The $1B Lie: Why Agtech Doesn’t Fit the VC Fantasy
Venture capital thrives on scale. The whole game is built around finding companies that can dominate massive markets, ride tailwinds, and return the fund with a single exit. But when you try to apply that playbook to Ag, things fall apart.
Most ag startups don’t fit the traditional VC model—and that’s not because they aren’t solving big problems. It’s because they don’t fall into the category creation mold.
When you look at startups and companies in general, they fall into one of three categories: Convenience, Change in Practice, or Category Creation. And only one of those really works with the “go big or go home” approach that fits the VC model.
1. Convenience – Helpful, but Not Critical
These tools make things easier, faster, or more efficient, but not fundamentally different. They’re modern takes on things that have always been done—getting info faster, automating a workflow, or layering in a new interface. They don’t change the information you get, just how you get it.
For farmers, think weather apps. Before smartphones, farmers relied on the radio, TV, or just looking at the sky. Now they get hyper-local forecasts on their phones. More convenient? Yes. Transformational? Probably not. If the app disappears, a farmer still finds a way to get the job done.
Same goes for a lot of dashboards, data layers, and farm management platforms. They offer modern interfaces or improved workflows, but they don’t dramatically alter decision-making with new insights or profitability. These tools are “nice-to-haves,” and as a result, adoption can be shallow, churn can be high, and willingness to pay is low. From a VC standpoint, these companies lack stickiness, pricing power, and scale.
In other industries, convenience tools can scale because there’s a massive customer base—millions of consumers or SMBs. Ag doesn’t have that kind of user base. You're often talking to a few hundred thousand growers at most, and often a very specific subset of that. Convenience alone isn’t enough to build a venture-scale company in ag.
2. Change in Practice – Crucial, but Hard to Scale
This is where the majority of Ag startups live. These are companies that solve real, often painful problems in the supply chain or production process and solve them with better tools, hardware, or services. The solutions tweak or improve upon an existing practice but rarely scale across the entire market.
The issue is that ag isn’t one market—it’s thousands. It’s fragmented by crop, region, soil type, climate, and even personal preference. So a robotics company might build an amazing apple harvester—but that tech won’t work for corn, soybeans, or lettuce.
What looks like a huge market on paper is small in practice.
Let’s say your startup solves labor with a machine that replaces field crews. Huge problem and absolutely worth solving. But the machine only works on high-density orchard crops. Suddenly, you’re serving 2% of U.S. farms. That 2% might love you, but the market isn’t scalable in a traditional venture sense. The TAM was theoretical.
These companies and solutions are critical but niche. They can grow into solid $20M-$50M in revenue companies with real impact —but they don’t hit the $1B mark traditional VCs are looking for and betting on.
These solutions are not viable unicorns—and trying to force them into that path often kills them.
3. Category Creation – Rare, but Transformational
This is the VC dream and hardest to achieve. A company that doesn’t just solve a problem—it creates an entirely new way of thinking about the industry. A whole new behavior, market, or infrastructure layer.
Uber is the classic example. It didn’t just compete with taxis; it introduced on-demand transportation and built the gig economy behind it. That model then unlocked food delivery, last-mile logistics, and more.
In ag, these companies are extremely rare. You could argue the combustion engine and tractor were category creators in their day. They didn’t just make farming faster—they changed what farming was. They unlocked economies of scale, changed rural labor dynamics, and enabled the rise of modern agribusiness.
Some people point to biologicals, carbon markets, or autonomy as modern examples. Maybe. But most of these are building on existing categories (inputs, equipment, services) rather than inventing new ones. Even something like carbon credits still has to get jammed into legacy systems like co-ops, compliance frameworks, and seasonal cycles. It’s not true category creation unless it breaks out of those constraints and sets a new standard for how things are done.
VC math assumes that category creators will emerge regularly. But in ag, those moments happen maybe once a generation. Betting on every startup to be the next Uber of ag is a recipe for disappointment and a fund that never gets returned.
Why This Matters
For the last decade, VC dollars have flowed into ag on the assumption it could look like SaaS or consumer tech—just with dirt. But that’s not how it works.
Ag is a different beast. It's cyclical, capital-intensive, slow to adopt, and deeply fragmented. It’s not a space where “move fast and break things” works—because people’s livelihoods (and food systems) are on the line. Farmers don’t chase shiny objects—they look for proven ROI, reliability, and solutions that work within a complex and highly variable system. None of that lines up with the blitzscale mindset or a 10-year fund horizon.
On top of that, even when a product is adopted, it doesn’t look like typical VC wins. Many of the best AgTech companies today are solving extremely hard problems with real economic impact—but they’re not growing into $1B+ exits. They’re growing into $10M, $20M, maybe $50M top line revenue companies. Healthy margins, happy customers, real impact. That’s success. But it’s not going to return a $500M fund, probably not even a $100M fund.
When VCs apply Silicon Valley math to Agtech, they set the wrong benchmarks, push founders toward unsustainable growth, and ultimately create misaligned expectations across the board. The results? Flat or negative VC returns. Founders chasing growth they can’t sustain. Solid companies burning out trying to look like unicorns. And we all miss out on the actual value being created.
How VC Math Needs to Change
If we want better outcomes in Agtech—for founders, investors, and the industry—we need to change how we think about success. That starts with shifting the math.
1. Reframe the Exit
Most Agtech companies won’t go public or sell for $1B+. A $50M–$200M strategic exit can be a great outcome—especially for a lean, capital-efficient company. This is far more realistic acquisition range for ag retailers, OEMs, input companies, or vertically integrated producers to acquire a company and provides stellar returns for smaller, more focused funds.
2. Ditch the Grow at All Cost Playbook
Ag isn’t software. You can’t growth-hack your way into adoption, it just leads to overbuilt organizations, high burn, and a customer base that’s not ready for the pace. Startups need more time to develop the tech and validate it across different production systems.
That means investors should back leaner teams, longer timelines, and consider milestone-based financing rather than pushing for top-line growth at all costs. Ag is a marathon, not a sprint.
3. Fund the Middle
There’s a massive and underserved middle ground in ag: companies that can be profitable, sustainable, and highly impactful, even if they’re not traditional “venture scale.” Maybe they only ever serve a niche, but they own it, solving real supply chain problems, building specialized hardware, or delivering tailored services to high-value ag segments. They won’t create new categories, but they do make the existing system better.
Think of it like a middle path between VC and private equity. Scaleable companies with solid 3-5x returns. That’s where most of agtech startups live.
4. Smaller Funds = Better Fit for Ag
If the typical Agtech company isn’t going to be a unicorn, then we need to stop structuring funds like every investment has to be one. That means smaller funds, tighter portfolios, and more realistic return expectations.
Look at Benchmark—they’ve kept their fund size consistent (~$425M) for decades, even as others have ballooned into the billions. Why? Because they know their strategy works best at that scale. They don’t need every company to be a $10B outcome—they just need a few great wins with strong ownership and capital discipline.
Agtech needs the same approach. A $10-$50M fund investing in capital-efficient companies that can exit for $50M–$200M can outperform a $200-$500M fund swinging for the fences. Especially when those exits are more likely, more frequent, and often get overlooked because they’re not flashy enough.
The best returns in Agtech will come from funds that right-size themselves to the opportunity—and stick to it, instead of doubling down on unicorn hunting.
Final Thought
Agtech isn’t broken. Venture capital isn’t broken. But the two are often misaligned.
There are founders building incredible companies in this space—but the VC model, as it stands today, isn’t designed for how ag actually works. If we want to unlock the full potential of the category, we need a new playbook. One that’s built for reality, not fantasy.
Because in ag, the $1B outcome might be rare—but the $50-100M one is real. And it’s worth betting on.
Interesting insights. Traditional VC funding model often is not suited for Agri Startups.
I would like to see more revenue-based capital and alternatives be part of how to “fund the middle.” Even with smaller VC investments, it can still lead to the fundraising rat race of founders having to do larger and larger rounds. It would be interesting for a VC to offer multiple financial products and investments strategies, even lending when it makes sense!