Agritech start-ups to attract $500 mn in investments in next 2 years

In 2019 alone, $244.59 million were invested in the sector, an increase of over 350 % YoY

Investments in the agritech sector are likely to exceed $ 500 million in the next two years with the recently funded startups scaling up well for further rounds and also because the scalability potential remains high.

The sector is getting traction, especially during the current pandemic, thanks to digital access to farmers, reforms and government support. The farmer as a consumer and a producer is now being empowered by access to information, inputs, farm to fork linkages and financing support.

According to Maple Capital Advisors,  during the first half of 2020, investors pumped $84 million in agritech firms as against $153 million, during the same period last year. 

While the value is high (due to Ninjacart's $90 million deal last year), the number of deals increased to 15 from 9 last year. If the Ninjacart deal is excluded, investment in 2020 was higher by 33 per cent compared to 2019.

The data shows that despite the Covid-19 impact, deal volumes and overall values have increased (adjusting for outlier-Ninjacart). Many startups are also showing traction with their seed or angel rounds of funding and going to market for subsequent rounds. Considering the investment momentum, M&A activity is also expected to increase in the next few years.

Maple Capital's report titled “India Agritech – Investment Trends, Initiating Coverage” released by investment bank Maple Capital Advisors, says that the sector has received more than $450 million in funding in the last few years. In 2019 alone, $244.59 million was invested by investors in the sector, an increase of over 350 per cent year on year.

Some of the major deals in 2019 and 2020 saw Tiger Global's investing of $89 million in Ninjacart for a 26.5% stake, Samunnati Financial Intermediation, which specialises in loans to farmers, raising $55 million, AgroStar raising $27 million in Series C funding led by Bertelsmann India, fresh produce distribution startup WayCool raising $ 17 million from LGT Impact, Caspian, Northern Arc, dehaat raising $12 million from Agfunder, Omnivore, Sequoia & Netherlands Development Finance Co, Intello Labs raising $6 mn from Nexus, Omnivore, Saama Capital, SVG Ventures, Jai Kisan raising $ 3.9 million from Akram Ventures and Nabventures among others.

Pankaj Karna, Managing Director at Maple Capital Advisors, said, “The golden age of Indian agriculture may well have just begun backed by unparalleled digital access to farmers, overarching reforms and government support. The farmer as a consumer and a producer is now being empowered by access to information, inputs, farm to fork linkages and financing support. We expect continued investment momentum especially on back of significant reforms and digital inclusion.”

He added, "Themes such as farm-to-fork linkages and factory-to-farm, which help farmers access agri inputs directly from producers, financing and farm mechanisation enablers to name a few, will be of significant interest in the coming months." Moreover, recently funded startups are scaling up well for further meaningful rounds as the  scalability potential  remains  significant. According to the report, domains such as access to inputs, digital agriculture, farmer financing showed maximum investment activity (number of deals) with venture capital firms active in this space. Companies with models related to market linkages and supply chain efficiency have received maximum capital in the last few years.

The report added, going forward the drivers would be agritech initiatives via increased internet penetration and mobile connectivity empowering rural India and farmers for better reach to end consumers and increase their income levels. The agricultural sector remains susceptible to the changing weather patterns as well as the impending threat of climate change. Agritech can mitigate some of this. Agri policy reforms are making way for active private participation across the food chain. 

"Investor interest demonstrated by increased deal traction & number of VC/PE’s focusing on this space. We expect the farm and fork linkages model to continue to attract major investments in years to come," he said.

Anshul Sushil CEO & Co-founder at Wizikey said, “Agritech is finally getting its fair share of attention and has caught eyeballs for all the right reasons - the innovation and research that is happening in India right now will change the way we all get food from farm to fork. The technology transformation in the industry will ensure direct supply and smoother distribution.”

The Indian agritech startups have been brought in to solve the challenges of agriculture and food production. The companies are supporting the agritech ecosystem in maximising productivity, increasing supply chain efficiency, and improving market linkages. Due to the increase in the demand for such solutions in the market, sentiment towards the agritech industry has been mostly neutral, and if on an extreme side, then positive more than negative, especially during March to May 2020.