In 2024, several high-flying agri-tech start-ups, such as AgBiome, AppHarvest, Bowery and Small Robot Company suffered a reversal of fortune when funding dried up and their offerings couldn’t scale. AgFunder’s trackers indicate that investment funding halved from 2022 to 2023, and further contracted in 2024. It’s becoming more apparent that the classical venture capital investment models don’t work for agri-tech, as the long timescales needed to prove a technology in the field don’t align with the shorter-term needs of VCs; this is particularly true for hard-tech start-ups. Alternative funding mechanisms, based on longer-term corporate investment and private equity, are now proving to be more appropriate. How can other agri-tech innovators avoid a similar fate in 2025? Our Chief Technology Officer, Alun James, says direct engagement with farmers is vital to ensure solutions meet their needs:

“My discussions with farmers has educated me that many of them are no longer chasing the traditional industry norm of year-on-year increases in yield. They’re looking to the longer term and seeking ways to maximise profit, even if that means lower yields and less revenue, as that’s what puts food on their family’s table.”

Labour scarcity and the production of high-quality, affordable food for growing populations are enduring concerns of the agricultural sector. Agri-tech has an important role to play here. However, strategic investment in three leading agri-tech categories will only continue if there is clear, demonstrable value to farmers. Unfortunately, evidence of return on investment (RoI) is particularly challenging for the agri-tech sector, as we discuss below.

Agri-tech’s RoI challenge

A farm is not a laboratory or a factory. Different farms grow different crops on different soils and care for different animals in different environments. Unpredictable weather patterns add to this complexity and are becoming more pronounced as climate change bites. With so much variability and random fluctuations, it can take many years of in-field operation to prove the value of agri-tech solutions.

One way to address this inherent variability is to grow crops and other sources of protein via controlled environment agriculture (CEA). Over the last ten years, we’ve seen a move to create indoor (e.g. glasshouse) and vertical farms. This enables precise control of fertilisers and feeds, water, pesticides, lighting, atmosphere and other inputs. CEA also allows fresh produce to be delivered to city dwellers from a small footprint, over a much longer season, thereby reducing food miles and reducing food waste.

Low interest rates during the Covid pandemic encouraged a proliferation of investment into CEA, but recently there have been several high-profile collapses in the sector (AppHarvest, AeroFarms, Bowery, etc.). The slightly higher costs of produce have been rejected by some food buyers, and the rise in interest rates is making the capital costs required to scale CEA infrastructure prohibitive.

Nevertheless, some agri-tech categories could become more viable over the coming years as technology costs fall. We anticipate that this will be the case for automation and robotics as their use scales across the sector. Digital insights will also become more readily available as AI-powered agri-tech solutions start delivering value. The critical success factor here will be relevant parties’ recognition that a shared data (and value) model is vital. Data silos – across farmers, distributors, academics, government and industry – are a barrier to success.

A biotech revolution is coming

Alun believes the next big growth area will be biology.

“We saw a chemical revolution in agriculture 50 years ago, enabling farmers to double yield without doubling costs. However, those benefits have plateaued, environmental awareness has increased, and public acceptance of chemical solutions is in decline. Government regulation, particularly in Europe, is now significantly restricting chemical applications.

“Biology offers a solution for the next step change, but it must be carefully managed. The advent of precision breeding programmes enabled by CRISPR and other gene monitoring systems holds great promise. Advancements in biologics and improved understanding of the microbiome also offer wide-ranging, alternative means of yield improvement and pest control, as evidenced by the agrichem majors partnering with biotech start-ups, although several of the investment darlings, such as AgBiome, have not survived. We are on the cusp of a biotech revolution, but, as ever, the proof will be in the farmer’s profit.”

Sagentia Innovation’s agri-tech specialists hold a wide range of science and engineering expertise combined with deep knowledge of the agricultural sector. Find out more about our agri-tech services and solutions we’ve delivered across agricultural automation and precision here.