VC firms looking at agriculture start-ups for rich harvest

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

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

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 start-ups were closed in 2017 with an investment of $37 million (around ~2.5 billion) as compared to 10 in 2016 entailing an investment of $27 million (around ~1.8 billion). In 2015, nine such deals were closed with a combined investment of $15 million (around ~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 start-ups to scale to the next level.”

Omnivore has funded a total of 15 agri start-ups 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 ~700 million in this space. “We are currently raising a ~6 billion fund, which had its first close of ~3 billion in January 2018. Some of the investors in the first close include German governmentowned 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 start-up 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 start-ups space. The typical deal size of the fund house stands at around ~50 million. “We are planning to invest in another three to four start-ups in the current year,” she added.

Ankur’s portfolio includes companies like Big Haat, which is a multi-brand agri estore; 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 fertilisers; InI Farms that works in horticulture sector among others.