Photo credit: Ergos

‘Grain bank’ Ergos gets $4.6m more from existing investor Aavishkaar. Here’s why

April 23, 2020

Indian impact VC firm Aavishkaar recently revealed it has invested ₹350 million ($4.58 million) into the Series A fundraise of agritech startup Ergos. It’s looking to close the round at about $15 million, according to Aavishkaar founder and CEO Vineet Rai. It’s not the first time the firm has backed Ergos. It previously led the startup’s seed round in 2015.

Founded in 2010, Ergos is trying to disrupt India’s agricultural supply chain through a ‘grain bank’ concept.

“Ergos was actually an experiment to combine [ag] warehousing and banking,” Rai tells AFN. “Just like a bank, the farmer goes in [to a warehouse] and deposits a bag of grain. And just like when we deposit money at the bank, that farmer gets a passbook, deposits their grain, and it’ll be checked and certified and excepted,” he says.

When the farmer returns to that same warehouse, he can claim back the same amount of grain – though not necessarily the exact same batch they’d deposited earlier. Moreover, they can sell the same amount of grain, at the same specification, to a buyer at another warehouse – though it doesn’t have to be the same consignment they originally deposited at their local warehouse.

As it is when you withdraw cash at another branch of your bank, “you can get new notes, you can get old notes – but they’ll be the same quality and quantity as you [initially] gave” at your local branch, Rai explains. 


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The idea originated with Ergos co-founder and CEO Kishor Jha, who previously worked as a banker at Barclays and ICICI. Returning from the city to his rural community in Bihar state, Jha wondered if the branch-based retail banking model he worked with could be translated to agricultural produce.

“What they do is digitize the grain and […] take the warehousing right to where the farmer lives,” Rai explains. The startup’s network of ‘micro-warehouses’ allows it to localize grain trading “by creating this very fungible stock of grain, with the ability to help the farmer sell grain whenever a buyer appears,” he adds.

Rai described Ergos as an asset-light business since it doesn’t have to invest heavily in the ‘micro-warehouses’ that are central to its model.

“[Ergos goes] to villages and recruits farmers to build a warehouse” on their land – typically by repurposing an existing building, he says. 

“They’re actually putting together best packing practices, the best warehouse management practices, helping those farmers to do it and actually engaging with local industry which is going to buy the grain.”

AgFunder portfolio company DeHaat just raised $12m in Series A funding to help get India’s farmers to market. Read about the Sequoia Capital-led round here.

Ergos takes these micro-warehouses on lease from the farmers and landowners that are able to provide them, taking advantage of the lower land costs available in rural districts as compared to larger agricultural storage units.

“[The startup] basically pays rent to a landlord and [keep costs down] because, in the villages, rent is very, very low,” Rai says.

Ergos generates revenue by “then asking [smallholders] to deposit, charging a rent for the storage, and then actually creating arbitrage between buyer and seller, and charging the seller a fee.”

The startup intends to use the new funds to scale up and go beyond Bihar into multiple states, Rai said. It aims to increase from its current 100 micro-warehouses, securing over a million farmers to its platform and 2,000 branches within the next five years and upping its average grain stock from 20,000 to millions of tonnes.

Outlining Aavishkaar’s investment strategy, Rai says the firm “normally [goes] in at idea stage, Series A, up to Series C  [and] can deploy up to $30 million” per round. 

It has raised and closed six funds to date, with around $450 million in assets under management. It’s raising further capital for two of its existing funds – the $200 million, India-focused Aavishkaar Bharat Fund and its $150 million maiden Africa fund. The firm is also in the midst of raising a new $300 million vehicle for Southeast Asian investments across agriculture, energy, healthcare, and financial services.

Aavishkaar’s limited partners have included a “who’s who” of development finance, including the World Bank’s International Finance Corporation, the UK government’s CDC Group, and Netherlands bank FMO, adds Rai. 

“The uniqueness of Aavishkaar is we’re not really just an investor. We are a creator of countries’ track record of [impact investing] in diff geographies, in different spaces. That is a skill no single large investor will have, and we do, and we can create a pipeline for them,” he says.

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