The agrifood sector continues to face an investment slowdown, but a convergence of macroeconomic factors — including labour challenges — might bode well for the future of agtech as farmers seek innovative solutions to market realities, Alex Frederick, lead research analyst at PitchBook, told AgTechNavigator.
Frederick was one of two authors of a 27-page market report on agrifood investment trends that shared insight from 329 asset managers in both venture capital (VC) and private equity (PE) for the first half (H1) of 2025. The PitchBook report defines agrifood funds as encompassing agtech, food tech, and consumer packaging good brands.
Among the topline statistics, VC fundraising in agrifood dropped 65% in H1 2025 from its peak in 2022, PitchBook reported. Additionally, the average size of new VC funds declined to $35.4 million in H1 2025, compared to $72.9 million in 2022.
Additionally, emerging VC firms are largely responsible for new agrifood fund launches, as the sector continues to shed the remaining investors who bought in during the hype cycle, Frederick noted. Emerging VC firms closed five of the six funds in H1 of 2025, PitchBook reported.
As VC funding dwindles, PE “has really positioned agrifood as more of a defensive investment, especially during all this macroeconomic uncertainty,” and remained relatively resilient in recent years, Frederick explained. PE fund counts remained steady from 2023 to 2024, despite PE capital dropping from $4.8 billion to $2.9 billion, PitchBook reported.
“We compared emerging and incumbent managers and saw pretty strong dominance of emerging managers. 81% of annual fund closures were emerging managers. ... It underscores the recent expansion and influx of specialized expertise into the space but also speaks to the limited institutional scale and experience during challenging market conditions,” Frederick noted.
PitchBook’s latest data follows the market research firm’s report on VC agtech funding in the second quarter of 2025, which similarly showed a downtown in funding activity for the sector, AgTechNavigator previously reported.
What’s next for agtech: Growth or consolidation?
Agtech might be “the most nascent space” out of agrifood sector, but the segment has “the strongest tailwinds for innovation,” given the need to feed a growing global populace and macroeconomic factors, Frederick pointed out.
U.S. farmers are paying for higher costs for crop inputs and ag machinery due to uncertainty around trade policy, putting capital expenditure investments on hold, as AgTechNavigator previously reported. Despite these rising costs, farmers might be pushed into investing in agtech solutions do the reality of not having enough labour to tend to the fields, Frederick admitted.
“There is a pretty significant percentage of startups needing capital injections soon. We will likely see greater consolidation. ... We may start seeing more distressed sales of companies, as they run out of capital.”
Alex Frederick, lead research analyst at PitchBook
“Many farmers are stuck trying ... to navigate through a hierarchy of very challenging issues. And cost is one of them but also having the tools and resources and labour to actually perform the farming work needed to maintain the farm, the crops, harvest and process the yields at the end of the season. And so, automation equipment may be expensive, but if they do not have labour to work the fields, it is essential,” Frederick said.
Farmers might need to adapt more agtech, but this increased demand might not be enough to buoy startups that need funding now. Amid the capital crunch, high interest rates, and funding slowdown, the agrifood sector might experience more consolidation, Frederick noted
“There is a pretty significant percentage of startups needing capital injections soon. We will likely see greater consolidation. ... We may start seeing more distressed sales of companies, as they run out of capital,” he elaborated.
