M to Nitricity (nitrogen fertilizer production)
  • Series A: $14M to WoodSpoon (home chef food delivery)
  • Series B: $160M to 80 Acres Farms (indoor farming)
  • Series C: $106M to Super Coffee’s parent (better-for-you coffee brand)

But dig in past the headlines, and investment starts to sound pretty complicated. Every investment round is unique, and those involved tend to only share the snappy stuff with the public.

So this week, we’re sharing 30+ of the most important terms for founders and advisors looking to understand the mechanisms of foodtech investment. Get out the flashcards, time to study up 🤓

p.s. This is a 7-minute read - Save the guide for later or strap in for a long-read.


The A-Z of FoodTech Investment


💡 Accelerators
: programs that help early-stage startups grow via expert coaching and intros to investors and strategic partners. Accelerators are fixed-term, cohort-based, and mentorship-focused. Read More: Accelerator Database

✅ Accredited Investor: a high-income investor (individual or institutional) who can make equity investments with less regulation and government oversight. This varies widely by country, but equity investment is regulated differently than publicly-traded stocks. In the USA, the Securities & Exchange Commission doesn’t require complicated investment registration if the company is only taking investment from accredited investors. It’s up to the company to make sure investors are accredited if the company wants to avoid government oversight of non-accredited investors.

🤝 Advisors: an outside expert supporting a startup with strategic advice and key introductions. Usually a pro in one area, like marketing, finance, fundraising, or a specific technology. Compensated either with equity (more common) or cash. Read More: Advisor <> Startup Matchmaking

💸 Angel Investors: the earliest investors in a startup, typically individual investors with checks from $10K -$100K. Angels know the space well and often are highly active advisors in the early days. Read More: Angel Investing 101

📉 Anti-Dilution Rights: future investment rounds ideally increase the valuation of the company. But this isn’t always the case. With this in mind, some investors require an anti-dilution privilege that protects them if future investment rounds have a decreased valuation (a “down round”). These are not required, but an investor might request or demand them in negotiations (particularly if the startup might be over-valued). 

📈 Annual Revenue: the sales coming into a company over 12 months. Simple, yes, but a key piece of the valuation puzzle. Startup valuations typically take AR and multiply it to assess a startup’s value (how that AR is reported varies widely -- could be 12 months trailing, 12 month forecast, or a hybrid). This year’s banner trend in funding is that the multiplier for valuation keeps increasing. While 5-10x used to be typical for high-growth startups, 40-50x is now typical. Read More: Valuations in foodtech

🌉 Bridge Round: typically a tactical, smaller round to extend a startup’s runway or achieve a specific goal before the next, larger round. While it sometimes can be a red flag that a startup is struggling, it’s also common that they just need a fast check for a big initiative or market entry. One recent example: cultured seafood co Shiok Meats closed a bridge round on July 21 to open a new production line, and likely used that capital for their acquisition of Gaia Foods just 20 days later.

🔥 Burn Rate and Runway: burn rate is simply the amount of money a startup is burning, inclusive of all the sales revenue against all operating costs. It’s usually expressed as a $ value lost each month. Burn rate is used to calculate the Runway, which is the length of time before a startup will run out of money. Seed-stage startups should aim for 12-18 months of runway to avoid joining the 29% of startups which fail after they run out of money.

🧢 Cap Table: a record of all the shareholders behind a company, including employees, investors, advisors –– anybody who has a piece of the equity pie. 

💵 Convertible Note: a startup’s earliest money is typically raised by the startup selling ‘convertible notes’ to investors that turn to equity later on. This process is simpler than issuing equity, and entitles the investor to a certain number of shares as soon as a future financing event takes place (or once the startup hits a certain valuation). Convertible notes usually include a discount, meaning the holder of the convertible note gets their shares issued at a lower share price. That’s more bang for their (early) buck than investors joining on later when a proper equity setup is established. Read about the related SAFE agreement below.

🕴 Corporate VCs: many corporations have their own investment arms, including Cargill Ventures, Kellogg’s Eighteen94, or Nestle’s Inventages. Why? Sometimes they’re scouting for strategic partnerships (imagine a global meat operator investing in a sustainable animal feed startup). Sometimes they’re just chasing a big return. It’s a growing space (currently around 10% of all foodtech investment) and a huge focus area for the big players. Read More: Investors Database

🔎 Due Diligence: before investing, investors (especially VCs) will comb through your financial plans and ‘kick the tires’ by talking with customers and your core team. This process used to take a few weeks, including several in-person meetings. But due diligence is less and less of a priority as investment velocity increases. Why? First, lockdown: we’re better at connecting over Zoom than we were 2 years ago, and in-person meetings are still often impossible. Second, it’s a founder’s market, so VCs are hesitant to ask too much or delay the process –– largely because of the outsized impact of Tiger Global, which has thrown out the playbook and invests at a velocity never before seen. That means corners being cut to get checks out, fast.

🥧 Equity Crowdfunding: crowdsourcing startups, where the small-scale private investors also get a small slice of equity. Of course, the small guys don’t get the same privileges as proper investors, and the likelihood of returns is slim. It’s especially popular with women and women of color who have historically been excluded from traditional VC. 

🌎 Impact Investing: incorporating social and environmental returns into an investment strategy. While this term remains popular outside of foodtech, it’s almost redundant in our space. Investors in foodtech are generally aware that the only viable, long-term investments address the environmental and social problems in our food system.

🔔 IPOs & SPACs: how companies convert private stock to public stock, and issue shares for trading among the general public. Provides the company with a boatload of capital and a liquidity event for all investors with shares. Read More: Foodtech IPOs and SPACs Explained.

💰 Liquidity Event: something that enables investors to ‘cash out’ the value of their shares. Typically these are acquisitions, mergers, or IPOs

👩‍💼 Lead Investor: the co-host of the financing party, the lead investor issues the first term sheet, agrees on key points (especially the valuation). It’s impossible to negotiate everything with every investor, so the lead sets the table for the round’s other investors. The lead investor usually writes the largest check, but this isn’t always the case. 

📜 Pay-to-Play: a requirement that investors participate in future rounds, or risk losing certain privileges (usually control over the startup like anti-dilution rights or a vote on liquidation events). These are typically not included in Series A rounds.

▲ Post-Money Valuation: the value of a company immediately after a financing round closes.

▼ Pre-Money Valuation: the value of a company just before a financing round closes. The two valuation types matter when determining the ownership share after funding is complete.

📈 Recapitalization: re-balancing a company’s debt and equity to stabilize the company’s financial setup. Companies usually do this by taking on some debt and ‘buying out’ shareholders. The reasons vary, but recapitalization is usually to solve a problem (i.e. too many investors, bad investors, or investors who are sick of waiting for a return and want to get out).

💵 Rolling Funds: a type of VC fund where investors can subscribe to the fund at any time, and regularly pay into the fund via quarterly payments. That’s different from conventional funds, where all investors join up together and nobody’s invited to the party later on. It’s a new type of fund that started in software, and has found it's way into foodtech.


👀 We're polling FoodHack Readers.

Do you currently invest or want to invest into startups?

Fill in our survey here about your investment appetite for a future piece we're putting together about individuals and private markets.


⭕️ Round: startups fundraise in rounds, where multiple investors participate on an agreed-upon valuation and distribution of shares. Each round, the startup has to buff up their business plan, negotiate terms with each investor, sign agreements with each investor, and go through due diligence. Issuing stock also typically requires sign-off from other investors and the chance for previous investors to participate, meaning a company can’t just take a check whenever an interested investor comes knocking. That’s why investment runs sequentially (Series A, B, C, etc), with each round ideally increasing in size and valuation. 

🏃‍♂️ Runway: see Burn Rate

⛑ SAFE: a Simple Agreement for Future Equity. SAFE agreements lay out a future path to the investor receiving equity, but provide the startup with cash immediately. The SAFE agreement will list the event that will issue equity to the investor (typical trigger events include future financing rounds or the sale of the company). Read about the related Convertible Note above. 

🌱 Seed Round: the earliest funding round, typically with a small number of investors investing in a company that doesn’t yet have a viable product. Pre-Seed is an even earlier-stage spin on the same story. These differ from Series A rounds in that investors don’t yet expect a crystal-clear business plan or advanced proof points of the business. Of course, you’ll still need some indicator you’re on the path to success to secure seed funding.

🤝 Syndicates: a special vehicle to fund startups, where a syndicate is assembled with the sole purpose of funding one specific startup. Syndicates are started by a syndicate lead (typically an experienced investor with a lot of capital), after which any accredited investor can join the investment with a small (minimum $1000) investment. If the syndicate investment later yields a return, the syndicate lead gets a commission fee of everybody’s earnings (somewhere between 5 and 25%). One FoodTech syndicate, FoodTech Angels, earns 15-20% interest on the carried gains of their investment.

📊 Term Sheet: the preliminary, non-binding agreement between an investor and the startup. Term sheets define the valuation for the company, the amount raised, share price, and other rights for the investor.

❓ Valuation: the process to determine how much a company is worth. Valuations are agreed upon between the company and the investor. The company often sets their goal valuation they want investors to agree to, while the investor analysts assess the business and come up with their own number. Valuation can be calculated on an absolute (based only on the company’s earnings and growth) or relative (comparing the company to others in the space) bases. Read More: Valuations in foodtech

⏰ Vesting: the schedule by which shares are issued to a shareholder. All equity shares can vest, no matter who’s receiving them: including cofounders, investors, and employees. For founders and employees, it’s a way to keep folks on board and reward them for their service. Sometimes, that’s after a specific event, but usually it’s a set timetable. For employees, it’s typically a one-year cliff after which stock starts vesting on a monthly basis.  

💸 VCs: venture capital firms are the primary investment engine for startups. They tend to join up once the startup is well-validated, with a strong business plan and established product. VC funds distribute a big pot of cash that’s pooled by various wealthy individuals, investment banks, pensions, and foundations. VCs make money in two ways. First, they earn carried interest, often 20%, when investments make a profit (i.e. a $100M fund earns $110M, the VC earns 20% of the $10M return). Second, VCs earn a management fee each year, often 2% of the value of the fund. VC firms often have an area of focus, and that’s especially true in foodtech. Read More: Most Active VCs in FoodTech

💦 Waterfall Distribution: the ‘pecking order’ by which investors are paid out when an investment produces a return. Waterfall distribution often starts by covering initial investments (put in $1M, get $1M back).


👉 TLDR: Don't have time to read everything? Find our guide online to refer to later.

👉 Share this: If you enjoyed the read, forward this email to fellow founders or share this on social and tag @foodhack :)

👉 Poll: Fill in our survey about your investment appetite for a future article we're putting together (takes 2 minutes)

Everything you need to know about investment terminology.

Blockbuster IPOs. High-rolling acquisitions. Celebrity investors. There’s been a perfect storm accelerating investment in foodtech over the past 12-18 months in particular, with foodtech growing 31% faster than general VC activity in 2020. 

Just last week, we saw:

  • Pre-Seed: $675k to Bite Ninja (restaurant HR tech)
  • Seed: $5M to Nitricity (nitrogen fertilizer production)
  • Series A: $14M to WoodSpoon (home chef food delivery)
  • Series B: $160M to 80 Acres Farms (indoor farming)
  • Series C: $106M to Super Coffee’s parent (better-for-you coffee brand)

But dig in past the headlines, and investment starts to sound pretty complicated. Every investment round is unique, and those involved tend to only share the snappy stuff with the public.

So this week, we’re sharing 30+ of the most important terms for founders and advisors looking to understand the mechanisms of foodtech investment. Get out the flashcards, time to study up 🤓

p.s. This is a 7-minute read - Save the guide for later or strap in for a long-read.


The A-Z of FoodTech Investment


💡 Accelerators
: programs that help early-stage startups grow via expert coaching and intros to investors and strategic partners. Accelerators are fixed-term, cohort-based, and mentorship-focused. Read More: Accelerator Database

✅ Accredited Investor: a high-income investor (individual or institutional) who can make equity investments with less regulation and government oversight. This varies widely by country, but equity investment is regulated differently than publicly-traded stocks. In the USA, the Securities & Exchange Commission doesn’t require complicated investment registration if the company is only taking investment from accredited investors. It’s up to the company to make sure investors are accredited if the company wants to avoid government oversight of non-accredited investors.

🤝 Advisors: an outside expert supporting a startup with strategic advice and key introductions. Usually a pro in one area, like marketing, finance, fundraising, or a specific technology. Compensated either with equity (more common) or cash. Read More: Advisor <> Startup Matchmaking

💸 Angel Investors: the earliest investors in a startup, typically individual investors with checks from $10K -$100K. Angels know the space well and often are highly active advisors in the early days. Read More: Angel Investing 101

📉 Anti-Dilution Rights: future investment rounds ideally increase the valuation of the company. But this isn’t always the case. With this in mind, some investors require an anti-dilution privilege that protects them if future investment rounds have a decreased valuation (a “down round”). These are not required, but an investor might request or demand them in negotiations (particularly if the startup might be over-valued). 

📈 Annual Revenue: the sales coming into a company over 12 months. Simple, yes, but a key piece of the valuation puzzle. Startup valuations typically take AR and multiply it to assess a startup’s value (how that AR is reported varies widely -- could be 12 months trailing, 12 month forecast, or a hybrid). This year’s banner trend in funding is that the multiplier for valuation keeps increasing. While 5-10x used to be typical for high-growth startups, 40-50x is now typical. Read More: Valuations in foodtech

🌉 Bridge Round: typically a tactical, smaller round to extend a startup’s runway or achieve a specific goal before the next, larger round. While it sometimes can be a red flag that a startup is struggling, it’s also common that they just need a fast check for a big initiative or market entry. One recent example: cultured seafood co Shiok Meats closed a bridge round on July 21 to open a new production line, and likely used that capital for their acquisition of Gaia Foods just 20 days later.

🔥 Burn Rate and Runway: burn rate is simply the amount of money a startup is burning, inclusive of all the sales revenue against all operating costs. It’s usually expressed as a $ value lost each month. Burn rate is used to calculate the Runway, which is the length of time before a startup will run out of money. Seed-stage startups should aim for 12-18 months of runway to avoid joining the 29% of startups which fail after they run out of money.

🧢 Cap Table: a record of all the shareholders behind a company, including employees, investors, advisors –– anybody who has a piece of the equity pie. 

💵 Convertible Note: a startup’s earliest money is typically raised by the startup selling ‘convertible notes’ to investors that turn to equity later on. This process is simpler than issuing equity, and entitles the investor to a certain number of shares as soon as a future financing event takes place (or once the startup hits a certain valuation). Convertible notes usually include a discount, meaning the holder of the convertible note gets their shares issued at a lower share price. That’s more bang for their (early) buck than investors joining on later when a proper equity setup is established. Read about the related SAFE agreement below.

🕴 Corporate VCs: many corporations have their own investment arms, including Cargill Ventures, Kellogg’s Eighteen94, or Nestle’s Inventages. Why? Sometimes they’re scouting for strategic partnerships (imagine a global meat operator investing in a sustainable animal feed startup). Sometimes they’re just chasing a big return. It’s a growing space (currently around 10% of all foodtech investment) and a huge focus area for the big players. Read More: Investors Database

🔎 Due Diligence: before investing, investors (especially VCs) will comb through your financial plans and ‘kick the tires’ by talking with customers and your core team. This process used to take a few weeks, including several in-person meetings. But due diligence is less and less of a priority as investment velocity increases. Why? First, lockdown: we’re better at connecting over Zoom than we were 2 years ago, and in-person meetings are still often impossible. Second, it’s a founder’s market, so VCs are hesitant to ask too much or delay the process –– largely because of the outsized impact of Tiger Global, which has thrown out the playbook and invests at a velocity never before seen. That means corners being cut to get checks out, fast.

🥧 Equity Crowdfunding: crowdsourcing startups, where the small-scale private investors also get a small slice of equity. Of course, the small guys don’t get the same privileges as proper investors, and the likelihood of returns is slim. It’s especially popular with women and women of color who have historically been excluded from traditional VC. 

🌎 Impact Investing: incorporating social and environmental returns into an investment strategy. While this term remains popular outside of foodtech, it’s almost redundant in our space. Investors in foodtech are generally aware that the only viable, long-term investments address the environmental and social problems in our food system.

🔔 IPOs & SPACs: how companies convert private stock to public stock, and issue shares for trading among the general public. Provides the company with a boatload of capital and a liquidity event for all investors with shares. Read More: Foodtech IPOs and SPACs Explained.

💰 Liquidity Event: something that enables investors to ‘cash out’ the value of their shares. Typically these are acquisitions, mergers, or IPOs

👩‍💼 Lead Investor: the co-host of the financing party, the lead investor issues the first term sheet, agrees on key points (especially the valuation). It’s impossible to negotiate everything with every investor, so the lead sets the table for the round’s other investors. The lead investor usually writes the largest check, but this isn’t always the case. 

📜 Pay-to-Play: a requirement that investors participate in future rounds, or risk losing certain privileges (usually control over the startup like anti-dilution rights or a vote on liquidation events). These are typically not included in Series A rounds.

▲ Post-Money Valuation: the value of a company immediately after a financing round closes.

▼ Pre-Money Valuation: the value of a company just before a financing round closes. The two valuation types matter when determining the ownership share after funding is complete.

📈 Recapitalization: re-balancing a company’s debt and equity to stabilize the company’s financial setup. Companies usually do this by taking on some debt and ‘buying out’ shareholders. The reasons vary, but recapitalization is usually to solve a problem (i.e. too many investors, bad investors, or investors who are sick of waiting for a return and want to get out).

💵 Rolling Funds: a type of VC fund where investors can subscribe to the fund at any time, and regularly pay into the fund via quarterly payments. That’s different from conventional funds, where all investors join up together and nobody’s invited to the party later on. It’s a new type of fund that started in software, and has found it's way into foodtech.


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⭕️ Round: startups fundraise in rounds, where multiple investors participate on an agreed-upon valuation and distribution of shares. Each round, the startup has to buff up their business plan, negotiate terms with each investor, sign agreements with each investor, and go through due diligence. Issuing stock also typically requires sign-off from other investors and the chance for previous investors to participate, meaning a company can’t just take a check whenever an interested investor comes knocking. That’s why investment runs sequentially (Series A, B, C, etc), with each round ideally increasing in size and valuation. 

🏃‍♂️ Runway: see Burn Rate

⛑ SAFE: a Simple Agreement for Future Equity. SAFE agreements lay out a future path to the investor receiving equity, but provide the startup with cash immediately. The SAFE agreement will list the event that will issue equity to the investor (typical trigger events include future financing rounds or the sale of the company). Read about the related Convertible Note above. 

🌱 Seed Round: the earliest funding round, typically with a small number of investors investing in a company that doesn’t yet have a viable product. Pre-Seed is an even earlier-stage spin on the same story. These differ from Series A rounds in that investors don’t yet expect a crystal-clear business plan or advanced proof points of the business. Of course, you’ll still need some indicator you’re on the path to success to secure seed funding.

🤝 Syndicates: a special vehicle to fund startups, where a syndicate is assembled with the sole purpose of funding one specific startup. Syndicates are started by a syndicate lead (typically an experienced investor with a lot of capital), after which any accredited investor can join the investment with a small (minimum $1000) investment. If the syndicate investment later yields a return, the syndicate lead gets a commission fee of everybody’s earnings (somewhere between 5 and 25%). One FoodTech syndicate, FoodTech Angels, earns 15-20% interest on the carried gains of their investment.

📊 Term Sheet: the preliminary, non-binding agreement between an investor and the startup. Term sheets define the valuation for the company, the amount raised, share price, and other rights for the investor.

❓ Valuation: the process to determine how much a company is worth. Valuations are agreed upon between the company and the investor. The company often sets their goal valuation they want investors to agree to, while the investor analysts assess the business and come up with their own number. Valuation can be calculated on an absolute (based only on the company’s earnings and growth) or relative (comparing the company to others in the space) bases. Read More: Valuations in foodtech

⏰ Vesting: the schedule by which shares are issued to a shareholder. All equity shares can vest, no matter who’s receiving them: including cofounders, investors, and employees. For founders and employees, it’s a way to keep folks on board and reward them for their service. Sometimes, that’s after a specific event, but usually it’s a set timetable. For employees, it’s typically a one-year cliff after which stock starts vesting on a monthly basis.  

💸 VCs: venture capital firms are the primary investment engine for startups. They tend to join up once the startup is well-validated, with a strong business plan and established product. VC funds distribute a big pot of cash that’s pooled by various wealthy individuals, investment banks, pensions, and foundations. VCs make money in two ways. First, they earn carried interest, often 20%, when investments make a profit (i.e. a $100M fund earns $110M, the VC earns 20% of the $10M return). Second, VCs earn a management fee each year, often 2% of the value of the fund. VC firms often have an area of focus, and that’s especially true in foodtech. Read More: Most Active VCs in FoodTech

💦 Waterfall Distribution: the ‘pecking order’ by which investors are paid out when an investment produces a return. Waterfall distribution often starts by covering initial investments (put in $1M, get $1M back).


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Everything you need to know about investment terminology.

Blockbuster IPOs. High-rolling acquisitions. Celebrity investors. There’s been a perfect storm accelerating investment in foodtech over the past 12-18 months in particular, with foodtech growing 31% faster than general VC activity in 2020. 

Just last week, we saw:

  • Pre-Seed: $675k to Bite Ninja (restaurant HR tech)
  • Seed: $5M to Nitricity (nitrogen fertilizer production)
  • Series A: $14M to WoodSpoon (home chef food delivery)
  • Series B: $160M to 80 Acres Farms (indoor farming)
  • Series C: $106M to Super Coffee’s parent (better-for-you coffee brand)

But dig in past the headlines, and investment starts to sound pretty complicated. Every investment round is unique, and those involved tend to only share the snappy stuff with the public.

So this week, we’re sharing 30+ of the most important terms for founders and advisors looking to understand the mechanisms of foodtech investment. Get out the flashcards, time to study up 🤓

p.s. This is a 7-minute read - Save the guide for later or strap in for a long-read.


The A-Z of FoodTech Investment


💡 Accelerators
: programs that help early-stage startups grow via expert coaching and intros to investors and strategic partners. Accelerators are fixed-term, cohort-based, and mentorship-focused. Read More: Accelerator Database

✅ Accredited Investor: a high-income investor (individual or institutional) who can make equity investments with less regulation and government oversight. This varies widely by country, but equity investment is regulated differently than publicly-traded stocks. In the USA, the Securities & Exchange Commission doesn’t require complicated investment registration if the company is only taking investment from accredited investors. It’s up to the company to make sure investors are accredited if the company wants to avoid government oversight of non-accredited investors.

🤝 Advisors: an outside expert supporting a startup with strategic advice and key introductions. Usually a pro in one area, like marketing, finance, fundraising, or a specific technology. Compensated either with equity (more common) or cash. Read More: Advisor <> Startup Matchmaking

💸 Angel Investors: the earliest investors in a startup, typically individual investors with checks from $10K -$100K. Angels know the space well and often are highly active advisors in the early days. Read More: Angel Investing 101

📉 Anti-Dilution Rights: future investment rounds ideally increase the valuation of the company. But this isn’t always the case. With this in mind, some investors require an anti-dilution privilege that protects them if future investment rounds have a decreased valuation (a “down round”). These are not required, but an investor might request or demand them in negotiations (particularly if the startup might be over-valued). 

📈 Annual Revenue: the sales coming into a company over 12 months. Simple, yes, but a key piece of the valuation puzzle. Startup valuations typically take AR and multiply it to assess a startup’s value (how that AR is reported varies widely -- could be 12 months trailing, 12 month forecast, or a hybrid). This year’s banner trend in funding is that the multiplier for valuation keeps increasing. While 5-10x used to be typical for high-growth startups, 40-50x is now typical. Read More: Valuations in foodtech

🌉 Bridge Round: typically a tactical, smaller round to extend a startup’s runway or achieve a specific goal before the next, larger round. While it sometimes can be a red flag that a startup is struggling, it’s also common that they just need a fast check for a big initiative or market entry. One recent example: cultured seafood co Shiok Meats closed a bridge round on July 21 to open a new production line, and likely used that capital for their acquisition of Gaia Foods just 20 days later.

🔥 Burn Rate and Runway: burn rate is simply the amount of money a startup is burning, inclusive of all the sales revenue against all operating costs. It’s usually expressed as a $ value lost each month. Burn rate is used to calculate the Runway, which is the length of time before a startup will run out of money. Seed-stage startups should aim for 12-18 months of runway to avoid joining the 29% of startups which fail after they run out of money.

🧢 Cap Table: a record of all the shareholders behind a company, including employees, investors, advisors –– anybody who has a piece of the equity pie. 

💵 Convertible Note: a startup’s earliest money is typically raised by the startup selling ‘convertible notes’ to investors that turn to equity later on. This process is simpler than issuing equity, and entitles the investor to a certain number of shares as soon as a future financing event takes place (or once the startup hits a certain valuation). Convertible notes usually include a discount, meaning the holder of the convertible note gets their shares issued at a lower share price. That’s more bang for their (early) buck than investors joining on later when a proper equity setup is established. Read about the related SAFE agreement below.

🕴 Corporate VCs: many corporations have their own investment arms, including Cargill Ventures, Kellogg’s Eighteen94, or Nestle’s Inventages. Why? Sometimes they’re scouting for strategic partnerships (imagine a global meat operator investing in a sustainable animal feed startup). Sometimes they’re just chasing a big return. It’s a growing space (currently around 10% of all foodtech investment) and a huge focus area for the big players. Read More: Investors Database

🔎 Due Diligence: before investing, investors (especially VCs) will comb through your financial plans and ‘kick the tires’ by talking with customers and your core team. This process used to take a few weeks, including several in-person meetings. But due diligence is less and less of a priority as investment velocity increases. Why? First, lockdown: we’re better at connecting over Zoom than we were 2 years ago, and in-person meetings are still often impossible. Second, it’s a founder’s market, so VCs are hesitant to ask too much or delay the process –– largely because of the outsized impact of Tiger Global, which has thrown out the playbook and invests at a velocity never before seen. That means corners being cut to get checks out, fast.

🥧 Equity Crowdfunding: crowdsourcing startups, where the small-scale private investors also get a small slice of equity. Of course, the small guys don’t get the same privileges as proper investors, and the likelihood of returns is slim. It’s especially popular with women and women of color who have historically been excluded from traditional VC. 

🌎 Impact Investing: incorporating social and environmental returns into an investment strategy. While this term remains popular outside of foodtech, it’s almost redundant in our space. Investors in foodtech are generally aware that the only viable, long-term investments address the environmental and social problems in our food system.

🔔 IPOs & SPACs: how companies convert private stock to public stock, and issue shares for trading among the general public. Provides the company with a boatload of capital and a liquidity event for all investors with shares. Read More: Foodtech IPOs and SPACs Explained.

💰 Liquidity Event: something that enables investors to ‘cash out’ the value of their shares. Typically these are acquisitions, mergers, or IPOs

👩‍💼 Lead Investor: the co-host of the financing party, the lead investor issues the first term sheet, agrees on key points (especially the valuation). It’s impossible to negotiate everything with every investor, so the lead sets the table for the round’s other investors. The lead investor usually writes the largest check, but this isn’t always the case. 

📜 Pay-to-Play: a requirement that investors participate in future rounds, or risk losing certain privileges (usually control over the startup like anti-dilution rights or a vote on liquidation events). These are typically not included in Series A rounds.

▲ Post-Money Valuation: the value of a company immediately after a financing round closes.

▼ Pre-Money Valuation: the value of a company just before a financing round closes. The two valuation types matter when determining the ownership share after funding is complete.

📈 Recapitalization: re-balancing a company’s debt and equity to stabilize the company’s financial setup. Companies usually do this by taking on some debt and ‘buying out’ shareholders. The reasons vary, but recapitalization is usually to solve a problem (i.e. too many investors, bad investors, or investors who are sick of waiting for a return and want to get out).

💵 Rolling Funds: a type of VC fund where investors can subscribe to the fund at any time, and regularly pay into the fund via quarterly payments. That’s different from conventional funds, where all investors join up together and nobody’s invited to the party later on. It’s a new type of fund that started in software, and has found it's way into foodtech.


👀 We're polling FoodHack Readers.

Do you currently invest or want to invest into startups?

Fill in our survey here about your investment appetite for a future piece we're putting together about individuals and private markets.


⭕️ Round: startups fundraise in rounds, where multiple investors participate on an agreed-upon valuation and distribution of shares. Each round, the startup has to buff up their business plan, negotiate terms with each investor, sign agreements with each investor, and go through due diligence. Issuing stock also typically requires sign-off from other investors and the chance for previous investors to participate, meaning a company can’t just take a check whenever an interested investor comes knocking. That’s why investment runs sequentially (Series A, B, C, etc), with each round ideally increasing in size and valuation. 

🏃‍♂️ Runway: see Burn Rate

⛑ SAFE: a Simple Agreement for Future Equity. SAFE agreements lay out a future path to the investor receiving equity, but provide the startup with cash immediately. The SAFE agreement will list the event that will issue equity to the investor (typical trigger events include future financing rounds or the sale of the company). Read about the related Convertible Note above. 

🌱 Seed Round: the earliest funding round, typically with a small number of investors investing in a company that doesn’t yet have a viable product. Pre-Seed is an even earlier-stage spin on the same story. These differ from Series A rounds in that investors don’t yet expect a crystal-clear business plan or advanced proof points of the business. Of course, you’ll still need some indicator you’re on the path to success to secure seed funding.

🤝 Syndicates: a special vehicle to fund startups, where a syndicate is assembled with the sole purpose of funding one specific startup. Syndicates are started by a syndicate lead (typically an experienced investor with a lot of capital), after which any accredited investor can join the investment with a small (minimum $1000) investment. If the syndicate investment later yields a return, the syndicate lead gets a commission fee of everybody’s earnings (somewhere between 5 and 25%). One FoodTech syndicate, FoodTech Angels, earns 15-20% interest on the carried gains of their investment.

📊 Term Sheet: the preliminary, non-binding agreement between an investor and the startup. Term sheets define the valuation for the company, the amount raised, share price, and other rights for the investor.

❓ Valuation: the process to determine how much a company is worth. Valuations are agreed upon between the company and the investor. The company often sets their goal valuation they want investors to agree to, while the investor analysts assess the business and come up with their own number. Valuation can be calculated on an absolute (based only on the company’s earnings and growth) or relative (comparing the company to others in the space) bases. Read More: Valuations in foodtech

⏰ Vesting: the schedule by which shares are issued to a shareholder. All equity shares can vest, no matter who’s receiving them: including cofounders, investors, and employees. For founders and employees, it’s a way to keep folks on board and reward them for their service. Sometimes, that’s after a specific event, but usually it’s a set timetable. For employees, it’s typically a one-year cliff after which stock starts vesting on a monthly basis.  

💸 VCs: venture capital firms are the primary investment engine for startups. They tend to join up once the startup is well-validated, with a strong business plan and established product. VC funds distribute a big pot of cash that’s pooled by various wealthy individuals, investment banks, pensions, and foundations. VCs make money in two ways. First, they earn carried interest, often 20%, when investments make a profit (i.e. a $100M fund earns $110M, the VC earns 20% of the $10M return). Second, VCs earn a management fee each year, often 2% of the value of the fund. VC firms often have an area of focus, and that’s especially true in foodtech. Read More: Most Active VCs in FoodTech

💦 Waterfall Distribution: the ‘pecking order’ by which investors are paid out when an investment produces a return. Waterfall distribution often starts by covering initial investments (put in $1M, get $1M back).


👉 TLDR: Don't have time to read everything? Find our guide online to refer to later.

👉 Share this: If you enjoyed the read, forward this email to fellow founders or share this on social and tag @foodhack :)

👉 Poll: Fill in our survey about your investment appetite for a future article we're putting together (takes 2 minutes)

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