Will the New U.S. Administration Make AgTech & FoodTech Relevant Again?
Contributed Content by: Adam Bergman, Managing Director, EcoTech Capital (February 11, 2025)
Most in the agtech and food tech sectors will be happy to see the end of 2024, which was a difficult year for many companies that have failed to generate meaningful commercial revenue, remain unprofitable, and have struggled to raise new capital. Over the past five years, the dominant influences on the agriculture sector were global: the COVID-19 pandemic, inflation, Russia’s invasion of Ukraine, and supply chain disruptions. However, in 2025 the sector will likely be influenced by policies pursued by President Donald Trump’s administration, including: 1) food & agriculture regulations, particularly if Robert F. Kennedy, Jr. is confirmed as U.S. Secretary of Health and Human Services; 2) a crackdown on illegal immigration; and 3) tariffs and retaliatory actions by our largest trading partners Canada, China, Europe, Japan and Mexico.
It is unknown if the Trump administration were to implement significant tariffs on the U.S.’ largest trading partners and they retaliated with tariffs on U.S. agriculture products, whether farmers would receive a similar level of emergency financial relief as they did during the first Trump administration. Any retaliation to tariffs could be catastrophic for U.S. farmers, already suffering from declining commodity crop prices due to oversupply, and rising input costs. With net farm incomes at their lowest levels in nearly a decade, it is likely that any suppliers to farmers will face margin compression. This is both a challenge and opportunity for agtech companies.
Although the overall financial markets rebounded in 2024, especially following Trump’s election, the euphoria was not spread equally throughout all sectors of the economy. Artificial Intelligence (AI), and FinTech, including cryptocurrency, garnered an outsized amount of capital, whereas agtech and food tech failed to generate much excitement or investment. It is unclear how much investor sentiment will change in 2025 as many investors remain weary due to the poor financial returns they have generated on almost $40 billion invested into agtech and food tech companies globally between 2018 – 2022. Furthermore, many companies that raised large financing rounds at high valuations have failed to achieve their own financial projections, and were forced to accept substantial valuation cuts, if they were even able to find investors. In 2024, bankruptcies accelerated, particularly in ag biotech, alternative proteins, and indoor farming, the three areas that accounted for the largest amount of capital raised in this sector during the past decade. Finally, many funds that have invested into agtech and food tech companies do not have the capital to make new investments as, either their current funds are fully invested and they have been unable to raise a new fund, or they are not making new investments, preserving capital to fund future rounds of current portfolio companies.
Despite these challenges, I do see some green shoots emerging that provide hope for 2025. Firstly, the U.S. agriculture and food sectors are dealing with significant labor shortages that seem to get worse each year, even before considering the impact from President Trump’s immigration policy proposals. The food service sector also is suffering from labor shortages, as food inflation over the past couple of years has started to hurt quick-service restaurants, already struggling to find employees and pay them rising minimum wages, making it hard to keep prices affordable. With demand for low-skilled labor rapidly outpacing supply and rising minimum-wage laws ironically making it uneconomic to hire these workers, even when available, automation and robotics is moving to the forefront today. Additionally, automation and robotics technology is advancing rapidly, with the introduction of new humanoid robots and autonomous mobile robots, particularly in agriculture and food service. I am excited to see these continued advancements in automation as I believe it can bring tremendous value to the food and agriculture sector in the near term. My optimism is reflected in the fact that robotics and automation was one of the few areas where investment remained strong in 2024, with U.S. financings completed by Burro, Carbon Robotics, Blue White, and Monarch Tractor, and 2025 could be an even better year for this sector.
Another area poised for a strong year is digitization, especially when combined with automation and robotics. More agtech companies are providing digital ag products that offer positive, short-term returns on investment (ROI) to farmers and food service customers. As farmers’ margins are squeezed, it is more likely that they will turn to technology to reduce costs, an area they have some ability to influence, while commodity crop prices remain low. With crop input prices (i.e. chemicals, fertilizers, and seeds) higher than in years past, farmers will need to be able to improve resource efficiency to be able to use less and achieve more. Fortunately for the agriculture sector, the digital revolution is about to increase in 2025; not only is AI spending expected to accelerate, but the technology is being optimized in other sectors first, so that it will be more effective by the time it’s implemented in the food and agriculture sector.
Two thousand and twenty-five could be the year that health and nutrition move to the forefront of government policy, especially if RFK Jr. is confirmed as HHS Secretary. It is shocking to learn that almost 125 million Americans are categorized as obese and severely obese, according to the U.S. Centers for Disease Control. U.S. healthcare spending reached over $3 trillion in 2023, much of it due to health issues caused by obesity. Unsurprisingly, there is growing interest around improving the nation’s health, which is a reason there has been an explosion of GLP-1 drugs to try to help people lose weight.
However, an alternative solution to the obesity crisis is using food as medicine, which allows people to move to a more nutritious diet to prevent and/or treat diseases. Food as medicine is likely to become a talking point this year, as RFK Jr. has been a strong proponent of “Make America Healthy Again”. He has been a vocal critic of processed foods eaten by many Americans today and a strong advocate for eliminating added fats, starches, and sugars, as well as food dyes and other additives already banned in other countries.
Shining a spotlight on Functional Medicine, which uses food as medicine, could benefit a number of agtech and food tech companies working on healthier food ingredients and products to replace sugar. Also, it would be great to see an increase in the production of much more nutrient dense produce that will offer better health options to consumers. Additionally, with more consumers wearing technology devices (like glucose monitors and smart watches) that more accurately track human health, and the continuous improvements in AI, we are nearing a point where, collaborating with doctors and nutritionists, people will be able to tailor their food choices to optimize health outcomes. Food as medicine aims to address the critical link between nutrition and health and reduce the diseases caused by diet, simply by using food rather than lab-created medicine to improve a person’s health situation, a strategy strongly supported by RFK, Jr.
Coming out of 2024, it is easy to have a negative perspective on the ag biotech, alternative protein, and indoor farming sectors, since all three areas faced funding challenges, with numerous companies being forced into bankruptcy after being unable to raise new capital or needing recapitalization at a significant valuation discount. Nevertheless, despite all this negative news, these three industries accounted for over 70 percent of the capital raised in the agtech and food tech sectors during the past decade with a growing number of companies developing differentiated products and/or technology and gaining commercial traction. It would be a mistake to write off these sectors, especially as all are poised to benefit from three mega-trends (food security, health & nutrition, and building a more sustainable food system) impacting the food and agriculture sector.
Although the ag biotech sector experienced a number of high-profile bankruptcies or company dissolutions (e.g. AgBiome and Yield 10) in 2024 and limited capital was raised, if RFK, Jr. is confirmed, one of his key initiatives is ending the use of crop chemicals (fungicides, herbicides, and pesticides). If his goal is achieved, it would provide a significant boost to ag biotech companies, many of which have found it hard to take market share from incumbent ag chemical companies. Even without any policy changes by the Trump administration to end or reduce the use of crop chemicals, the opportunity for the ag biotech sector is improving each year. Current crop-chemical products are losing their effectiveness against pests and weeds. Glyphosate, the leading herbicide used in the U.S., is banned in a growing number of countries, and concerns about its side-effects, coupled with massive lawsuits at home, are creating doubts about glyphosate’s future. U.S. states like California, Connecticut, and Washington are pushing for increased use of biological replacements, due to concerns about the health impact of crop chemicals, particularly glyphosate, on farmers and farm workers, as well as runoff damage to ground water, lakes, rivers, and streams. Additionally, a growing number of farmers are exploring the use of regenerative agriculture practices, especially in many parts of the U.S. where soil degradation is happening, and this trend likely will continue due to the effects of climate change.
Given that growing food outdoors is expected to get harder due to the impact of climate change, one would expect the indoor farming sector to be poised to benefit. Although the indoor farming sector made progress with increasing production, expanding into new retailers, and growing market share, most companies, particularly vertical farms, were held back in 2024 by their inability to achieve profitability. Following the bankruptcies or shuttering of operations of Bowery Farming and Smallhold, there are people asking whether the vertical farming sector is viable. Although this is a fair question, since no vertical farming companies have achieved sustained profitability yet and many have struggled even to achieve positive unit economics, it is too early to give up on this sector. One area of potential success for vertical farming companies is through crop diversification. In 2024, Oishii raised a $134 million Series B financing to expand strawberry production and Plenty open its Richmond, Va., strawberry facility, which will be the largest vertical farm producer of strawberries globally. Additionally, AeroFarms and GoodLeaf Farms have been expanding production of microgreens, a product with a large potential market opportunity. Strawberries and microgreens are just two examples of potentially higher margin crops than leafy greens.
While still challenging, 2024 was a better year for the U.S. greenhouse industry as three of largest players achieved success: BrightFarms opened 3 new large farms in the U.S.; Gotham Greens’ annual production capacity reached ~100 million heads of lettuce per year and its products became available in retail locations across all 50 states; and Little Leaf Farms completed the expansion to its McAdoo, Pa., facility, making it the largest indoor producer of lettuce in the U.S., according to the company. However, there were both winners and losers in the greenhouse industry, as few companies are profitable, and increased production is already leading to a price war in some regions that will make it even more difficult for companies to achieve profitability. Also, greenhouse providers have started closing older farms that were proving uneconomical. The biggest hope for the indoor farming sector, both greenhouses and vertical farms, is the growing interest from grocery retailers and food service providers for surety of produce supply. As the number of weather-related events caused by climate change increase and more produce cultivation moves offshore, there are mounting concerns about the ability of outdoor growers to deliver consistent supply, providing an opening for indoor farming companies to receive multi-year contracts, if they can show both a viable business and high quality product with consistent production.
The alternative protein sector underperformed in 2024, and it doesn’t seem likely that there will be any major policy initiatives to support the industry under the Trump administration. The reality is that any existing U.S. federal government support of the cultivated meat industry will be reduced or eliminated, if the policies implemented by many Republican-led states are anything to go by. Many alternative protein companies, especially those in the cultivated meat sector, have yet to make products that are cost competitive. Unfortunately, the technology is still being optimized and they are unable to achieve economies of scale, so there is a growing likelihood that many of these companies will run out of money and face bankruptcy or shutter operations this year, just like Motif FoodWorks and SCiFi Foods in 2024.
The biggest positive for the sector remains the continued price volatility of foods, particularly dairy, eggs and meat. Food prices will remain volatile in 2025 and could even get worse with the continued spread of H1N1 influenza (bird flu), which is not only devastating chicken flocks, but has also sickened dairy cows and even been found in raw milk. The growing prevalence of zoological diseases, like bird flu and swine flu, opens the door for new products from biomass and precision fermentation, to mycelium, and next-generation plant-based protein companies. I believe these companies are likely to find traction in the B-to-B market, if they can provide customers with a drop-in replacement product that has a comparable taste, competitive price, and consistent availability.
After years of strong investment between 2018 - 2022, we are entering the third year of a bear market for the agtech and food tech sector. Having experienced a similar situation in the CleanTech sector, where we had a bull market from 2005 – 2010 followed by a bear market from 2011 – 2016, I think there are many lessons to be learned by agtech and food tech companies. The CleanTech financing sector roared back to life in 2017 during the first Trump administration when significant capital flowed into the sector as a result of technology innovation, increased commercial adoption and a belief that government support would be reduced and as a result, the private sector needed to take a stronger role. Eight years later at the start of the second Trump administration, the hope is for a similar renaissance in the agtech and food tech sectors. The success of this revival will depend on two components: whether companies can move to profitability rapidly; and whether new capital sources will appear that can help to finance the continued growth and development of these companies.
ABOUT THE AUTHOR
Adam Bergman is a managing director at EcoTech Capital where he works at the intersection of technology innovation and climate change. Bergman is a sustainability executive leader with over 25 years’ investment banking experience raising capital and executing M&A transactions. He also provides strategic advice and financial guidance to senior executives and boards on partnerships and growth strategies. As one of the first investment bankers to focus exclusively on the CleanTech sector, starting in 2005, Bergman is recognized as a leading subject matter expert and is a frequent speaker at industry events and publisher of articles on sustainability.
Bergman has built industry leading agtech investment banking practices at Citi and Wells Fargo by creating a broad ecosystem to help drive adoption of technology and innovation throughout the food & ag value chain. He established the agtech cohort for Wells Fargo’s innovation incubator (IN2), which was launched at the Donald Danforth Plant Science Center in St. Louis, Missouri, in 2018. He is a technology advisor to Western Growers Association, and for farmer-owned Landus Cooperative,
headquartered in Ames, Iowa, and SeaAhead, a bluetech startup platform in Boston, Massachusetts, whose mission is to support new, innovative ventures, with a focus on sustainability and the oceans.
Bergman has a B.A. in political science from Johns Hopkins University, where he was inducted into Phi Beta Kappa. Additionally, he holds an M.A. in international development from the International University of Japan.
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