Indian agritechs grab investor attention, drive agriculture modernization

19, Jan. 2021

A file photo of Krishna Kumar, founder and chief executive officer of CropIn, which plans to expand its presence in overseas markets. (Photo courtesy of CropIn)
A file photo of Krishna Kumar, founder and chief executive officer of CropIn, which plans to expand its presence in overseas markets. (Photo courtesy of CropIn)

By Atul Ranjan and Celine Chen

NEW DELHI, NNA - Agritech, one of the hottest investment segments in recent years, is expected to see further growth and adoption in India, where agriculture has remained remarkably resilient during the pandemic.

Indian agritech startups which are bringing innovation to the farming sector by leveraging various technologies have caught the attention of investors betting on emerging opportunities amid agriculture modernization push across the world, including India.

According to research firm Venture Intelligence that tracks private equity and venture capital investments in India, funding in agritech startups grew from $43 million in 2017 to $69 million in 2018.

Both years recorded 17 deals each. In 2019, the deals nearly doubled to 32, increasing investments sharply to $232 million.

In 2020, however, total funding fell to $152 million while the number of deals dropped marginally to 30 due to COVID-19 pandemic that caused a massive disruption in business activities.

The disruptions and India's strict pandemic lockdown "shattered the status quo for 130 million farmers as well as millions of agricultural traders and SMEs," said a joint report by two venture capital firms - America's Accel and Omnivore Capital Management Advisors, which is based in India.

"Existing supply chains froze, staggered, and only slowly reopened. Farmers found themselves struggling to purchase inputs, access finance, and find markets for their crops. Unable to conduct business for weeks on end, agricultural traders and SMEs were worse hit," said the report, which was issued in December 2020.

However, the pandemic brought about the unintended consequence of accelerating the country's up-and-coming agritech ecosystem, it said.

In the last four years, agritech startups in India witnessed unprecedented growth alongside rising interest from the venture capital investor community. Leveraging 4G connectivity and increasing smartphone penetration, agritech entrepreneurs built farmer platforms, B2B agri marketplaces, rural fintech businesses, and farm-to-consumer (F2C) brands. But this dynamic ecosystem was enjoyed by only a small part of Indian agriculture and reached less than 20 percent of Indian farmers, said the report.

Agritech startups, which for years had co-existed with the traditional ecosystem, suddenly discovered that they were essential during the pandemic, which "helped catalyze a shift across the agricultural economy, away from traditional, informal, and analog markets towards innovative, formal, and digital ones," it added.

While many sectors faltered, the agriculture sector has proved to be surprisingly resilient and was the biggest contributor to the nation's GDP. The sector grew 3.4 percent between April and June last year, when the economy contracted by nearly 24 percent.

The adoption of technology throughout the farming ecosystem and agricultural products being essential commodities ensured business continuity for most players during the lockdown, said the report.

Agritechs that saw a surge in digital adoption include Ninjacart, Cropln, DeHaat, Eruvaka, Fasal, AgNext, StellApps, Arya, FreshtoHome, Country Delight, Clover, Orinko and ITC Ltd.

A survey of 67 agritech companies revealed a considerable increase in demand for most players across the value chain during the lockdown with several of them expecting to see positive sales growth for 2020.

The increase in demand translates to optimism around fundraising as well, with 60 percent of respondents confident about seeing a surge in investment activity in the sector in 2021, according to the report.

"We expect the strong momentum that the agritech sector is witnessing to sustain in the next 12 months, as the demand for reliable food supply and quality produce increases. We believe the rapidly maturing sector and the entry of more entrepreneurs will create a fertile ground for innovative strategic plays," said Accel and Omnivore.

They also noted the pandemic and government's far-reaching farming reforms have contributed to new business models gaining importance.

They include B2B platforms and farmer marketplaces connecting stakeholders in the supply chain; farm to consumer brands (F2C); safe and traceable food products as a result of rising health awareness; and precision agri-technology with many more farmers using smartphones.

In addition, the new government reforms coupled with the pandemic disruptions have accelerated the creation of inter-state e-markets involving farmers, traders and buyers.

Arindom Datta, executive director for rural and development banking/advisory at Rabobank India, foresees "exciting innovative financial solutions".

He said, "Blockchain solutions would facilitate trade in commodities involving multiple players with an acceptable degree of integrity and transparency. Technology enabling price discovery, food traceability/quality and digitization of commodities would result in optimal decision making by market players leading to resilient business models paving way for increased ability for financial institutions to take exposures in commodity financing."

Nasscom, the premier trade body and chamber of commerce of the tech industry in India, noted that there are more than 450 agritech startups operating in India, up from over 350 in 2016, which are not just targeting the local market but are also expanding their global footprint.

An August 2019 report by Nasscom said that since 2014, more than 25 Indian agritech firms have established their global presence.

“Every ninth agritech startup in the world is originating from India,” it said.

One such startup CropIn, which raised $20 million this month in a Series C funding led by Singapore's Temasek-backed ABC World Asia, an Asia-focused private equity fund, is also looking to further expand its presence in overseas markets.

“CropIn will use Series C funds to focus on its global expansion, while continuing to innovate on its machine learning-based predictive analytics platform ‘SmartRisk’ to further strengthen its artificial intelligence capabilities,” Krishna Kumar, founder and CEO of CropIn, told NNA in an email.

“The company is also investing to penetrate deeper in its target markets globally,” he said, adding that the firm recently opened an office in Amsterdam, the capital of the Netherlands, and will be hiring local leaders to drive growth in the European market.

The startup, which has raised a total of $33.1 million and partnered with over 225 clients across 52 countries so far, is also looking to expand its presence in Japan and Southeast Asia.

“We are planning to hire people and expand our presence in the Southeast Asia region as well,” the company said in a statement.

According to the firm, CropIn’s solutions are crop- and location-agnostic, and can be customized to suit the needs of customers around the world.

“Through our research, we identified that pest and disease as well as over-utilization of fertilizers is a major challenge in Japan,” the company said, adding that it offers solutions to such problems.

“These solutions are also available in Japanese language,” the firm told NNA.

Currently, the company has a total of four offices including three in India and one in Amsterdam through which it serves clients globally.

Some of the leading clients with which CropIn has worked include the World Bank, Organic Cotton Accelerator (OCA), Rainforest Alliance, Mercy Corps AgriFin, East-West Seed and Ethiopian Agricultural Transformation Agency.

The company, which has won various awards including last year’s ‘2020 Innovation Challenge for Food Security & Agriculture Risk Financing’, organized by the World Bank, claims to have digitized 13 million acres of farmland and gathered data on 388 crops and 9,500 crop varieties in over 52 countries.

Another local firm Ergos, an agritech startup that is building a technology-backed grain storage facility for small and marginal farmers in India, raised $11 million on Wednesday (Jan. 13) from investors including the United Kingdom-based investor CDC Group.

The firm provides farmers doorstep access to end-to-end post-harvest supply chain solutions by leveraging its technology platform.

Experts say Indian agritech startups over the last few years have been receiving funding from sector-focused global investors, among others, seeking to ride the tech-adoption wave in the agriculture sector.

Craig Gifford, head of South Asia private equity funds at CDC Group, which is backing the Indian startup Ergos believes “leveraging cutting edge technology is key to addressing some of the challenges farmers face in India.”

India-based Omnivore Capital Management Advisors, which funds entrepreneurs building the future of agriculture and food systems, has invested in over 20 local startups since 2011.

Its managing partner Mark Kahn said that “generalist VC funds are waking up to the massive opportunity in farmtech”, placing bets on digitalization, supply chain transformation, and farmer-focused financial services.

Local agritech startups say that the new farm laws in the country that have liberalized the sale of agriculture produce across the country and addressed the issue of contract farming, among other things, are likely to boost agritech startup ecosystem and benefit farmers in the country.

The three new farm laws that came into force last year, however, continue to face severe resistance from certain farmer groups. On Jan. 12, the country’s top court stayed the implementation of these laws until further orders.

“There are already around 560 agritech startups in the country, and with these kinds of policy reforms thousands of new startups will come up,” Kishor Jha, founder and CEO of Ergos, said in a phone interview with NNA.

He noted that the ease of doing business for private players in the agriculture market across India will get a boost.

“Earlier, it was very difficult (for private players) to directly engage with the farmers for any kind of grain procurement or transaction. In most of the cases licences were required. Now you don’t need any licence,” he said.

He added that the full potential of agriculture in the country can be realized through the widespread adoption of emerging technologies.

“If you are keen to see India growing at the fastest possible growth rate, you have to bring agriculture into the mainstream where startups can also unlock its value,” he said.

Gaurav Vats, head of agricultural innovations and institutional building at the Indian Society of Agribusiness Professionals which is mentoring various agri-based ventures in the country, also believes that a reform push in the agricultural sector will create an enabling environment for startups to grow.

According to experts, while agritech startups are eagerly waiting for the implementation of the new farm laws, the agritech startup ecosystem will continue to grow in the country even if the laws are scrapped or their implementation delayed.

“Even if they don’t get implemented, it won't make much of a difference. The agritech ecosystem is getting heated now, it's gaining traction year after year,” said Ashish Khetan, director and chief investment officer, Indigram Labs. It is an agritech incubator, that has mentored about 110 agritech startups since 2017 and also provided funding to 15 startups.

Khetan said that these laws, however, have the potential to “revolutionize” the agritech startup ecosystem in the country.

An August 2020 report by consultancy firm EY noted that agritech in India is still in infancy stages with just 1 percent penetration of the addressable market potential of $24 billion. To grow further, the startups will have to demonstrate scalability to receive support from investors, it said.

“Success in the agritech landscape depends on the startups’ ability to innovate the agriculture value chain without disrupting traditional channels, and their ability to establish partnerships with stakeholders such as distributors and food processing organizations,” said the EY report.

The Indian agriculture sector, which has been grappling with challenges such as limited access to technology, credit and marketplaces, contributes to 16 percent of India’s gross domestic product (GDP) and employs 43 percent of the Indian workforce, the report said.

The sector brings immense benefits to several other industries in the country such as consumer packaged goods, retail, chemicals and e-commerce which are heavily dependent on agriculture produce.

Meanwhile, the Indian government is encouraging the country's youth to set up more startups.

Shri Ashok Dalwai, CEO of National Rainfed Area Authority, and Chairman, DFI, Empowered Body Ministry of Agriculture and Farmers Welfare, said, "There are more than 300 registered incubation centres under both public and private sectors. In the agriculture domain too, a large number of Agricultural Incubation Centres exist and more are under establishment. With growing agricultural produce and focus on agri-processing (food and non-food), the opportunity for startups is immense. "

A farmer on a motorcycle inspects crops in the northern Indian state of Bihar on Dec. 24, 2020. (NNA)
A farmer on a motorcycle inspects crops in the northern Indian state of Bihar on Dec. 24, 2020. (NNA)