Key Takeaways
- Underlying demand continues to fuel AgTech adoption
- The sector is poised for more disciplined and sustainable growth
- Leveraging AI and advanced technology strengthens investor appeal
Investment in agribusiness experienced a boom in the early 2020s, when investor enthusiasm for food security, supply chain resilience and agricultural innovation surged in the wake of the COVID-19 pandemic. Venture capital deployed unprecedented levels of funding into agrifood technology, while private equity groups targeted food processing, logistics and packaging platforms. At its peak, Canadian venture funding across the economy reached record highs in 2021 and 2022, and agribusiness was a direct beneficiary of that exuberance.
That boom has since cooled. Agrifood VC fundraising dropped 65% from its 2022 peak and new VC fund launches have shrunk from 49 in 2023 to just 17 in 2024. Early 2025 data show continued pressure in VC, with only US$200 million raised across six funds year-to-date. PitchBook reports that the average new VC fund size has decreased significantly and larger VC funds exceeding US$250 million have virtually disappeared. In contrast, PE in AgTech has shown greater resilience, maintaining relatively stable fundraising. While capital raised has declined by 40% from 2023 to 2024, the number of fund launches has remained steady year-over-year. Canada’s relative position in the global picture is notable, as Canadian AgTech accounts for about 2% of worldwide investment, according to Farm Credit Canada.
While the industry has experienced a period of consolidation and a notable pullback in VC fundraising since 2021, there is a growing view among industry players that emerging technologies are poised to revitalize investment and accelerate deal flow heading into 2026.
Shifting Focus and Looking Ahead
Despite the overall slowdown in deal volume since its peak in Q1 2022, the sector's median pre-money valuations and deal sizes have grown, signaling that competition for high-quality assets remains strong. Investors are concentrating capital on companies demonstrating strong fundamentals, commercial traction and scalable business models. Moreover, later-stage deals now account for a significantly larger share of investments compared to early-stage rounds, making it clear that investors are leaning toward established businesses.
One area that has seen remarkable growth is precision agriculture, which involves the use of sensors, data and AI to apply inputs that will maximize yields, cut costs and reduce environmental impact. PitchBook data points to a significant shift in Q2 2025, where precision agriculture startups outpaced agriculture biotech companies in VC funding, securing US$580.2 million across 36 deals, representing a 71.2% quarter-over-quarter increase in capital raised. We expect this trend to accelerate as AI filters down to other agricultural applications and established players continue to use M&A to acquire critical tech capabilities.
In contrast, agriculture-related biotech companies raised substantially less capital in Q2, bringing in US$270.6 million, a steep 72.5% quarter-over-quarter decline. The significant difference in the investment trends between precision agriculture and agriculture biotech highlights a shift in investor priorities toward technologies that address immediate challenges and leverage AI's potential.
Broader market trends and external regulatory requirements also indicate that emerging technologies, including blockchain and AI, will be a major catalyst for increased business activity and deal flow in the space. New traceability rules and requirements being implemented in various jurisdictions require strict monitoring across the food chain, creating opportunities for innovators in blockchain and AI supply chain management and tracking, advanced pathogen detection, real-time monitoring and foreign-material detection. With an evolving regulatory landscape and expanding AI use cases, Global Market Insights projects that the agriculture AI market will grow by more than 25% annually.
Public institutions have also stepped in to bridge the funding gap. Farm Credit Canada, through FCC Capital, has pledged C$2 billion in AgTech investment by 2030, already committing C$170 million in its first year through a mix of direct deals, fund commitments, and accelerator programs. This infusion of public capital provides both financial stability and confidence to private investors considering co-investment opportunities. Further to our recent article, PE Opportunities and Trade in the Spotlight at CVCA Invest Canada, representatives of Farm Credit Canada attending the CVCA Invest Canada Conference presented an ambitious agenda to encourage and support growth and investment in the Canadian agricultural sector through traditional and innovative financing mechanisms.
Takeaways
Recent trends indicate that while the broader agribusiness industry has experienced slowdowns and reduced capital in recent years, underlying demand for operational efficiency and sustainable agricultural practices, as well as the growth of AI more broadly, continues to fuel AgTech adoption. The increasing maturity of the sector means that investors are prioritizing quality over quantity, funneling capital into established companies with clear paths to profitability.
This landscape is setting the stage for a more disciplined and sustainable phase of growth. Companies that can demonstrate innovation, scalability and a clear value proposition, especially those leveraging AI and advanced technology, will be best positioned to attract capital and drive the next wave of transformation in global agriculture. The projected growth of the agriculture-specific AI market and the vital role that technology (including blockchain technology) is playing to address current industry pain points strongly suggest that emerging tech will continue to see substantial investment moving forward.
