The Callaghan Innovation grant would enable the company to complete development and validate its systems at scale with commercial herds, she said.
Kahne would be selecting about six farms from around the country and placing about 300 of the devices in each herd.
"Unless you're able to run these large-scale trials, you don't gain the statistical confidence to bring the product to market," Clay said.
Kahne would be monitoring the animals throughout an entire season, working closely with the farm managers, nutrition advisors, and researchers.
"These will be real working farms, collecting data and managing that information for improved farm management and performance."
So far, 500 prototype units had been sold to researchers around the world and 1500 of the 'Sentinel' rumen monitoring systems had just been pre-sold to kiwi farmers.
Each device costs about $100, with the in-shed transponder costing $2000.
The 'Sentinel' is a 14.5cm x 2.7cm cigar-shaped cylinder with two flexible 'wings which reach 18.5 cm tip to tip.
It is inserted into the rumen - one of the stomach chambers in ruminant animals - and the wings help the device settle in the correct position.
The company is also developing the 'Catalyst', a circular four-inch fertility monitoring system, but its main focus right now was on the 'Sentinel', Clay said.
Callaghan Innovation kicked off at the start of this month, handing out $25 million to eight companies its first round of grants.
The new Government body was set up to accelerate commercialisation of innovation in New Zealand firms, said Graham Smith, acting general manager of business R&D grants.
"Grants like these are just one of the ways we enable businesses to invest more in research, science, engineering and technology so they can be more successful," he said.
Kahne is privately owned and last year raised $2.4 million in a funding round led by Wellington based venture fund Movac.
