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Despite weak economic conditions triggered by the Covid-19 pandemic impacting valuations, the investments in Indian agritech ecosystem are estimated to be in around $300-350 million in 2020, almost the same as that of previous year as the start-ups attracted funding from both new and existing investors.
Rising technology adoption among farmers, development innovation applications, and farm sector reforms are seen driving investments in the agritech arena and venture capitalists are optimistic about better prospects in the new year.
“The highlight was watching the agritech ecosystem grow even faster than in years past, catalysed by lockdown and the opportunity to help farmers in this difficult time,” said Mark Kahn, Founding Partner at Omnivore, an impact venture fund. Omnivore invested about ₹130 crore in 11 deals during 2020 as compared to ₹47 crore in seven firms during 2019.
Outlook for 2021
“The outlook for 2021 is to remain very active. Will probably do 4-5 new investments as well as follow-on rounds in our existing portfolio,” he said.
Hemendra Mathur, agritech investor, who closely tracks the space, said there were about 25 deals during the year with total investments between $300-350 million similar to the previous year. “Despite being a Covid year, the sector did well. I am confident that the investment rate would increase to $500 million a year and hopefully we get close to $1 billion a year as we see more mature agritech start-ups. What is required is a successful exit, which will take some time – maybe in 2022 and 2023 we will start seeing exits in this space, which hopefully will give more momentum to the sector,” Mathur added. Investments were spread across segments such as supply chain and precision agriculture. About half a dozen new investors, including mainstream investors such as Sequoia and Nabventures, came into the sector.
“A lot of investors realised that agriculture is a very resilient sector. The economy was not growing, and in fact, the growth rate was negative for most of the sectors, except for agriculture. So, investors do realise that there’s lot of resilience in the sector,” Mathur said.
Fund raising
The Covid lockdown saw new business models emerge, while several start-ups took the venture debt route to meet their funding requirement as raising capital became tough due to the tough economic situation.
The B2C model has picked up across categories such as fresh produce, staples and milk, among others. “A lot of brands, which were convention operated in the B2B segment have started B2C and I think the trend is going to stay forever,” he said. Mathur added there will be new opportunities in categories such as health and nutrition that can leverage the raw material base we have in herbal products and plant protein, among others.
“India’s agriculture sector is witnessing a strong confluence of tailwinds such as an increasing supply of quality entrepreneurial talent, greater private capital flowing in to fuel innovations, strong policy support for the sector and an unprecedented adoption of technology, making it viable to build solutions at scale. This, coupled with the resilience and growth which the sector has demonstrated during the pandemic, would drive further innovations and investments in the sector in 2021,” said Neha Saraf, Investment Director at Aavishkaar Capital.
She added, “Aavishkaar Capital has been one of the early backers of agritech in India and we would be doubling down on it with even greater conviction in the coming decade.”