Impact investors flock to startups in agritech

fertilizer company

BANGALURU: Impact-focused investors are investing more in India’s agritech businesses than they did just two to three years ago, with one particular sector receiving the most attention.

According to a survey by the Impact Investors Council, the rate at which the number of agritech companies receiving funding has expanded over the past three years hasn’t kept up with the growth in the overall amount of investments (IIC).

According to the research, the total amount invested in agritech businesses increased by more than twofold from $412 million in 2020 to $889 million the following year before dropping to $846 million in 2022. The number of agreements increased to 66 in 2021 from 55 in 2020 but decreased slightly the previous year just as the startup industry was hit by a fundraising winter.

According to the research, the average deal size tripled to $6 million in 2021 from the previous year before dropping to $4 million in 2022. This shows that the majority of transactions were modest in size and that a small number of companies received a sizable chunk of the total.

According to the report, seed-stage deals made up than half of deal volume but less than a tenth of its value. The number of Series A deals increased in 2021, and the total deal value nearly tripled, but both indicators decreased in 2017. The majority of the funds raised came from late-stage agreements, including those in the Series C and beyond.

The information is generally consistent with statistics on startup investment. In 2021, the second year of the pandemic, venture capital investing into startups had skyrocketed as investors and company owners sought out new business prospects and benefited from historically low interest rates. The focus has switched to profitability and lowering capital burn, but funding has slowed over the past few months as central banks all over the world quickly raised interest rates.

Yet, it is anticipated that India’s agritech sector would continue to expand rapidly for a number of years even though half of the country’s population depends on agriculture. The agritech sector is predicted by the Inclusive Finance India report to develop over the next five years at an annualised rate of over 50%, reaching $34 billion in gross merchandise value by 2027, a significant increase from the present $4 billion. The most heavily funded segments were also highlighted in the IIC report. Research revealed that over 65% of the total financing went to startups that facilitated market linkages, which link farmers and markets. With the help of these technological platforms, the highly dispersed agricultural community hopes to address important issues including fair product pricing, access to good inputs and advisory services, institutional credit, and institutional information. According to IIC, technology in India is closing the gap and facilitating development in the agricultural sector.

Agritech businesses with a focus on market connectivity last year collected $374 million from 23 agreements. Throughout the year, the industry saw two significant transactions: Captain Fresh and Waycool.

In addition, the market-linkage segment had the most deals and the highest revenue throughout the course of the three years under consideration. Farm management and agri-inputs were among the main segments funded. Nonetheless, the dairy industry also received a sizable investment in 2022, when $126 million was spent in four partnerships, up from $49 million. But a lot of this might be attributed to Country Delight, which raised $108 million last year.