Planting out rice in Palakoddu, Tamil Nadu, India. Image credit: Deepak kumar / Unsplash

The 8 F’s of Indian agritech investing

December 10, 2020

Editor’s note: Aditya Jahagirdar is a member of the investment team at Ankur Capital, based in Bengaluru, India. A B Chakravarthy was previously principal at Menterra Venture Advisors in Chennai, India, where he led the firm’s agriculture-related investments. This article represents the views of the authors and not necessarily those of AFN.

Last year, agrifoodtech investments in India were worth $1.1 billion in total, according to research from AgFunder. Back in 2013 this figure was only $89 million. Given that agriculture contributes 15% of India’s GDP and employs close to half of its workforce, agritech came as a rather late entrant to mainstream venture funds’ portfolios.

Well, better late than never.

Agriculture poses a massive opportunity. Typically, the sector is segmented on a ‘farm to fork’ basis, with technology layers (artificial intelligence, machine learning, ‘internet of things,’ and so on) added on top.

In this article, we take a fresh approach of looking at Indian agritech through a product lens. This will allow the reader to grasp and appreciate the vastness of the sector, and also get a sense of the startup activity in Indian agritech.

The ‘eight F’s’ of Indian agritech investing are food, fuel, fiber, feed (or fodder), forestry, farm inputs, financing, and ferrying. Let’s look at what each ‘F’ encompasses and what the past, present, and future look like for them.

(Please note: We have attempted to give a few examples of companies and technologies in each category. This is not an exhaustive list.)

Food

This category encompasses everything inside the kitchen and fridge cabinet of a consumer. It includes the following items:

  • Fruits and vegetables
  • Meat and seafood
  • Dairy
  • Pulses, cereals, millets
  • Spices, flowers, medicinal plants
  • Nuts
  • Honey
  • Oils
  • Algae

These products have been undergoing two major changes: how they are produced, and in what format.

Category Past Present Future Startups
Meat Chicken, mutton Hygienic, traceable meat Plant-based meat, cell-based meat GoodDot, ClearMeat
Dairy Milk, yoghurt, butter, ghee Flavoured milk, ice cream, cheese Milk with active ingredients, flavored ghee Milk Mantra 
Groundnut Fresh nuts, homemade confectionaries Peanut butter Energy bars, super foods Yogabars, The Whole Truth

Beyond the staples, there are almost 250 other commercial crops that are regularly consumed by Indians. How are they going to be reimagined?

Fuel

There are three types of energy relevant for ag:

  • Nonrenewable – oil, natural gas, coal
  • Renewable – solar, wind, hydro, biofuels
  • Organism-based – algae, cellular, manpower, beasts of burden, plant-derived ethanol
Category Past Present Future Startups
Fuel Animal and human, fossil fuels Solar, wind, hydro, nuclear, biomass Plant-based, microorganism -based JSP Enviro

Today, 80% of the energy generated in the world comes from fossil fuels. Given the large size of the market and the potential for impact through plant-based and other clean sources of energy, we feel this sector is severely overlooked.

Fiber

This category largely includes whatever we wear and what we use to store or protect goods that we consume.

There are three forms of fibers in widespread use:

  • Synthetic – typically made using petrochemicals
  • Natural – cotton, jute, banana, pineapple, opium
  • Blends of both synthetic and natural fibers
Category Past Present Future Startups
Apparel Cotton, indigo (colors), wool, silk Synthetic cotton, wool, silk Hemp, banana, and pineapple fiber BoHeCo
Packaging Cardboard, wood Plastic, styrofoam Biodegradable, plant-based, and renewable resources Bambrew, Kriya Labs
Bags Cotton, jute Polythene, leather High-strength water and fire-resistant cotton, jute, and hemp bags LaFabrica Craft

Consumer durables, furnishing, housing – anything that today uses plastic can potentially be displaced by natural materials and fibers.

Feed

This category includes all types of feed or fodder for livestock, fisheries, sericulture (silk production), and more.

Category Past Present Future Startups
Animal feed (for cattle, fish, poultry, etc) Grains, oilcake Pellets, fish meal Insect-based protein, other sustainable proteins String Bio, Keetup

Sustainability consultant Mary McCarthy writes: “Forty-five percent of global greenhouse gas emissions from livestock production are related to feed production and processing. About half of global agricultural land is used for feeding animals, and more than a fifth of wild-caught fish is fed to animals. In many countries, livestock production is accelerating deforestation and biodiversity loss, as well as water scarcity – irrigation of feed crops consumes 12% of global groundwater and surface water.”

Sustainable methods of producing animal feed are hence a large market opportunity for Indian agritech startups and investors.

Forestry

Forestry consists of timber and non-timber forest products, the latter of which includes fruits, nuts, medicinal plants, firewood, resins, and honey, among others.

Category Past Present Future Startups
Forestry (furniture, household items, other materials, etc) Wood  Plastic Paddy straw-based alternatives to wood The Bio Company

Indian forests and the biodiversity hosted by them are under pressure for many reasons, ranging from fuel wood collection, and extraction of resources, fodder, wood, and non-timber forest products. The wooden furniture industry by itself is estimated to be worth $18.5 billion and is growing at a compound annual growth rate of 30%. Clearly, this is yet another sector waiting to be disrupted.

Farm inputs

This category includes anything that goes into growing agricultural products, such as:

  • Seeds
  • Fertilizers
  • Pesticides, insecticides, herbicides
  • Irrigation systems and monitors
  • Farm machinery and equipment
Category Past Present Future Startups
Seeds Farmers grow their own seeds High-yielding variety seeds Climate and disease-resilient seeds Tierra Seed Science
Farm tools Manual tools Mechanized improvements Internet of things, robotics Fasal, GRoboMac, TartanSense
Crop protection  Intercropping, natural methods (eg, fire as a trap for insects) Chemical, synthetic inputs Blended and sustainable inputs (eg, pheromones, bio-pesticides which only target pests and do not harm crops or the wider environment) Barrix Agro Sciences
Crop nutrition Farmyard manure, biomass Generic chemical-based products like urea, muriate of potash Bio-fertilizers and other products that provide targeted nutrients FIB-SOL life Technologies

Agriculture in India is marred by low levels of productivity. One of the reasons for this is the lack of adoption of effective farm management practices and high-quality inputs. The markets for farm inputs and farm management tools are expected to reach $1.5 billion and $3.4 billion in value, respectively, by 2025 according to Ernst & Young.

Finance

Here we include both financing and financial protection (insurance) for farmers.

Category Past Present Future Startups
Farmer financing Self-financing, moneylenders Banks, non-banking financial companies Consumer financing and crowdfunding, contract farming, digital lending platforms FarMart, Jai Kisan
Crop insurance  Communities covering risk  Government provision and financing of insurance Digital insurance distribution Gramcover

As ag becomes increasingly digitalized, financial institutions will be better positioned to provide financial services like credit and insurance for farming activities across the country.

Ferrying

This category includes all logistics along the value chain from farm to fork, including aspects of discovery between a buyer and seller.

Category Past Present Future Startups
First-mile transport Ox-drawn carts Unorganized shared transport, fossil fuel-based vehicles Tech-optimized shared transport, electric vehicles Tessol
Commodities trading (eg, grains) Bartering and home-based storage Government mandis and private marketplaces Digital marketplaces Bijak
Livestock trading Based on personal networks Informal middlemen, semi-annual trade fairs  Hyperlocal online platform-based trading enabling better prices and quality Animall

With 1.3 billion consumers, 235 million cultivators and agricultural laborers, and a rapidly growing interest in agritech from both entrepreneurs and investors, the future of Indian agritech looks more promising now than ever.

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