AgTech Funding Faces Headwinds, Finds Opportunities in Dairy and Solar

The U.S. agricultural technology sector is experiencing a challenging investment landscape, but some companies are finding growth prospects in areas like dairy farming and solar energy. Macroeconomic pressures and a sluggish agricultural cycle have influenced this downturn.

Funding Declines in AgTech

The AgTech sector, which encompasses precision farming, data analytics, and biotech, is seeing a drop in venture funding. According to recent data, venture funding in this sector fell to $1.6 billion across 137 deals in the first quarter of 2025. This represents a decline in both the number of deals and the total capital compared to the prior quarter.

“AgTech’s challenges aren’t unique. What we’re seeing is part of a broader venture capital correction, particularly outside AI,” said Tom Brennan, partner, McKinsey & Co.

However, interest remains strong in precision farming due to labor shortages, using automation and robotics for more accurate farming. On a trailing 12-month basis, precision agriculture had a deal value of $1.82 billion, with a 48.5% value increase in the ‘robotics and smart field equipment’ sub-sector.

Dairy and Solar Sectors Offer Growth

Monarch Tractor, based in California, has seen increased demand for its autonomous products, particularly from dairy farms. Praveen Penmetsa, Monarch’s CEO, stated, “Our latest feature, autonomous feed pushing, has seen strong uptake, especially from co-ops like Dairy Farmers of America.”

Robotic tractors are also being employed to maintain solar farms, which is another growth area for agtech firms. The demand for these services is driven by U.S. utilities as they work to power the AI data center boom.

“We’re already working with top North American solar developers and expect to announce major partnerships soon,” Penmetsa added.

Industry Dynamics and Outlook

Major companies like John Deere and Caterpillar are increasing their presence in automation, signaling the strategic value of the technology. Vasanth Ganesan from McKinsey stated that “Big players entering the space signals strategic value. It suggests there’s now a clearer path to exit — which was not always the case in AgTech.”

The capital markets are expected to rebound in the second half of 2025, assuming trade disruptions don’t persist, which would benefit established companies ready to expand. The global market for agricultural robots is projected to reach $20.3 billion by 2030, growing at a CAGR of 13.9% from 2023 to 2030 (GlobeNewswire, 2024).