VCs are prioritizing quality later-stage agtech companies over riskier early-stage start-ups, as total deal count and investment dollars decline in the third quarter (Q3) of 2025 — establishing a new floor — market research firm PitchBook shared in a quarterly report.
In Q3, VCs deployed $1.3 billion over 117 transactions, compared to $1.5 billion over the same number of deals in Q2 of 2025 for a 15.38% decline in dollars quarter-over-quarter, PitchBook reported. Additionally, the deal count is 49.6% lower compared to the same quarter last year.
Investments in pre-seed and seed companies dropped further in Q3, now representing 14% of total transactions year to date, compared to 29% historically, PitchBook reported.
“Investors are making fewer deals and prioritizing the ones that are seen as the least risky or have the highest amount of potential,” Alex Frederick, lead research analyst of agrifoodtech at PitchBook and co-author of the report, told AgTechNavigator. “Overall, this is not a great thing for the pipeline long-term.”
Broad AI interest propels demand for robotics
Despite the overall downturn, interest in precision ag (i.e., robotics) and animal ag continues to grow. But investment in biologicals is waning as questions remain around their effectiveness compared to traditional synthetic fertiliser and gaps in education about their proper use.
Animal ag attracted the largest amount of VC dollars, with $701.7 million in 29 deals, followed by precision ag companies with $533.8 million across 27 deals. The third lowest area of VC investing was crop inputs and enhancements, including biologicals, which received $23.9 million across 16 deals in Q3.
“If you are looking at VC in general, there is this bifurcation,” Frederick said. “There is the AI story, and anything touching AI is seeing the vast majority of funding, and then everything else.”
He noted that VCs, farmers, and startups are still trying to figure out what all the potential use cases or applications where AI can add value. “In the report, the seed companies — a number of them — have AI somewhere in their model.”
Elsewhere in the industry, 13 indoor farming deals were made for $149.3 million in Q3 2025, compared to $78.5 million over seven deals in the previous quarter. Despite the uptick in dollars and deals, the narrative on indoor agriculture is largely the same, as the sector is still grappling with unit economics and cost concerns.
“Right now, the economics of growing produce in vertical farms is just challenging to make work,” Frederick said. “There are these big challenges — energy costs, limited amount of crops you can actually grow indoors, and then risks of contagions and contaminants that can very quickly get into the water supply [and] can ruin all the crops in the entire facility, which has been the downfall of some of these companies. So, there are some major challenges.”
Exits are up, but is that a good thing?
Agtech exits notched up in Q3 for a total of $155.8 million for the quarter and are on pace to end the year about 30% higher than last year. However, these exits come from smaller transactions, which won’t be enough to fuel a resurgence in agtech investments.
“In general, exits have been challenged. That has been a recurring theme, and we are seeing that play out in the flywheel of investment activity. If capital is not able to exit or companies are being acquired at down rounds, less liquidity is trickling back to VCs and [limited partners]. That means it is not being redistributed into new investments.”
He added, “It is important to have capital distributed throughout the entire pipeline, not just on maturing late-stage companies.”
