Dollars down, deals up as investors change tack: India Agrifood Startup Investment Report 2020

AgFunder today publishes the latest edition of the India Agrifood Startup Investment Report, its annual analysis of the latest agtech and foodtech funding trends in the world’s second-largest country.

Put together with the help of our friends at Omnivore, India’s only local dedicated agrifoodtech VC firm, the report covers the Indian financial year, FY2020, which ran from April 1 2019 to March 31 2020.

The report can be downloaded here.

Overall, investment into Indian agrifood startups took a tumble in FY2020, dropping 56% compared to the previous financial year to reach close to $1.1 billion in total. Deal numbers were up marginally, from 125 in FY2019 to 133 this year.

Investors heading upstream

Downstream deals saw a decline in investment for the first time since 2013, sliding by 67% year-on-year. To some extent, this reflected an increasingly cautious approach from VCs in general, as multiple hyper-funded startups in other sectors ran into trouble on poor unit economics. The onset of Covid-19 only compounded this trend.

But upstream investment, focused on solutions for farms and supply chains, more than doubled. Upstream agrifood startups raised a total of $312 million across 56 deals in FY2020, up from $145 million across 43 deals in FY2019. Upstream startups’ share of the overall agrifood funding pie also grew from 34% last year to hit 42%.

In particular, tech addressing India’s smallholder economy and fragmented supply chains attracted increased investor interest on the back of rapidly expanding internet connectivity and smartphone ownership. Startups working on farm digitalization, improving supply chain efficiency, and precision agriculture were among those to score funding as big-name generalist VCs including Lightbox, Sequoia Capital, and Tiger Global made first-time upstream agrifood bets.

Even the ‘deep tech’ end of the upstream categories saw funding pick up last year. Taken together, startups in covering ag biotech, farm management software and sensors, farm robotics, and novel farming systems raised $24 million, up from $17.7 million in FY2019.

Despite this pivot towards upstream tech, consumer-facing Restaurant Marketplaces remained the highest-funded category in India in FY2020 with $276 million raised across six deals. The two most prominent players in the space, Swiggy and Zomato, raised $263 million between them as fierce competition and stressed unit economics called for more cash.

Premium consumption growth continues to hold strong

The financial year’s most active category by number of deals was also downstream. Premium Branded Foods & Restaurants raised $169 million across 37 transactions, indicative of strong growth in premium consumption demand driven by higher income households even as the wider consumer sector slowed down.

Consumers’ willingness to pay for quality and convenience in daily consumption drove investment into startup brands offering premium products in dairy, meat, and fresh produce. Among the highest funded in this category in FY2020 were online meat retailer Licious, Indo-Nepalese-Tibetan restaurant chain Wow Momo, and ‘new retail’ tea house Chaayos.

More investment at Series A, decline in seed funding

The year saw $35 million deployed across 49 seed deals in the agrifood space, down from $41 million across 52 deals in FY2019. This is chiefly in line with the trend witnessed across sectors in Indian seed funding.  Activity at the seed stage was significantly tilted towards upstream startups, as the market’s more mature downstream companies sought bigger tickets.

The top seed deal involved agri-commodities trading and wholesale platform Bijak, which banked $2.6 million in a round led by Omidyar Network, Omnivore, and Sequoia’s early stage vehicle Surge.

FY2020 saw 30 Series A deals raising a total of $112 million, versus $70 million across 16 deals the preceding year. Farmer platform DeHaat raised the largest Series A sum in the agrifood space in FY2020 — and the largest upstream agrifood Series A in India to date — with a $12 million round led by Sequoia, with AgFunder and Omnivore also participating.

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