“Our investment strategy hinges on improving agricultural sustainability & smallholder profitability”

Jinesh Shah, Managing Partner, Omnivore

As a ‘financial first’ impact investor Omnivore is geared to deliver marketrate venture capital returns while making a difference in the lives of Indian smallholder farmers and rural communities. Based in India, Omnivore is an impact venture capital firm that funds entrepreneurs building the future of agriculture and food systems. The firm pioneered agritech investing in India, backing over 25 startups since 2011, and currently manages Rs 9.35 billion (approximately $132 million) across two funds. Jinesh Shah, Managing Partner, Omnivore shares his views with Agrospectrum on investments in agritech startups and the future of agri-fintech startups in India. Edited excerpts;

What is the status of agritech startup investment in India?

There has been a remarkable surge in agritech startup activity due to rapid advancement in underlying technologies. Rural smartphone penetration and mobile internet has provided the digital backbone to scale both businessto-farmer (B2F) and business-to-business-tofarmer (B2B2F) models. An increasing number of farmers are now able to improve their yields, lower their operating costs, and ensure their products get the right market value. There is an increased focus on improving market linkages for the farmers, which is helping farmers receive a better income for their produce. Further, allied sectors such as horticulture and dairy are seeing movement from unorganised to organised play, which in turn, is helping farmers get better business. Today, there is increased communication between producers and customers, which is helping the farmers tweak his/her production efforts. This positive phenomenon has led to the evolution of a supportive agritech ecosystem with participation from accelerators, strategic corporate involvement, and VCS at every stage.

How is Omnivore contributing to the growth of agritech startups in India?

Omnivore pioneered agritech startup investing in India and is the only impact investor in South Asia focused exclusively on agriculture and food systems. To date, we have backed over 30 startups, and currently have Rs 9.35 billion (approximately $135 million) under management across two funds.

Omnivore invests in Indian startups developing breakthrough technologies for agriculture, food, climate resilience, and the rural economy. Our investment thesis focuses on six core agritech themes: Farmer Platforms and Fintech, Precision Agriculture, Agri B2B Marketplaces, Farm to

Consumer (F2C) Brands, Agrifood Life Sciences, and Post-harvest Technologies. Furthermore, our investment strategy hinges on our Theory of Change (TOC), made up of four pillars. These include improving smallholder profitability, enhancing smallholder resilience, and improving agricultural sustainability. The recent addition of the fourth pillar, catalysing climate action, highlights our commitment to prioritising innovations focused on combating climate change in Indian agriculture. For any new investment that we undertake, we look for strong alignment with one or more of our TOC pillars.

What are your plans and strategies for FY 2021-22?

Omnivore will continue to actively make new investments in the focused areas of agriculture and work towards the improvement of farmers and farming via our theory of change. Besides, we will continue to support our existing portfolio companies in their onward growth journey.

Besides, we intend to start the fundraising exercise for Omnivore Fund 3 in the next couple of months and bring additional capital to support the Indian agritech and the smallholder farmers.

Did the pandemic impact investment in the agritech startup ecosystem?

While agriculture was not directly affected by the COVID-19 containment policies of 2020 and 2021, it would be wrong to say that it was entirely unaffected. A lockdown on the movement of labour, and constraints on downstream activities like logistics, distribution, and consumption, did impact the sector as a whole to some extent. Indian agriculture ultimately proved to be very resilient. However, we assess that the second wave had more stress on the agri ecosystem in comparison to the first wave.

As a Venture Capitalist focused purely on agritech, Omnivore did not see major turbulence in the sector or the startup deal flow emerging from it. Challenges relating to how deals were done, how negotiations took place, and how investors and entrepreneurs built comfort with each other, were quickly overcome as all stakeholders embraced the new normal. The startup investment space, as a whole, saw some initial fluctuations in valuation expectations and departures from the norm when it came to deal terms. This has since been corrected. Our investment strategy and deal volume remain unfettered by the pandemic. We saw a 130 per cent increase in capital deployment in 2020 compared to 2019.

Investors in the agritech sector leaned towards backing proven business models and chose to boost existing portfolio investments to tide over challenges posed by the pandemic. In such a situation how would you foresee agritech startups in India?

The lockdown provided the agritech startups across all stages of growth the unintended opportunity to show farmers, traders and retailers a different way of doing business.

While traditional markets will continue to exist, a ’habit-shift’ in the agri community is clearly underway which will usher in more investments in this sector.

The Indian agritech ecosystem is focusing on addressing core problems and has to do little to create demand. The sector has a significant amount of inefficiencies and as a result, we do not have to create user awareness via marketing. It is an essential sector, and most agritech startups are working towards creating sustainable business models.

Currently, many leading agri-fintech startups are helping farmers through Artificial Intelligence (AI) and Machine learning (ML). How do you envision the future of agri-fintech startups in India?

The future of agri-fintech startups in India is very bright. We are home to approximately

130 million smallholder farmers and a majority of them are often locked out of formal financial services due to hurdles within the existing system. Technology is creating a sturdy and reliable alternative lending system. It is not only bringing in more ‘new to credit individuals’, but also achieving effective financial inclusion.

However, we believe that agri-fintech has to be part of integrated solutions to improve the value chain rather than being a stand-alone service. Farmers face various problems and unless one solves them together, it will fail to add value to farmers’ lives.