This article was first published for evokeAg

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Globally and locally, not a week goes by without the news of an agtech company closing up shop, or the release of another statistic about dramatic declines in agtech venture funding.

This is not unique to agtech - if you remove OpenAI’s $40B US raise in Q1 2025, global venture capital investment is down from Q42024, and flat from the prior year, according to Crunchbase. And it’s true for venture capital funds, too– according to KPMG, fundraising is on track to drop below 2024’s eight-year low.

But the broader challenges in the funding landscape actually make it particularly hard for agtech companies, given agri-food tech is already underinvested. Only 5.5% of global venture capital investment went to agrifood in 2023, whereas agrifood systems contribute at least 15% to global GDP, hire over half the workforce, and contribute to one third of greenhouse gas emissions.

It’s even worse when, as is all too common right now, great companies with strong customer traction are struggling to close funding rounds that would have been straightforward 18 months ago. When startups hitting their milestones still can't find capital, performance and fundability have become frustratingly disconnected. The pain is real for the entrepreneurs, and their teams, customers, and backers, who are facing the reality of shutdown.

But when we zoom out and look at Australian agtech specifically, a different picture emerges. We think this is actually a strategic moment to be bullish about agtech in Australia- here’s why. 

A necessary - albeit painful - correction

In many ways, the correction we’re seeing in generalist and agtech venture funding  is a normal and healthy dynamic. As David Downs said on stage at the inaugural evokeAG in 2019, “the valley of death exists for a reason.” 

While painful, the funding pullback forces us to ask important questions. When is venture capital actually the right fit for agtech companies? How do we grow the pie - across states and sectors - rather than fight over slices? How do we overcome structural and cultural challenges to get better, faster at commercializing research? Who else should be around the funding table– corporates, government, growers? 

Current conditions are also weeding out tourist investors, pushing us toward more thoughtful, industry-appropriate capital approaches that are designed for the realities of agri-food and fiber systems. 

Given Australia was relatively late to the venture-backed agtech funding “party,” we’re able to benefit from global learnings without going through the massive bubble-bust cycle that other markets are experiencing. It also affords the opportunity to take a coordinated approach to build investment strategies that are tailor made for Australia - tuned for the specific needs of our ecosystem

Australia has taken a different trajectory, and that’s a good thing

Over the last decade, Australia has been quietly building. Coming from such a low base, while growth is modest, it’s important to recognize that it represents significant progress. Australian agtech funding has shown resilience in 2024, and our startup ecosystem continues its steady maturation—less boom-bust volatility, more sustainable growth.

True to nature, many Australian startups have focused on scrappy execution and pragmatic growth– prioritizing customers and making the most of limited investment and non-dilutive funding.

We’re already metabolizing the learnings of overseas ecosystems and past failures. Our research and development corporations (RDCs) are getting more risk-tolerant with their innovation models, as evidenced by recent venture fund launches from GRDC, HIA, and Wine Australia. Our government is recognizing that in agri-food, we need to expand beyond the classic accelerator/incubator models— the Beanstalk Drought Venture Studio pilot is a much needed, non-equity-based support model that specifically targets the research-commercialization gap. Startup supporters like Farmers2Founders are asking tough questions and catalyzing collaborations.

Our peak industry body, AusAgritech, is asking critical questions about blended capital and whole-of-ecosystem funding approaches. 

This progress matters because Australia's over 550 agtech companies, and those that come after, will operate in an environment of increasing sophistication. More investors who understand the sector. Stronger government support through coordinated approaches. Stability through grants and R&D incentives. 

The fundamentals haven't changed, and investment opportunities are emerging

These innovation and funding dynamics, while often seen as separate from boots-on-the-ground production, are actually critically connected. The underlying pressures that make agtech investment necessary haven't disappeared—they're intensifying.

Climate variability continues to squeeze farm profitability—primary producers have seen annual profits decrease by 23% according to ABARES. Labor availability is a persistent challenge across the value chain. At the same time, there is growing interest in on-farm practices for corporations seeking to address scope 3 emissions and understand climate- and nature-related financial risks. 

And new pressures are emerging: pharmaceutical companies are capturing food spending through GLP-1 medications, forcing food companies to find new efficiencies and revenue streams just to maintain margins.

These structural challenges create clear investment opportunities. Companies developing climate-resilient crops help producers adapt to volatile conditions. Automation solutions address labor constraints while improving efficiency. And startups helping food companies navigate pharmaceutical margin pressure are solving urgent, immediate problems.

Beyond the current challenge, we can see a bright future for Australian agtech

Australia offers unique advantages for pursuing these opportunities. We have world-class research capabilities, particularly in areas like robotics and agricultural science. Our diverse climate and agricultural systems provide ideal testing conditions for agtech solutions. And we're building a stable innovation environment through increasingly-coordinated government support, R&D incentives, and growing collaboration between private investors, researchers, and industry.

The current funding environment is undeniably challenging, but those willing to look past short-term cycles to underlying structural trends will find compelling opportunities. 

There are already many agtech founders working to solve these urgent problems - we need you to keep building. And for those looking for a new challenge, there are many high-impact, high-potential areas to dive into in Australian agtech right now.