Where is the funding for food waste?

If you didn’t read Part 1 and don’t have the time to catch up - don’t sweat it, we forgive you, and have taken the liberty of condensing last week’s 1000+ words into a neat summary below 👇

TL;DR: The MENA region is one of the worst offenders in food waste globally, yet relies heavily on food imports to sustain its growing, youthful population - unsustainable in more ways than one.

That being said, last week, we did conclude on a positive note.

Although progress has been slow, the UAE and Saudi Arabia have committed to ambitious targets that if achieved, will reduce food waste by 50% by 2030. Similar initiatives have also been launched in Jordan, Egypt, and beyond.

While easier said than done, these are crucial steps forward. Without government leadership on food loss and waste, enacting meaningful change across the food chain will prove a titanic struggle.

Local startups should be uniquely positioned to help further accelerate the progress being made.

Last week, we looked at Barakah and how they’ve adapted the surplus meal-to-consumer model to fit the Saudi cultural context.

And they’re by no means alone.

There are several MENA-based startups tackling food waste at multiple stages of the food supply chain - though fewer than one would hope, given the scale and outsized adverse impact of the problem.

But before diving into the potential reasons for this, let’s break down how each of these startups is working to reduce food waste at different stages of the food supply chain.

🥊 Fighting the good fight

While Barakah tackles surplus meals in Saudi Arabia, Tekeya in Egypt and Foodeals in Morocco address similar challenges with leftover food from restaurants and retailers.

In the UAE, Daniel F. Soloman’s HeroGo is stepping in to address food loss that occurs further upstream.

Supermarkets often reject perfectly good fruits and vegetables simply because they don’t meet conventional aesthetic standards.

Similar to Misfits Market in the US, HeroGo uses a subscription-based platform to help farmers and importers recover value from 'ugly food' that would otherwise go to waste. This model allows consumers and businesses to save up to 30% on grocery expenses.

As of August 2023, HeroGo had 7,000 subscribers and began offering corporate subscriptions last year, supplying boxes to multinationals like HSBC, TotalEnergies, Arla, and Signa Group.

The company plans to extend its service to the F&B industry, and also intends to diversify beyond fresh produce into dried and non-chilled foods.

They’re in talks with supermarkets to identify other at-risk food staples for inclusion in their delivery service.

The ultimate goal is to expand their offerings to include dairy and frozen foods, with a target of listing at least 3,000 items on their platform, up from just a few hundred now.

Investors are starting to take notice. HeroGo just graduated from Oraseya Capital’s Sandbox accelerator, receiving a $150k investment, and followed that up in quick succession with an undisclosed investment from AngelSpark.

Circa Biotech, Edama Organic Solutions and The Waste Lab focus on environmentally friendly waste processing.

Waste segregation and recycling in the UAE are still at the very early stages.

Set up a little over a year ago by co-founders Lara Hussein and Ceylan Uren, The Waste Lab works with both businesses and households, offering affordable and accessible food waste segregation, collection, and composting tools, as well as the ability for impact to be measured through a digital dashboard for real-time data and impact reporting.

Saudi startup Edama Organic Solutions similarly recycles food waste, but to create a product called Desert Compost.

A premium soil enhancer, it significantly boosts sandy soil fertility, potentially increasing yields by 100% and cutting water usage by 75%.

They recently signed a deal with SIRC, to form a new joint company to develop organic waste recycling in The Kingdom.

Abu-Dhabi based Circa Biotech farms black soldier fly (BSF) larvae. Organic waste is diverted from landfills and upcycled by the insects to produce high quality protein suitable for poultry and farmed fish, as well as organic fertilisers, and sustainable biofuels.

Last month they expanded their strategic partnership with Abu Dhabi Agriculture and Food Safety Authority (ADAFSA) and Spinneys, after a successful 6-month trial that saw them divert 54% of food waste from landfill, and then upcycle it.

At the household level, Saudi startup Uvera is developing an appliance called Aurora, which uses UV-C light and vacuum sealing to extend the freshness of food by up to 97%.

The results are impressive—vegetables last 141% longer, fruits 123% longer, and meats 33% longer, all without the use of chemicals.

Uvera also seems set to introduce a new supply chain solution called Foodline, which will focus on fresh food management and spoilage prediction.

⛰️ But why is it so hard to raise funding?

🏆 Success stories matter

The startups above aren’t necessarily reinventing the wheel when it comes to food waste, but that’s not a bad thing.

Food waste is a global issue, and MENA lags behind other regions in addressing it.

Adapting successful global solutions and business models to fit the local cultural context is simply the smartest approach.

That’s not to say it’s easy—it’s far from it, especially when it comes to food waste, where regional attitudes differ significantly from those in the US and Europe.

For instance, a surplus meals marketplace like Too Good To Go operates successfully in Europe but it would face very different challenges here.

To that end, as we discussed last week, Barakah has adeptly localised its surplus food offering for the Kingdom, appealing to religious, cultural, and financial considerations. With over 1 million users and plans for GCC expansion, Barakah is well-positioned for growth.

Too Good To Go’s success - operating in 17 countries with 80 million users and €102M in annual revenue - provides a valuable playbook and helps validate the business model in investors' eyes.

It’s no surprise that Barakah is the best-funded startup among those covered.

Likewise, HeroGo can draw inspiration from both East and West.

Singapore-based TreeDots, which focuses on B2B distribution of surplus and imperfect food supplies in Southeast Asia (Series A - $15 million), Nordics-based Motato, a D2C e-commerce retailer specializing in overstock dry foods and consumer products (Series D - €130 million), and US-based Misfits Market, the leading D2C platform for selling 'ugly' produce and surplus groceries (over €530 million raised), are all relevant touchstones for HeroGo as it scales and diversifies its product offering.

While making the unit economics work in e-grocery is notoriously difficult, HeroGo has momentum, and investment is beginning to flow.

🔮 Outlook

Looking at the landscape as a whole, it’s clear why regional VCs might be hesitant.

Securing a return on investment is never guaranteed, but investing in startups with proven models that have secured an exit invariably increases the likelihood of success.

It may simply be too early for many VCs in the region to take a chance.

The good news is that investment in climatetech is on the rise in the region, growing by 40% year-on-year in 2023. Agtech, carbon capture, and climate management platforms are particularly attractive to VCs.

And this trend isn’t slowing down. The Dubai Future District Fund committed up to $54.5 million before Christmas, VentureSouq has an active climatetech-focused fund, and US VC Princeville Capital plans to invest $50 million in MENA climatetech startups over the next five years.

MENA-based startups tackling food waste are making significant positive impacts, particularly in raising awareness of the scale of the problem.

To drive real change at scale, stronger partnerships between foodtech businesses, regulatory authorities, and all participants in the food supply chain will be pivotal.

There’s no time to waste.

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