The Rise of Ag Biologicals: Opportunities and Challenges in Investment

Gustavo Mamao, head of international business development at IdeeLab, the foremost Brazilian contract development and manufacturing organization (CDMO) in ag biologicals, explores the dynamic landscape of agricultural biologicals and the evolving investment thesis surrounding this promising sector. The views expressed in this article are the author’s own and do not necessarily represent those of AgFunderNews.

Understanding Ag Biologicals

In recent years, ag biologicals—products derived from natural inputs such as microbes, plant extracts, or biochemicals—have garnered significant interest. These products aim to enhance crop protection, soil health, and plant growth. Market forecasts indicate consistent double-digit growth for this sector, projecting the global market to increase from $13.6 billion in 2024 to $24.6 billion by 2030, according to DunhamTrimmer.

Historical Context

Two decades ago, I co-founded a biological control company in Brazil, stepping into largely uncharted territory. At that time, the concept of ag biologicals lacked recognition, resembling more a chemical pesticide venture in both perception and regulatory approach. With a vision and the scientific expertise of my co-founder, we built our enterprise from the ground up, eventually proving the efficacy of our products and attracting significant investment.

Investment Landscape for Ag Biologicals

Reflecting on my journey, I question the absence of a robust investment thesis for ag biologicals today. Current challenges include the decline in venture capital in agrifoodtech, evidenced by the lowest funding levels since 2015 in the first half of 2025, as noted in a recent AgFunderNews article.

Deconstructing Agrifoodtech

To effectively craft an investment thesis for ag biologicals, we must dissect the agrifoodtech sector further. Many distinct ventures currently intermingle under the agtech umbrella, but biological product discovery aligns more closely with pharmaceutical development than with ag robotics. Recognizing this divergence is crucial for cultivating meaningful investment opportunities.

Essentials of Ag Biologicals Development

A clear framework of product innovation is essential for analyzing ag biologicals. The development process generally includes:

• Discovery and Validation: Initial scientific understanding leads to product application testing, including field trials.
• Regulatory Approval: Companies must navigate specific regulatory requirements, often based on existing chemical frameworks.
• Go-to-Market Strategy:
  • Soft Launch: Building farmer confidence takes time, often requiring two to three years of positive trial outcomes.
  • Full Launch: Once a product demonstrates success, establishing distribution channels becomes paramount.

Innovations Shaping the Future

Moreover, advancements in synthetic biology are unlocking new avenues for biological product development. However, higher regulatory barriers can extend timelines for capturing value, demanding substantial capital infusion.

Investor Perspectives: Aligning Goals and Expectations

Early-stage ventures in ag biologicals inherently come with risks and uncertainties. Nonetheless, the opportunities for significant returns do exist. As an industry matures, the likelihood of avoiding loss becomes more plausible, implying investors may need to recalibrate their return expectations.

Investment Benchmarks

Ag biological investments are unlikely to yield billion-dollar exits soon, making high-return outliers less common. However, through strategic alignment and patient capital, the prospects for moderate intermediate returns (around 5x) become more realistic. Key milestones for successful exits include:

• Obtaining regulatory approval in significant markets (e.g., US, Brazil, Europe).
• Building a solid reputation through successful soft launches.

Navigating Challenges in Ag Biologicals

Challenges persist across the ag biological landscape, necessitating a carefully tailored investment thesis:

• Slow Product Adoption: Unlike CPG products that can market quickly through trends, trust with farmers is built over time. A well-executed education effort can foster long-term adoption.
• Distribution Fragmentation: Agriculture is relationship-driven. Understanding local markets and establishing trust with key opinion leaders is crucial for distribution success.
• Regulatory Complexities: Companies must be prepared for lengthy regulatory processes while securing experienced advisors to navigate these waters smoothly.

Conclusion: Unlocking Ag Biologicals’ Potential

To truly harness the potential of ag biologicals, investors need not only chase the largest exits but also align their expectations with the sector’s unique dynamics. Focusing on promising niche sectors, fostering strategic partnerships, and allowing for a longer timeline can lead to sustainable and rewarding investments in this rapidly evolving field.