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AI attraction means foodtech startups must ‘prove’ rather than ‘promise’

Reports suggest that artificial intelligence (AI) is sucking investment from foodtech and agritech, but investors say the picture is complicated.

“For those hoping to see a resurgence in agrifoodtech spending – or at least stabilisation after years of decline – keep hoping,” said AgFunder, an investor in deeptech for agrifood and human and planetary health, as it released new data in October.

In Q3 there have been “some notable rounds” from livestock management and alt-protein startups, but investors are “are passing up potential opportunities in foodtech to pursue flashier plays in artificial intelligence”, it explained.

This mirrors the impression of data released earlier this year by Pitchbook: 71% of all venture capital deployed in Q1 of 2025 went to AI and machine learning startups, and “generalist investors may be overlooking attractive foodtech opportunities to get AI exposure”, noted the financial database.

Evan Cholfin, CEO of brand consultancy Luxhammer, called the AI investment figures "unprecedented", saying they have left sectors like foodtech and agritech “scrambling for attention”.

However, this is not a collapse, he argued; it’s a reprioritisation.

“Capital hasn’t vanished from agrifood – it’s just flowing toward companies that can deliver immediate returns,” Cholfin told Ingredients Network.

“Autonomous field robots, AI-powered crop diagnostics, and smart irrigation systems are still raising money, because they reduce labour costs and improve yield within a single growing season. The new litmus test is speed to impact.”

Most attractive AI offerings offer payback over promise

Others agree. Wes Frierson, vice-president for enterprise solutions at tech provider FoodChain ID, said that many industry players in the food and beverage manufacturing or ingredients space had been “let down” over the past few years, either by vendors delivering “very superficial AI features” or by promises of “magic” automation – including fully autonomous formulation – that “simply doesn’t work in practice”.

He added: “The most attractive AI offerings will continue to be those that can offer immediate payback [...] not just a promise.”

Indeed, Pitchbook highlighted that there had been notable deals in Q1 that demonstrate “ongoing opportunities”, though the examples cited were all in the restaurant space – wage access and reservation platforms, and so on.

In the food and ingredients space, interest is driven by measurable operational improvement, according to Cholfin, such as autonomous weeders that cut herbicide use and AI-powered formulation platforms that halve time to market for new stock-keeping units (SKUs).

“The funding window isn’t closed – it’s just more demanding. Investors want to see outcomes in 12 to 24 months, not five years,” he explained.

Investors are now seeking quality over quantity, Pitchbook noted in its Foodtech VC Trends report.

“Startups must demonstrate not only innovation but also clear market traction, operational efficiency, and alignment with major trends such as sustainability, health, and supply chain resilience to stand out,” it wrote.

“Those able to meet these demands may benefit from larger cheque sizes and stronger investor support, while those unable to show near-term viability may struggle to secure funding or face pressure to accept lower valuations or alternative financing options such as venture debt.”

This has put pressure on what some experts still see as more “speculative” bets, such as lab-grown meat – a space in which investment has tailed off dramatically, according to figures compiled by the Good Food Institute and Net Zero Finance in April for its report State of the Industry: Cultivated meat, seafood and ingredients.

“It is increasingly clear that private funding alone will be insufficient to fully fund first-of-a-kind cultivated meat facilities,” the authors wrote.

Cultivated meat companies made “remarkable strides in reducing input costs” but private funding was drying up, they explained, adding: “The investment environment of the past two years has been fundamentally different from the low-interest rate period of 2020 to 2022 when the 10 largest cultivated meat and seafood rounds were raised.”

Economic and geopolitical uncertainty reduces investors’ risk appetite

Around that time, investment flooded into the food and agritech space as the pandemic brutally exposed supply chain fragilities.

In 2025, it is a very different landscape. Mounting economic and geopolitical uncertainty has reduced investors’ risk appetite, and they have turned away from categories they don’t feel particularly comfortable with, explained Jack Ellis, who leads agriculture and food research at Cleantech Group.

“It may be the case that generalist investors are increasingly drawn to what they see as ‘fundamental’ AI innovation,” he told Ingredients Network. “But a lot of the technological innovation we need to see in food is going to be enabled by those fundamental AI technologies.

“So, the apparent shift in investor focus to AI will be positive for food tech as a whole in the longer run.”

AI is, for example, ​likely to play a critical role in things like bioprocess optimisation in precision fermentation and cellular agriculture, or product design for plant-based proteins. AI that shortens timelines, lowers costs, or helps comply with emerging regulations like the EU’s carbon reporting rules will also attract attention and funding.

“[I]magine a regulation change or a strategic shift – like switching out ingredients, a new claim target, or cost reduction opportunity,” said Frierson. “Today, it's tough to assess how that change will impact hundreds of products.

“With AI, food manufacturers will be able to describe a complex condition or goal, and the tool will scan the portfolio to identify affected products, assess each one individually, and categorise them based on the level of change required.”