Unused Market Power & Agritech Opportunities to Boost Growth over the Next Decade

Early in June Egreens, an agri business announced an INR 150 million fund for early stage, agritech startups in India. The firm’s intention with the fund is to support startups that use innovative technologies and disruptive business models across the entire value chain of food production, storage and transportation.

The investment comes at a time when agritech has emerged as a sunrise sector in India. India is today home to over 600 new age agritech startups that are creating disruptive tech enabled solutions catering to the wide spread farmer community across all states in India.

A recent FICCI-PwC report concluded that the Indian agritech sector holds potential to receive investments higher than $10 billion in the next 10 years. In spite of the pandemic affecting deal activity and investments throughout 2020, the agritech segment managed to double the investment and received more than $500 million in investments, as compared to $248 million in 2019. The coming decade is going to see the sector shine and grow.

The investment comes at a time when agritech has emerged as a sunrise sector in India. India is today home to over 600 new age agritech startups are creating disruptive tech enabled solutions catering to the wide spread farmer community across all states in India

To discuss the scope for growth of the Indian agritech sector, the StartupCity editorial team caught up with Mayank Chaurasia, Founder, eGreen Farms. The discussion that followed veered from his views about the challenges faced by Indian agricultural sector to how agritech startups can help counter these roadblocks. We also spoke to him about the firm’s new agritech focused fund.

Q.Agriculture forms the very backbone of our country. The sector however has been faced with several challenges for years. In your opinion what are some of the most significant challenges faced by the Indian agricultural sector that the industry needs to overcome?
Mayank:The central problem being faced by Indian agriculture is low productivity (below the world average in major crops) which is due to high yield gaps, Increased vulnerability due to the effects of increased frequencies of extreme climatic events(droughts, floods, submergence, extreme temperatures etc.), declining and degrading natural base (land, water, agrobiodiversity) declining factor productivity (low organic matter in soils with low fertility) poor varietal and seed replacement rates besides several institutional(credit, input subsidies), infrastructural (roads, cold storage, marketing facilities), socio-economic constraints(fragmented land, poor/slow adoption of new technologies), along-with no MSP support except major crops.

Q.Agtech has emerged as a burgeoning vertical in the Indian tech startup landscape with over 600 such new entities being formed within the last few years. How big of an opportunity does the agritech sector hold in the Indian context?
Mayank:India has perhaps the largest agricultural community in the world, with about 50 percent of the Indian population earning a source of livelihood from it. The Indian agri startups have seen a massive surge since 2016. The sector had secured a funding of approx. $73 million in 2018, according to NASSCOM. While the broad sector challenges exist across farmer segments, there are specific unmet needs for each segment that offer the opportunity to build large venture capital backed businesses. While the onset of Covid-19 early last year disrupted several industries the agritech sector has proved to be surprisingly resilient. This has led to the opening up of an immense network of opportunities to drive the sector sustainably. New age startups are leveraging technology to tap the retail as well as B2B market places through Digital agronomy startups. To sum it up, India agritech is a huge untapped opportunity that is still unfolding.

Q.Tell us more about the INR 150 million agritech fund that eGreen has announced. What kind of startups will the fund largely focus on and what is your expectation with the fund’s performance?
Mayank:Agrisupply chain is very fragmented with last mile delivery being almost missing. Therefore, it offers a tremendous opportunity to identify and invest in the right startup who is trying to solve this problem. Egreens is looking to invest in high quality new age start-ups having proven concept and good founding team. Egreens shall be investing in the various sectors viz. Fruits and Vegetables, Grocery, AgriTech segment. We are also looking into synergy with technology start-ups working in agriculture domain having layers in Artificial Intelligence, Machine Learning, ‘Internet of Things’ etc. There are unmet needs of startups and companies working in these segments and we want to partner with them to fulfill those needs.

Q. What are some of the most important factors that you will be looking for in a startup before backing them? Also, throw some light on the investment approach the team will undertake going forward?
Mayank:Founding team, idea, traction achieved and intent are the few major aspects that we shall be looking in a startup before investment. For investment purpose, we have created a google form, where the companies or start ups can provide their relevant details for further evaluation. We shall be having multiple discussions with the founding team to understand their outlook of the business, competitor landscape, business viability and business model and then shall consider the companies for investment.

Q.eGreen has also recently invested INR 150 Million in its in-house food retail brand, VegEase. How does the firm intend to utilize this fresh infusion of capital to its advantage?
Mayank:Idea behind this investment is to create both forward and/or backward integration with VegEase. While VegEase is present in B2C segment, we want to grow our pace in B2B, B2B2C segment as well. Further,with collaboration we can target a bigger market.

Q.Given that penetration has been rather low for agtech startups, what would your advice be to entrepreneurs in order to overcome this roadblock?
Mayank:Although there has been strong investment activity over the past few years, market penetration in the sector is still very low. We believe that unused market power and agritech opportunities will continue to boost growth in this space over the next decade. There is an opportunity for players to grow horizontally and as well as vertically across agritech segments so that they have a lasting and end-to-end relationship with the farmer. There is also an opportunity for some of the major retailers and ecommerce players to increase their food availability by integrating back into the agritech area. Finally, food processing companies can find agritech companies to maintain a strong focus on quality and performance. Going forward, we can see an increase in the penetration of sectors such as financial services, direct agriculture and farm management and quality management as well as tracking the major market forces provided by these sectors and the level of funding these sectors have seen. The start of Agritech requires the development of dynamic business models with high economic units while allowing instead replacing traditional value chain participants to succeed in these areas.