What is happening in India’s high value agrotechnology startups?

Back in early 2021, in a book, Shifting Orbits, in the chapter on Agritech, I had written the following: “There is general optimism both globally and locally regarding agricultural technology prospects that has led to assessments that precede business fundamentals. Terminal startups continue The big ones with tight margins are likely to stay weak in the medium term from a valuation standpoint and exit if global interest rates start to rise in the medium term or if there is a major global liquidity shock ahead.” Peripheral startups, I meant startups in The field of agricultural technology that uses new age technology in a limited way and relies on digital interfaces.

No one seems to have heeded our prescient call about inflation and its negative impact on valuations and exits. Now, we have a situation at hand where the most valuable agritech startups face either funding delays, layoffs, specific questions about their revenue model and the like. What’s going on?

In simple words, there have been and still are concerns about profitability and economic viability. Among other things, the relatively high valuations of marginal startups are driven by increased participation from public venture capitalists with access to cheap global liquidity against the backdrop of the prevailing near-zero interest rate environment in the developed world. More peripheral agritech startups in later stages have received funding from public venture capitalists.

With smaller general VCs and niche VCs focused on agriculture being smaller, they initially chose to focus on the early stages of Series A in agricultural technology startups, but have recently begun to focus more on peripheral agricultural technology and in some cases companies Emerging traditional heavy assets. In an age of cheap global liquidity and high-volume dealmaking by big venture capitalists, smaller venture capital funds (including niche venture capital that specializes in agriculture) have been able to display high benchmark valuations (but not exits) in startups in the field agricultural technology. Bain & Co. has released. Report in June 2021 in which the size of the digital agricultural market (3 components – market linkage, agricultural inputs, and logistics) is expected to reach about 30-35 billion USD by 2025 (3 more years and 5 months left.). Will these numbers come true?

At present, the current situation is as follows: the three or five high-value agri-tech startups are draining money and pursuing business models with a greater focus on proposing a loss or waste in market engagement. In many cases, in order to demonstrate revenue growth, quite a few startups buy proceeds from traditional offerings or smaller startups: a win for both and this ensures a peaceful coexistence. Are there in fact farmers in this trade as sellers or is it once again the misfits who buy from farmers and sell to market-linked start-ups?

This raises questions like: Can India count on leading market-connection startups in agritech to deliver high gross value-added (GVA) digital agriculture by 2025? Will market-related startups (digital extensions) coexist with traditional extensions? Is there comprehensive data to prove that farmers benefit from market-linked startups? Is “washing the trace” prevalent in the Gaza Strip?

This is where the need for alternative solutions and players increases. There is an urgent need to develop and enhance market link skills of Primary Agricultural Credit Communities (PACS), Farmer Producer Organizations (FPOs) etc. Basic infrastructure can be established to connect the market with basic processing facilities in various panchayats under the PPP model. Furthermore, the same PPP model can be used to create a new set of market-linked start-ups (eg the agricultural version of ONDC) or integrate PPP-funded platforms that already provide services and boost farmers’ income before increasing their income It is less focused on raising capital than venture capital or impact funds with a higher and higher valuation while neglecting the sustainability of the core business. In my view, we cannot count on money-losing VC-backed startups to solve the problem of market connectivity for Indian agriculture.

India has a large number of people employed in the agricultural sector and in view of the great importance of the sector it may be wise to keep an eye on the actual events in this sector such as the “invisible hand of free markets” and its long claims. It creates underdeveloped children’s problems rather than scalable, viable and robust business models. Indian farmers are ‘waiting for Godot’ to help!

(Rajesh Ranjan is the CEO of Napventures Fund. Opinions are personal)

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