Guest article: Agtech poised for a rebound in 2025?

Guus Hovius is executive director, equity private placement, at Rabobank North America.

Josh Bean is associate, equity private placement, at Rabobank North America.

The views expressed in this article are the author’s own and do not necessarily represent those of AgFunderNews.

In 2024, the agtech landscape remained complex, with high interest rates, less favorable trading conditions for public agtech companies (in comparison to other tech sectors), and challenging exit opportunities posing significant hurdles for companies seeking capital.

This creates challenges for investors in realizing returns and raising new funds from their institutional partners, ultimately adding more complexity for companies seeking capital.

These conditions pushed investors to focus more on companies with commercial traction and a path towards profitability.

However, as the economy continues to rebound and interest rates are cut, the agtech market can anticipate new capital inflows and a return to pre-COVID-19 normalcy.

Despite the widespread challenges listed above, Rabobank has identified multiple themes that remained resilient in 2024: AI and autonomous solutions, precision agriculture, gene editing, and sustainability innovation. These themes are largely driven by an increased traction from impact investors with a strong sustainability focus driven by global challenges as food security and climate change.

Robotics and AI can greatly enhance farm productivity, reduce costs, and improve precision of crop management tasks (e.g., spraying, weeding).

Currently, the sector is fragmented, with many startups developing specialized machines. While a fully autonomous digital ecosystem is still in development, early solutions are already improving efficiency in repetitive tasks. Adoption will take time; as of July 2024, 87% of commercialized agricultural robots are owned by startups and scaleups, suggesting future consolidation as effective and easy-to-implement solutions gain interest.

Precision agriculture is addressing numerous issues at the farm level, such as operational inefficiency, tighter labor markets, and sustainability metrics. This technological advancement ranges from digital tools and applications to promote stronger efficiency on-farm to fully autonomous systems and machines. Companies offering tools with low capital expenditures and overhead costs have shown the most promise. In a recent Rabobank analysis of 132 new product announcements in the agriculture space, 74% mentioned improvements in farm productivity, and 62% included references to smart technology, indicating strong demand at the farm level.

Gene editing in both plants and livestock is showing significant promise, offering the potential to enhance crop yields, improve disease resistance, and increase nutritional value.

However, further regulatory approvals are needed to advance the market and ensure the safety and efficacy of these technologies. Currently, plant gene editing is more advanced, with several successful applications already in use in market.

Sustainability has also continued to advance as a key topic in the agricultural space. For example, in 2025, the Corporate Sustainability Reporting Directive (CSRD) will require large and listed SMEs in the EU to report on sustainability impacts, risks, and opportunities. While most farmers and growers are not directly subject to these standards, they will be indirectly affected by buyers or suppliers seeking data and insights from their value chains.

In the U.S., the full impact of the new administration remains uncertain, but Rabobank maintains that the need for innovation will drive value in the U.S. industry as well. Consequently, there is increasing demand at both the farm and corporate level for technology and tools for carbon MRV, traceability, and ingredient / crop optimization.

Overall, we expect to see a rebound in the agtech market, particularly for emerging companies that are providing innovative/advanced solutions and strong commercial traction.