If 2024 was a year of market corrections and recalibration, 2025 could be a year of “chaos,” “uncertainty” and “short-term decision making,” predict agrifoodtech investors quizzed by AgFunderNews at the start of the year.
“Protectionism combined with investors seeking a faster cash return will lead to short-term decision making, while higher tariffs will likely push [interest] rates back up if markets are impacted,” warns Mark Durno at early-stage investor Rockstart. “And continued political instability will put pressure on commodity markets.”
At base, says Dave Chen at growth-stage investor Equilibrium Capital, there is a disconnect between “the need for globalization in our food system and the move to nationalism, protectionism, and trade barriers.” As we have already seen this week, meanwhile, “Tariffs don’t need to be enacted for the threat to have disruptive results,” he adds.
It’s early days, but there are also concerns that the Trump administration could create “chaos” at the FDA and “further complicate regulatory frameworks and approvals for new bio-based food ingredients,” predicts Gil Horsky at early-stage investor Flora Ventures. Meanwhile trade wars and conflicts in the Middle East and Eastern Europe could further disrupt supply chains that are already challenged by rising costs, extreme weather events and recurrent bouts of avian flu, he warns.
‘There is still capital in the market’
That said, “There is still capital in the market, albeit investors will be much more selective,” says Durno at Rockstart. “Most new or second/third generation funds are closing at only two-thirds the size that we saw in 2021/2022, driving a more conservative approach to investing than we have seen in previous years.”
Deals are getting done, adds Michael Lavin at early-stage investor Germin8 Ventures, although he expects to see “valuations coming down further or at least remaining where they are, as startups navigate what may feel like a capital drought. I also think 2025 will bring more consolidation, driven by good cases for combined offerings and distressed M&A.”
While there may be some “notable, category-defining exits in the next year, we’re probably still some time away from agrifoodtech exits and their valuations being frequent and repeatable,” he adds. “Some specialist investors are widening their sector apertures to yield more shots on goal, a trend that may continue in 2025.”
As to where we are in the current funding downcycle, 50% of respondents see signs of recovery vs 36% expecting “more pain to come,” with the remainder unsure or seeing a “bright” 2025 for startups in the space (with the caveat that this is a survey of 14 agrifoodtech investors, without statistical significance).
What’s hot and what’s not in agrifoodtech investing…
While gene editing and biologicals are exciting, these innovations may take years to come to market, while robotics could be “more expensive to scale than we think,” notes Durno at Rockstart. Water tech is also in danger of being overhyped, he says, “because there are only a few players who can really scale and monetize it.”
AI is “obviously a key tech disruptor,” says Horsky at Flora Ventures. “But there is a real risk of it being overhyped in industries such as agrifood. Today every startup in the field claims it uses AI and that’s its secret sauce, while using AI is becoming a basic hygiene factor for just competing in the playing field.”
That said, we should not throw the baby out with the bathwater, says Lavin at Germin8. “I actually don’t feel like AI has been overhyped in ag. There are some companies attaching themselves to the AI trend who really shouldn’t. But I think there’s a lot of missed opportunities for agrifoodtech startups to better incorporate AI to make them more competitive, do the jobs too complex for software, and possibly increase revenue per customer by 2-5x, much like how fintech previously scaled vertical SaaS.”
According to Durno at Rockstart, “Sincere ag and food VCs will be more nuanced around water technology, natural ingredients, bio-based materials, soil/plant health and tangible drivers for carbon credits such as biochar. Investing in farmland will increase, as will sales of small-medium farms that struggle under new regulatory, taxation, and trade pressures. Biodiversity is still a fairly open trend, and we expect to see some more detail coming to the tech thesis in 2025.”
Jaap Strengers at early-stage investor Future Food Fund, meanwhile, expects to see “the early emergence of potential winners in fermentation-based ingredient production,” while Mark Kahn at India-focused investor Omnivore expects to see the “first agritech IPOs in India” this year.
The Ozempic effect…
The rise of GLP-1 drugs doesn’t necessarily mean consumers are looking for ‘tech’ solutions, with many food companies instead seeing an opportunity to reframe existing products as “companion” foods. However, for those unable to afford or sustain usage of these drugs, we are seeing a “massive, untapped opportunity for the food and supplements industry to step in with innovative, next-gen oral products and ingredients [that boost satiety],” claims Horsky at Flora Ventures.
“The future of weight management might not be in pricey injections, but in accessible, powerful food alternatives that fit seamlessly into consumers’ lives.”
As for biomanufacturing, he says, the smart money is on foundational enabling technologies that help the broad swath of companies in this space increase efficiency and lower capital costs.
Antony Yousefian at early-stage investor The First Thirty, meanwhile, expects to see firms focus on benefits that are tangible for the end consumer: “Health over climate, a focus in tech for health, human health in food, including animal health, plant and soil.”
When it comes to funding, respondents predict continued investment in bioenergy and biomaterials, insurance, supply chain visibility and risk management, and climate adaptation tools. Investment in ag marketplaces and fintech will be “spurred by advances in AI and a maturing Ag software landscape that now make it possible to correct antiquated systems and certain distortions present in the agrifinance landscape and capital markets,” says Lavin at Germin8 Ventures.
Investors’ pet peeves:
As for pet peeves, what brings out investors’ inner Grinch?
“Founders who refuse to face the music, with high expectations for valuations and false notions about the fundraising landscape.” Yanniv Dorone, Fall Line Capital
“Companies that ignore good advice to reduce cash burn who finally realize their mistake and ask existing investors to bail them out.” David Pierson, Syngenta Ventures
“Founders who send quarterly updates focused on their food tech conference speaking ‘traction’ and how they have spent the money rather than updates on gaining customer traction and routes to real business performance.” Andrew Ive, Big Idea Ventures
“Some institutional LPs are not looking at the entire picture to continue backing the early stage funds and deals. They need to be the ones with the long-term perspective. No early stage = no later stage opportunities = less returns and impact.” Mark Durno, Rockstart
“Startups, even some without a tech driver, are still seeking silly valuations. This is a bad habit of early-stage investors and founders that will invariably lead to corrections in later rounds.” Mark Durno, Rockstart
“AI startups presenting their case as if it is the only one on the market.” Mark Durno, Rockstart
“Why are so many investors obsessed about founder ownership >>50% after whichever early-stage investment round in a world where many cap tables are not perfect and founders will not necessarily work that much harder for, say, 5 or 10% more ownership?” Jaap Strengers, Future Food Fund
“What annoyed me most about 2024 was the rampant misuse of AI in pitches and messaging.” Stephanie Dorsey, E²JDJ
“Carbon market business models.” Antony Yousefian, The First Thirty
2024 agrifoodtech investing in three words:
Asked to summarize agrifoodtech investing in 2024 in three words, here are some of the responses we received:
- Dreams meeting reality
- Market corrections, ouch!
- Dead cat bounce
- Uncertain outlook persists
- Badass, resilience, perseverance
- Optimistic but cautious
- Resilience amid uncertainty
- Hit the bottom
- After the hype
- Unoriginal, slow, and disappointing
- Wading through treacle
The most surprising things about 2024 in the agrifoodtech industry:
“I was surprised how quickly generalist investors and LPs left the agrifood space. As a sector fund, we have always understood that the agrifood transition thesis will take time so we hoped for more patience from impact driven investors.” Mark Durno, Rockstart
“Still quite high valuation multiples paid despite lack of proof for exit multiples to justify this.” Jaap Strengers, Future Food Fund
“Surprised me how quickly so many of the specialized agrifoodtech funds repositioned to become ‘climate funds.’” Gil Horsky, Flora Ventures
“There’s still considerable exciting activity at the seed stage, but a widening gap is emerging between companies that have validated their technology and those that have secured the resources needed to scale. In 2025, we will concentrate on assisting our companies in scaling up, focusing not only on securing funding but also on providing essential resources and building valuable relationships. Customers and a demand runway are key to unlock the resources for scale.” Andrew Ive, Big Idea Ventures
“In 2024, regenerative agriculture transitioned from a niche concept to a mainstream strategy, gaining widespread adoption among farmers, corporations, and policymakers. Despite an overall decline in agrifoodtech funding, regenerative agriculture saw substantial growth and major companies like Nestlé and PepsiCo are now integrating regenerative methods into their supply chains.” Stephanie Dorsey, E²JDJ
“With private and public company valuations falling precipitously from the highs of 2021, funding shortages and declines in deal activity, it was a surprise we didn’t see more consolidation among startups. I suspect in 2025 we’ll see more consolidation, driven by both distressed M&A and the opportunities to augment offerings, especially where there is vertical software with strong product-market-fit and growth.” Michael Lavin, Germin8 Ventures
“I was surprised by overinflated valuations and the willingness of some investors to explore new versions of failed technologies.” Paul Rous, Natural Ventures
What world events are investors concerned about?
“The potential for a significant rise in zoonotic diseases and the spread of illnesses among animals within the food system.” Andrew Ive, Big Idea Ventures
“Potential trade disputes and tariffs could disrupt supply chains and limit access to essential resources. Tariffs on agricultural commodities and equipment may hinder startups’ ability to innovate and scale effectively. As market conditions become more unpredictable, securing funding could become increasingly challenging for emerging companies in the sector.” Stephanie Dorsey, E²JDJ
“Potential for proliferation of tit-for-tat tariffs that affect the price and flow of ag inputs and commodities if the Trump administration follows through as threatened.” David Pierson, Syngenta Ventures
Further reading:
Farmers sound alarm on anti-seed oil rhetoric and escalating trade tensions
Tariff whiplash: Uncertainty is driving inefficiencies in CPG supply chains, says consultant
USDA nominee promises financial aid to farmers to offset “devastating” impact of a trade war
