Agritech ranks high among the sectors that are being chased by venture capital firms for investment and the increasing spread of digital economy is only going to fuel this, according to Rohit Sood, a Principal at Bertelsmann India Investments (BII), a venture capital fund focussed on investing in Series B and Series C rounds of start-ups.

“In pre-Covid period, sectors like edutech, gaming and agritech were gaining a lot of momentum. During Covid, these sectors got even more attention and healthtech has joined them now,” Sood told BusinessLine .

This is also because agritech sector of late has been attracting a lot of modern entrepreneurs, be it young techies fresh out of institutions or professionals who have successful careers. They all are ready to look at agritech just as any other sector, Sood said.

On the other end of the spectrum, however, fintech was struggling because of the liquidity crisis. And, Covid has made it worse, he said.

“There are a bunch of reasons why agriculture has come to the spotlight. One, because of the whole digital story that keeps on growing day by day. Thanks to the impetus given by Jio, technology has reached Indian farmers. Second is the reforms undertaken by the government, which though happened with a lag,” Sood said.

“The government may have initiated reforms in agriculture some years ago, but business models taking advantages of those measures are mushrooming now,” he added.

As regards Bertelsman’s investment in agritech, he said it has already invested in AgroStar, a firm focussing on farmer inputs. Though there are multiple, interesting business models on both input and output sides, the output-side sees more activity purely because of more arbitrage opportunities and the large market size.

Change in consumer behaviour

Another reason why the agritech sector would see a spurt is the change in consumer behaviour. “There is a momentum towards digitisation as well as organisation. All these firms on the output side will find more momentum because the consumer now is more interested in knowing from where the produce comes from and whether they can be trusted or not. The new set of reforms allow the firms to go and buy directly from farmers, bypassing the mandi, and take it to the retailer or directly to the consumer. Covid has actually accelerated this consumer behaviour,” the BII executive said.

This would help both farmers and businesses. While farmers are assured of better price for their produce, firms would be able to tell farmers with whom they work to use better quality seeds and nutrients.

According to Sood, two sectors that are seeing growth currently are hydroponics and greenhouse farming. “The jury is still out on greenhouse farming, but there are certain crops for which this module makes good sense. Hydroponics, on the other hand, has already arrived. There are a lot of output stage companies working directly with farmers using hydroponics for farming,” he said.

Sood said Bertelsmann normally invests only in two to three companies a year and its portfolio in the last four years was only 15 companies. “I have spent a lot of time with output-stage companies and will probably do something in future there,” he said.

He said there are several macro factors that favour investment in agritech sector. “The sector will see a lot of capital. But I do not know whether it would be $500 million over the next two years (as projected by a report recently). That order of magnitude in the next two to four years doesn’t seem far out,” Sood said.