Impact investors flock to startups in agritech
2 min read 31 Mar 2023, 12:48 AM IST$846 mn invested in 2022 despite funding winter: Impact Investors Council
PremiumBANGALURU : Impact-oriented investors are pouring more money into agritech startups in India than they did just two to three years ago, with one segment, in particular, getting the most attention.
However, growth in the number of agritech firms that are getting funded hasn’t matched the pace at which the total amount of investments has increased in the last three years, according to a report by the Impact Investors Council (IIC).
The total value of investments into agritech startups more than doubled from $412 million in 2020 to $889 million the following year before falling to $846 million in 2022, the report said. The number of deals swelled to 66 in 2021 from 55 in 2020 but fell a tad last year, just as a funding winter began engulfing the startup world.
The median deal size tripled to $ 6 million in 2021 from the year before but then fell to $4 million in 2022, the report noted. This indicates most deals were small-sized, and a handful of startups garnered a large portion of the total amount.
Indeed, seed-stage transactions formed nearly half the deal volume but less than a tenth by value, the report showed. Series A transactions jumped in 2021, and aggregate deal value nearly tripled, but both metrics showed a decline last year. Late-stage deals, Series C and beyond, accounted for the biggest chunk of the money raised.
The data is broadly in line with the overall startup funding figures. Venture capital funding into startups had soared in 2021, the second year of the pandemic, as investors and entrepreneurs chased new business opportunities and benefitted from ultra-low interest rates. But funding has slowed over the past few months, as central banks worldwide rapidly lifted interest rates, and the focus shifted to profitability and reducing cash burn.
Still, the agritech sector in India, where half the total population depends on farming, is projected to keep growing at a brisk pace for several years. According to the Inclusive Finance India report, the agritech sector is expected to grow at an annualized pace of around 50% over the next five years, reaching $34 billion in gross merchandise value by 2027, a sharp rise from the current $4 billion. The IIC report also highlighted the segments that are receiving the most funding. It showed that startups focused on facilitating market linkages, which connect farmers and markets, garnered over 65% of the total funds. These tech platforms aim to address critical challenges faced by the highly dispersed farming community, such as access to quality inputs and advisory services, institutional credit, information, and fair product pricing. In India, technology is bridging the gap and facilitating progress in the agricultural sector, according to IIC.
Market linkage-focused agritech startups received a total of $374 million in 23 deals last year. The sector saw two large deals, Waycool and Captain Fresh, during the year.
The market-linkage segment also recorded the most deals and received the highest amount in all three years under review. Other top segments which received funding were farm management and agri-inputs. However, in 2022, the dairy segment also received significant funding, where $126 million was invested in four deals, an increase from $49 million in 2022. But this was largely due to Country Delight raising $108 million last year.
