The Rise of Indian Agritech Startups Since 2020

Date:11-22-2022

Just like every other sector, agriculture has also been disrupted by tech companies in the last few years, attempting to transform it with the introduction of various technologies. The money flowing into this segment through startups has been a welcome change from the government support the sector usually counts on. In fact, till recently, it is this very overhang of official controls that kept the sector heavily underinvested, considering its size and impact.

Nearly 100 agritech startups raised close to $1.33 billion across 139 deals between January 2020 and June 2022, according to Entrackr’s data tracking platform Fintrackr. This includes around 37 deals worth $155 million in 2020, 58 deals worth $636 million in 2021 and 44 deals worth $539 million this year.

This relatively high interest points to the sheer size, and by extension, potential for extraordinary change in agriculture in India.

Year-on-Year growth in agritech startups investment

The year 2021 was a golden period for startups across sectors and agritech was no exception. Startups in the agritech space saw a 300% jump in total funding from $155 million in 2020 to a whopping $636 million in the last year. With nearly $539 million investment, 2022 is on par in terms of total fundraise as compared to the previous year.

According to Venture Intelligence data, total funds raised by Indian agritech startups stood at $222 million in 2019 and $89 million in 2018.

The rapid surge in investments in agritech startups can also be seen from the Bain & Co report which said that the space received about $1 billion in funding between 2017 and 2020. Interestingly, the following years 2021 and 2022 (till June) saw nearly $1.17 billion in funding in which Waycool, Ninjacart, DeHaat, Absolute and AgroStar and Arya.ag emerged as the top fundraisers.

The year-on-year growth in agritech startups can be seen here:

Agritech startups saw larger rounds in 2021 and 2022

To address the challenges like supply chain, packaging, storage, payments, credit and advisory, various startups have been leveraging data analytics, artificial intelligence (AI), machine learning (ML), blockchain, software as a service (SaaS) and Internet of Things (IoT) to fill the gap.

Walmart, Flipkart and Tiger Global-backed Ninjacart, which is on the list of top-funded agritech startups, connects producers of food directly or farmers with retailers, restaurants, and service providers using in-house applications. Lightbox-backed WayCool supplies fresh farm produce as well as grains to restaurants and retail stores while Ninjacart only deals in fresh farm produce. Ninjacart and Waycool raised $145 million and $117 million in their latest funding round.

DeHaat, which scooped up $115 million in its Series D round, provides customized inputs, advising, financial services and market linkages to farmers for distribution. The Patna and Gurugram-based startup also connects farmers with third-party lenders for their working capital and large enterprises such as Reliance Fresh, Zomato and Udaan for bulk sourcing.

Pune-based AgroStar has evolved into a full-stack platform for farmers which provides farm advisory solutions and agri inputs through online and offline channels.

Valuation wise, Ninjcart, DeHaat, Waycool and AgroStar were the top companies with valuation of $815 million, $500 million, $460 million and $240 million respectively until December 2021. However, plant bioscience startup Absolute and farmgate storage enabler Arya.ag have also made entry into the list of top 10 valued agritech companies in India after their new fundraising in 2022.

In terms of revenue, Ninjacart managed to cross the Rs 750 crore revenue mark in FY21 and could become the first agritech startup to reach Rs 1,000 crore revenue mark in FY22. Waycool and DeHaat posted Rs 382 crore and Rs 358 crore in revenue in FY21 respectively.

Startups across stages managed to raise funds

Besides the aforementioned startups, Bijak, Intello Labs, Unnati, Gramophone, BharatAgri, BigHaat, Krishify, Cropin and VeGrow among others have also revolutionized the agritech space with differentiated business models and received decent funding in the past couple of years. Overall, 114 startups in the early stage and 25 startups in the growth stage scooped up $350 million and $980 million respectively since January 2020. The period saw 25 startups, mainly in the early stage, which did not disclose their financial details. Fintrackr has prepared a complete breakdown of series wise and year wise funding for the period: January 2020 to June 2022.

No unicorns from agritech space

India produced more than 100 startup unicorns in the past decade. Interestingly, 60% of the total unicorns were announced in the past 18 months i.e. 43 unicorns in 2021 and 18 unicorns in 2022. These startups were from almost all kinds of segments such as edtech, fintech, SaaS, e-commerce, foodtech, social commerce, electric vehicles, pharmacy, logistics, insurance, mobility, crypto and gaming. But, no agritech startup has managed to touch or cross the $1 billion valuation mark.

That said, with back-to-back funding from Walmart and Flipkart, Ninjacart inched close to becoming a unicorn in its last round with a valuation of $815 million. The company had previously raised $90 million led by Tiger Global in 2019 in one of the largest funding rounds in agritech space. DeHaat, Waycool and Sequoia-backed Absolute are also on the soonicorn list. One reason for not yet having a unicorn in this sector is perhaps the fact that most startups in this space started raising large funds only in recent years, coupled with the fact that companies in this segment may not experience exponential growth in a short time — which is typically the reason for tech companies gaining sky high valuations in quick succession. Finally, at high volumes, the agritech space can be very ruthless and competitive, leaving little margins on the table for players.

City wise funding

Maharashtra, Karnataka, Rajasthan, Haryana and Uttar Pradesh were the top destinations for agritech startups in India from January 2020 to June 2022.

The breakup of city wise deals can be seen below:

Differentiators

While the agritech segment saw startups solving every aspect, a couple of companies have cropped up with a different approach and managed to impress venture capitalists to invest in their ideas. For context, Absolute is a plant bioscience company which leverages phytology, microbiology, omics, molecular biology, epigenetics and AI to control the whole cycle of agri produce on its farm right from seed to harvest. The New Delhi-based startup claims to use plant biology and hydrology to maintain quality and other supply chains and unlike other agritech companies, its product reaches consumers, retail stores and restaurants on the day of harvesting.

Agritech focused funds and Govt initiatives in 2022

India is home to more than 1,000 agritech startups and several venture capital funds, debt funds and angel investors have been backing startups in this segment for a long time. Recently, Omnivore had announced that it is setting up a $130 million worth fund to back startups focusing on agriculture, food, climate change and rural development. The fund’s portfolio companies include DeHaat, Arya, Reshamandi, AgNext, and Bijak, among others. In March, Ninjacart launched a $25 million worth fund to back new-age agritech startups. Ankur Capital, which also focuses on agritech startups, is now gearing up for its third fund with a size in the range of $125-150 million.

Since January 2022, close to 15 venture capitalists have launched their new fund and a clutch of them will also focus on agritech startups. However, the number of pure-play agritech-focused VC funds on the list is quite worrisome.

Meanwhile, the Indian government has also shown its deep interest in agritech startups. In March, Union Minister Piyush Goyal said that the central government is looking to set up a fund for agritech companies in India. During the union budget 2022-23, Finance Minister Nirmala Sitharaman also announced that the government will set up a fund for agritech startups in the drone and farming-as-a-service business. According to Sitharaman, the fund allocation will be facilitated through NABARD. There is however a clear difference in the approach taken by private investors versus government-sponsored efforts. While the government efforts are farmer-focused and policy-led, the private efforts are more focused on the market side, although funding to build say, a cold chain for efficient logistics does benefit the farmer too, eventually.

For startups in the space, the big challenge is hedging themselves from the many risks a farmer faces, in the journey from seeds to collections (sales). Thus, even startups providing a very specific service cannot escape the impact of say, a poor monsoon in their operating area, or lack of access to credit, or, as we see right now, issues with access to phosphatic or nitrogenous fertilizers. But there is zero doubt that improving infra in the form of better connectivity, storage and better access to info will continue to expand opportunities for startups to make an impact, profitably in a sector that continues to throw up newer opportunities almost every time one looks at it again.

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This article was initially published in AgroPages' '2022 India Focus' magazine.