The year 2024 brought about market corrections and recalibrations in the agrifoodtech industry, setting the stage for what investors predict to be a year of chaos, uncertainty, and short-term decision-making in 2025. With protectionism on the rise, investors seeking quicker returns, and potential trade wars looming, the landscape for agrifoodtech startups is looking tumultuous.
According to early-stage investor Mark Durno at Rockstart, political instability and higher tariffs could lead to short-term decision-making and put pressure on commodity markets. The move towards nationalism and protectionism is creating a disconnect with the need for globalization in the food system, as highlighted by Dave Chen at Equilibrium Capital.
The potential chaos at the FDA under the Trump administration and disruptions in supply chains due to trade wars and conflicts in the Middle East and Eastern Europe are also causing concern among investors. The challenges posed by rising costs, extreme weather events, and avian flu outbreaks further compound the uncertainty in the industry.
Despite the challenges, investors believe that there is still capital in the market, albeit with a more conservative approach to investing. Deals are still being done, although valuations may come down as startups navigate what could feel like a capital drought. More consolidation and distressed M&A are expected in 2025 as startups seek to weather the storm.
In terms of what’s hot and what’s not in agrifoodtech investing, gene editing, biologicals, robotics, and water tech are all areas of interest, with AI being a key disruptor. However, there is a risk of AI being overhyped, and investors are looking for startups to better incorporate AI to remain competitive.
Looking ahead, investors anticipate the emergence of potential winners in fermentation-based ingredient production, as well as the first agritech IPOs in India. The rise of GLP-1 drugs presents an opportunity for the food and supplements industry to create innovative, next-gen oral products that cater to consumers looking for weight management solutions.
Overall, investors predict continued investment in bioenergy, biomaterials, insurance, supply chain visibility, and climate adaptation tools in 2025. While the year may be marked by chaos and uncertainty, there are still opportunities for innovative startups to thrive in the evolving agrifoodtech landscape. Investment in ag marketplaces and fintech is on the rise, fueled by advances in AI and a maturing agricultural software landscape. These developments are correcting antiquated systems and distortions present in the agrifinance landscape and capital markets, according to Lavin at Germin8 Ventures.
However, not all investors are thrilled with the current state of affairs in the agrifoodtech industry. Some of their pet peeves include founders who have unrealistic expectations for valuations and fundraising, companies that ignore advice to reduce cash burn and then ask for bailouts, and startups that focus on superficial metrics rather than real business performance.
In 2024, agrifoodtech investing can be summed up in three words: dreams meeting reality, market corrections, and uncertainty persisting. Some investors were surprised by how quickly generalist investors and LPs left the agrifood space, the high valuation multiples being paid without proof of exit multiples, and the shift of specialized agrifoodtech funds to become climate funds.
Looking ahead, investors are concerned about potential world events such as the rise of zoonotic diseases, trade disputes and tariffs disrupting supply chains, and the impact of tariffs on agricultural commodities and equipment. These factors could make securing funding increasingly challenging for emerging companies in the sector.
In conclusion, despite some challenges and surprises in 2024, the agrifoodtech industry continues to show resilience and potential for growth. As we move into 2025, investors will be looking for opportunities to scale up companies, navigate uncertainties, and drive innovation in the agricultural sector.
