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    AgTech ventures ride the pandemic boom

    AgTech ventures ride the pandemic boom

    AgTech ventures ride the pandemic boom
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    By N Ramakrishnan   IST (Updated)


    Greater digitisation and increased investor interest will drive growth in the AgTech sector.

    When Punjab-headquartered AgNext Technologies announced that it had raised $21 million in a Series A round of funding, it was yet another affirmation of the potential that the sector had both for founders and investors.
    The company, which uses artificial intelligence, machine learning and the Internet of Things (IoT) to provide rapid food quality assessment, said this was one of the largest Series A rounds in the agriculture technology (AgTech) space.
    Alpha Wave Incubator fund, which is backed by DisruptAD and managed by Falcon Edge, led this round in AgNext Technologies. Incidentally, this was Alpha Wave Incubator’s first investment in the AgTech space in India. Existing investors Omnivore and Kalaari Capital participated in the round. AgNext Technologies said that the fund infusion gave a 5x exit to a-IDEA NAARM, a leading agri-biz incubator in the country that is managed by the National Academy of Agricultural Research Management (NAARM).
    Data provided by Venture Intelligence, which tracks private company financials and VC/PE deals, shows that there have been 21 deals so far in 2021 in the AgTech space with $190 million being raised by the ventures. (See Table 1. The table does not include AgNext Technologies’ fundraise, which was announced on August 19. VC includes seed to Series F investments in companies less than 10 years old, and late-stage tech investment.)
    Table 1
    VC Investments in Agri-tech startups (2019 - 2021 YTD*)
    Year / QuarterNo. of DealsAmount ($M)
    2021 YTD*20169
    *Up to August 18, 2021.Source: Venture Intelligence
    The startups in the AgTech space cover the entire spectrum – right from providing products and services for precision farming to financing to helping farmers find a market for their produce. Barring the initial few weeks of the Covid-19 pandemic induced lockdown in 2020, the AgTech space has actually done quite well during the pandemic. The fact was that farming continued and 2020 saw record harvest and sowing. There are more investors, including mainstream VC funds, showing interest in the sector.
    “It has been an aggressively positive time for agri-tech,” says Mark Kahn, Managing Partner, Omnivore, a VC fund that focuses on the AgTech space. He points out that when supply chains broke in March-May 2020 due to the nationwide lockdown, there was a surge in digital platforms.
    In a recent interview to this writer, he said they had seen an “incredible growth” since March 2020 and “we really think this has crossed an inflexion point.” Farmer platforms and B2B marketplaces were two specific segments within the AgTech sector that witnessed incredible growth.
    According to Ritu Verma, Managing Partner, Ankur Capital, an early-stage VC firm that invests in tech-enabled businesses including in AgTech, since the pandemic broke, interest in AgTech and in digitisation has gone up. Most of the interest has been on the sourcing and distribution side and much less directly on the farm. But as digitisation increases across the spectrum, there is bound to be greater thrust at the farm level also. She points out that there are a lot of changes happening across the AgTech landscape – from getting inputs into farms to doing things on the farm to post-harvest and to the supply chain. There has been considerable investment in warehousing.
    The pandemic highlighted the need for better communication among the farming community. And, if the farmer was better placed to store and stock the produce, then he or she was better off. That is why there is an increased thrust on digitisation and warehousing thanks to the pandemic.
    According to Ag-Tech in India: Investment Landscape Report 2021, brought out by ThinkAg, a platform that connects various players in the ecosystem, there was a dip in investments into the sector in 2020 compared with the previous year. The drop in AgTech investments, the report notes, “deviates from the global trend of pandemic tailwinds significantly accelerating fund flows.” The report observes that the long-term prospects for the sector continue to be good, a sentiment that is supported by ground-level surveys conducted by the organisation, which report an overwhelmingly positive business outlook and continuing investor interest.
    More interestingly, there is a greater diversity of investor profile, with more mainstream venture capital firms getting interested in the sector early on.
    The ThinkAg report shows that capital flows in 2020 were down 35 per cent to $409.5 million from $605 million in the previous year. A total of 42 ventures raised funds in 2020 against 58 in 2019. The average value of the first cheque received by a company was $1.1 million in its first institutional fundraise while $2.15 million was the median investment in 2020 compared with $1.42 million the previous year, indicating a higher proportion of large deals.
    According to the report, there is a greater diversity of investor profiles compared with 2020. The new sources of venture capital funding have almost entirely come from generalist or mainstream funds. Last year also witnessed the entry of various international PE and growth investors infusing late-stage capital into the AgTech ecosystem, said the report. The report said ventures were reaching scaling milestones that are required to raise larger rounds of funding, showing a growing maturity of the ecosystem. The ventures were also building out adjacent services to create a platform solution. The report pointed out that opportunities in supply chain digitisation would remain a focus for innovators and investors.
    The nationwide lockdown in March 2020, during the first wave of the coronavirus, accelerated digital adoption by customers, says Sateesh Nukala, Co-founder and CEO, BigHaat, a digital platform that is a one-stop stop for agri needs. Since the covid pandemic, the company has grown eight times, matching the growth the company had seen since in the entire period since it started six years back.
    Kishor Jha, CEO and Director, Ergos, a start-up that has created a grain bank to help farmers convert their grains into tradable digital assets and which is mainly present in Bihar, expresses similar sentiments. Before the lockdown, the company handled around 13,000 tonnes of grains, which went up three times in 2020. This year, the venture hopes to handle close to 100,000 tonnes.
    These AgTech ventures have attracted new sets of customers, particularly those who are tech-savvy. Harshal Belokar, a dentist practising in Navi Mumbai, is one such. His family has a farm in Dasala village in Buldhana district in Maharashtra, on which they were growing crops including soya beans. When he wanted to switch over to other crops on a part of the farm, Belokar says he decided to plant chilli because he had heard there was a good market. He asked around to find out where he could get good quality seeds, but without any luck. A search on the Internet threw up the name of BigHaat and Belokar says he bought two varieties of green chilli seeds from the platform. The seeds were delivered promptly, they were of good quality and he has had a good crop, he told this writer over the telephone.
    Likewise, Parikshit Gokuldas Daga is an MBA in marketing and HR and a full-time farmer in Chhattisgarh, who grows tomato and chilli on his ancestral farm in Mahasamund. They were growing paddy and the returns were low. Daga says he decided to diversify into tomato and chilli on a portion of the farm. He had heard of AgTech start-up Fasal, which is into precision farming and provides IoT based AI-powered intelligence platform for horticulture crops. Thanks to this, says Daga, he was able to get details on how much watering needed to be done, how much of pesticides needed to be used and on which part of the farm the pesticides had to be sprayed. He also got accurate weather and rainfall forecast, all of which have helped him immensely in his farming.
    These successes will spur other farmers to also adapt to technology in their fields and for other transactions. Both Kahn of Omnivore and Verma of Ankur Capital believe that the digitisation that happened due to Covid is not a one-off phenomenon. More farmers and others in the ecosystem will start using more technology once they see the benefits that others have reaped.
    N Ramakrishnan is a Chennai-based freelance journalist with over three decades of experience. The views expressed are personal
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