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Investors Interest in Consumer Products Startups Surged Amid Covid-19

Consumer products startups saw funding jump in Q1’20 while fintech industry witnessed one of the worst quarters in years.

Consumer products funding was up 36% quarter-over-quarter, garnering $3.3B across 366 deals. Q1’s surge was largely driven by mega-rounds in the alternative proteins, gaming, and fitness spaces. 

Lets have a look at the consumer products areas that have seen the most growth amid Covid.

1. Food and beverage

Food and beverage startups saw funding soar in Q1’20, raking in $1.3B — more than double the dollars compared to the prior quarter — across 106 deals. 

Sustainability and health remained top of mind for investors, with Impossible Foods’ $500M Series F coming in as one of the largest deals of the quarter.

Alternative protein companies are looking to scale as they see tailwinds from meat shortages and challenges at production factories: Impossible Foods has previously highlighted ambitions to expand to Asia.

It is a company developing plant-based substitutes for meat, dairy, and fish products situated at Redwood City, California, United States while the cultured meat company Memphis Meats raised $186M in its Series B this year to build its first production facility. Beyond Meat is planting The Future of Protein. NextProtein is developing a new large scale technology that produce a sustainable source of protein.

Protein fermentation technology and baby nutrition garnered a great interest among investors. Sustainable protein company Nature’s Fynd closed an $80M Series B in March, while direct-to-consumer baby food brand Little Spoon raised $10M in February. 

Microbiome health- and energy-boosting solutions also captured investor interest in Q1. Companies like Olipop,US beverage brand raised nearly $10m in Series A funding.With its new financing, Olipop will focus on sales and marketing, product innovation, its direct-to-consumer business and strengthening the appeal and awareness of digestive health across the US. Coffee creamer maker Laird Superfood seals $32m funding led by tech firm WeWork: ‘We intend to have products in every aisle of the grocery store,’ says CEO

2. At-home fitness

The at-home fitness sector benefited from Covid-19 in Q1’20, as funding more than quadrupled from the previous quarter.

India-based holistic health platform Cure.fit raised $110M in another one of the quarter’s mega-rounds, underscoring the trend of digital health coaching. Personalized coaching platforms emerged, with virtual care company Vida Health closing a $25M Series C-II in April.As people remained self-quarantined due to Covid-19, fitness wearables startups offering connected at-home health and wellness solutions saw increased interest. 

3. Gaming

WHO has been encouraging people to stay at home and play video games. Many game stores are giving away access to premium stuffs for free or giving away huge discounts. Roblox, which allows people to design virtual worlds and play in other user-created environments, raised $150M in its Series G at a $4B valuation, while mobile game development studio Scopely closed one of the largest deals of the quarter with its $200M Series D-II in March.

Livestreaming continued to pick up steam, reflected in deals to Genvid Technologies, which builds development tools for interactive livestreams, and Boom.tv, which is a 3D livestreaming platform. 

As e-sports continues to gather a greater audience, startups having e-sports engagement will likely attract investor attention. 

4. Home goods

Home goods funding increased in Q1’20, especially to D2C startups, as people remained locked down at home. D2C home linens startup Brooklinen gathered $50M in a growth equity round in March, while D2C home products startup Resident raised $13M in a Series A in January. 

Other highlights to take note of include smart mattress and robotic furniture startups, which saw deals in Q4’19.

On the flip side, sectors like beauty, household essentials, and apparel saw activity slow as Covid-19 intensified. As categories like beauty and apparel experienced sales slumps due to shelter-in-place orders, investors shifted their focus away from startups in this space.

In the household essentials sector, consumers are relying on big brands that have proven value and performance over years.

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Also Read:Why Do 90% of startups fail?

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