Venture Capital firms looking at agriculture start-ups for rich harvest

Funding in such companies sees steady rise every year; in FY18 alone, around Rs 2 billion worth of investment has gone to five firms

Venture Capital (VC) investment in startups that are working in agriculture and allied fields are gaining traction. This year, VC firms have backed five start-ups in the space with an aggregate investment of $32 million (around Rs 2 billion), which indicates that 2018 could well breach previous years’ record of early-stage investment in agri and agro-based startups.

The rising interest of the investor community in the agriculture sector is also reflected in the number of deals that were closed in the last three years. According to data compiled by Venture Intelligence, a total of 11 investments in agri startups were closed in 2017 with an investment of $37 million (around Rs 2.5 billion) as compared to 10 in 2016 entailing an investment of $27 million (around Rs 1.8 billion). In 2015, nine such deals were closed with a combined investment of $15 million (around Rs 975 million).

“We were pioneers in funding agri startups in India since 2011-12. But today, agriculture has become much more mainstream, and you have both impact funds such as Lok, Aavishkaar, Aspada, Elevar, Ankur, Unitus and generalist VC funds such as Accel, IDG, Matrix, Kalaari, Nexus increasingly focused on agri startups,” said Mark Kahn, Co-founder of Omnivore Partners. “Besides, we are also seeing a lot of strategic investors getting involved in this space of late which would help agri startups to scale to the next level.”

Omnivore has funded a total of 15 agri startups so far including companies such as Skymet, Stellapps, Eruvaka, YCook, MITRA, Ecozen, Doodhwala and AgNext. In the current financial year, Omnivore is looking at investing around Rs 700 million in this space. “We are currently raising a Rs 6 billion fund, which had its first close of Rs 3 billion in January 2018.  Some of the investors in the first close include German government-owned development bank-KfW, SIDBI, DGGF, AXA Investment Managers, The Rockefeller Foundation, Ceniarth, RBL Bank, and the Sorenson Impact Foundation,” Kahn said adding that the fund house is likely to complete the fundraising by November 2018.

Similarly, another VC fund working in this space-Ankur Capital is equally bullish in its outlook.  

“We are seeing a lot of interest in agri startup space in the last one year. I think this is the right time to invest in agriculture as the telecom penetration is increasing and the information asymmetry is slowly coming down,” Rema Subramanian, co-founder of Ankur Capital said.

Ankur Capital has so far closed 11 deals out of which seven are in agri startups space. The typical deal size of the fund house stands at around Rs 50 million. “We are planning to invest in another three to four startups in the current year,” she added.

Ankur’s portfolio includes companies like Big Haat, which is a multi-brand agri e-store; CropIn that digitises farm data to offer real-time insights on-farm efficiency, productivity and forecast, and Suma Agro that works in the space of soil degradation among others.

Aavishkaar is another early stage fund VC fund with significant interest in the agriculture sector.

“From our fund perspective, we are trying to see how many such investments can be made in geographies that are normally not covered, like say the low-income states where the potential for agriculture and related areas is in fact very high,” Pradeep Pathiyamveetil, Managing Partner at Aavishkaar Venture, said.

The fund house has invested in dairy companies in eastern India like Milk Mantra, HR Foods apart from investing in ULink Agritech, which manufactures and distributes organic fertilizers; InI Farms that works in horticulture sector among others.

Most active investors
 

Number of companies and portfolio companies
 

• Omnivore 14: Skymet,Khedut, Arohan Foods, Barrix, Steelapps, Eruvaka, MITRA, Ycook, Ecogen, Retigence, FR8, Gramcover, Agnext, Doodhwala
• Aavishkaar 7:  Osam, INI Farms, Milk Mantra, Kamdhenu, AgroStar, Zameen Organic, Ergos
• SIDBI VC 3: Megaa, Natureland Organic, Sahaj Agro Farm
• StartupXseed Ventures 2: Aarav Unmanned Systems, Aibono
• 3ONE4 Capital 2: Aarav Unmanned Systems, Aibono

Source:Venture Intelligence

Agri bets
 

Start-ups/area of activity

• Skymet: Weather forecasting 
• AgroStar: Direct-to-farmer digital startup (supplying inputs)
• Doodhwala: Digital milk delivery startup
• AgNext: Precision agriculture
• Big Haat: Multi-brand agri e-store
• CropIn: Digitalisation of farm data
• Milk Mantra: Dairy sector
• ULink Agritech: Manufacturing of  organic fertiliser