In what has been a rather dull year for Indian startups – marked by smaller funding amounts and fewer unicorns – businesses in the agriculture and agri-tech space managed to raise as much as $1.32 billion. This is more than six times the funds raised by the sector during the same period last year.
The sector has a lot of headroom to grow in the coming days due to rising tech penetration, industry insiders and experts told DH. That is good news for Asia’s third-largest economy, where agriculture, with its allied sectors, is the largest source of livelihood.
As more farmers adopt technology and improve predictability by basing their decisions on data, “there is no looking back in terms of funding and financing that will come to this industry,” said Saumya Kumar, the director of ISB’s startup incubator, I-Venture.
The last five years saw the birth of about a fifth of India’s agri-tech and agriculture startups, while the last five months alone accounted for 35 per cent of all funds raised by the sector so far, showed data from Crunchbase, which is a platform that tracks private companies.
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Despite the booming fund flow and mushrooming of agri-tech companies, the party is far from over.
Although scaled startups and organised players are disrupting the space, they have barely scratched the surface, according to Chinna Pardhasaradhi, the chief financial officer of agriculture supply chain start-up WayCool Foods. “Both of them, combined, don’t constitute 1 per cent of the total addressable market,” Pardhasaradhi added.
Experts tied the sector’s growth to technological advancements and the digitisation push.
The pandemic has accelerated the five-year-equivalent progress in just a couple of years, according to Shashi Kant Singh, PwC’s Executive Director - Agri & Natural Resources.
“There has never been a doubt about India's agri-tech potential," said Singh. "But the brisk pace at which it’s growing can be attributed to factors such as conducive policy framework, increasing internet and smartphone usage in rural areas, enhanced penetration and adoption of digital solutions, agri-fintech and ecosystem support at (the) Centre and state government level.”
Startups in the sector have played a vital role in helping farmers get access to finance, AI-driven data and better markets, to name a few.
“Whenever the offerings are directly related to farmers, say instant loans, it has driven adoption among them,” said grain commerce platform Arya.ag’s managing director and co-founder, Prasanna Rao.
Problems become opportunities
Over the past few years, the lack of infrastructure and inefficiencies in the sector have invited a lot of specialised funds. This has turned the sector into a breeding ground for investors and entrepreneurs, said natural fibres supply chain startup Reshamandi co-founder and chief technology officer Saurabh Agarwal.
“New-age entrepreneurs are also coming into the traditional sector because of the market readiness,” he said, while attributing its growth to consumer apps and increasing internet penetration via smartphones.
While the sector looks promising, its unorganised nature could be a possible challenge.
“The space is significantly large, and at the same time, there are multiple categories present here,” Pardhasaradhi said, highlighting the different complexities in terms of cultivation, crop pattern, storage, processing and distribution.
Others agreed.
“Due to the small land holdings and unorganised market in India, bringing value to the farmers and convincing them about the benefits get difficult,” Agarwal said, adding that unlike companies in other sectors, there was no instant redemption and value realisation took longer.
I-Venture’s Kumar zoomed in on challenges including the need for better farming techniques, access to markets and accurate weather data, while PwC’s Singh focused more on how funding currently was highly concentrated in startups providing certain streams of products and services.
“For instance, not many players are providing solutions in biotech - plant, animal life, sciences and genomics. Globally, there is a lot of funding happening in this stream and hence Indian players have a great opportunity to capture a better share of this pie in future,” Singh said.