Agri startup uses franchise route to smart fields

He and a few others were studying farms around Vaishali and realized that the unit economics of growing wheat in that region made it unprofitable. The irrigation and labour costs for rajma would be lower, and the crop cycle shorter, enabling farmers to grow three crops a year instead of two. But it was hard to convince farmers who had been growing wheat for decades.

“For two months we met them daily and discussed this, but to them we were just 25-year-old kids. Finally, one of them said, ‘Chalo, I’ll let you try this on my land, just so that you guys stop coming to my home.’ He set aside a third of his land for our kidney bean pilot," says Kumar with a chuckle. Soon, 14 other farmers joined in.

Green Shoots

That was the first bud of what grew into the startup DeHaat (registered as AgRevolution) that Kumar co-founded with Amrendra Singh, Adarsh Srivastava, and Shyam Sundar Singh in Patna in 2012. At the outset, its model was to provide advisory services to farmers and market linkages. It tied up with food processing companies for procurement, assuring them quality and availability of produce. It tied up with input companies to provide seeds, fertilizers and pesticides to farmers, assuring them reliable products at fair prices. Lately it has been bringing financing and insurance companies to its platform.

“We don’t charge farmers for our advisory services though we have been investing a lot to provide customized advice and timely pricing information. Some 26-27% of our revenue comes from farm input sales and distribution, and the remaining from market linkage of produce," says Kumar.

What DeHaat has tried not to lose sight of through all this is its core value proposition, which was to improve the profitability of farmers around Vaishali. To be able to scale up and yet maintain that level of engagement with farmers, it came up with a franchise model. Micro-entrepreneurs in small towns and villages run these franchises, collectively known as DeHaat, which means countryside in Hindi.

Gautam Singh was a driver in Delhi, sending money back home to his wife and children in Jaitipur village near Vaishali. Four years ago, he returned to Jaitipur to start a DeHaat centre for farmers from his village and surrounding areas. The centre is the touch point for everything, from farm inputs to offloading produce. Farmers access advisory services on the DeHaat mobile app and call centre as well as at the centre. A DeHaat centre serves 300-400 farmers. There are now 700 such franchises, working with 244,000 farmers in Bihar, Jharkhand, Odisha and Uttar Pradesh.

The franchise model differentiates DeHaat from a B2B agri-marketplace like Bengaluru-based Ninjacart, which works with larger collection centres. The lines between them can blur, but Ninjacart’s focus is on delivering farm produce to a range of buyers from retailers and restaurants to food companies.

DeHaat is more involved on the farmer side, and mostly ties up with institutional buyers for procurement. “From the first day, our gut feel was to be closer to farmers and create an ecosystem around them. That’s how we’ve evolved," says Kumar.

It’s a hub-and-spoke model, where nodal warehouses connect with DeHaat centres, which, in turn, connect with farmers in a 5km radius. “The DeHaat approach of farmer engagement is complicated. There’s a lot of training required for the DeHaatis (franchisees). And yet, it has been growing 3x or more a year," says Mark Kahn, founding partner of Indian agritech VC Omnivore, which joined AgFunder, a Silicon Valley fund, in DeHaat’s seed round funding of $4 million last year. Until then the startup had only tapped debt financing, but now it appears set for rapid expansion.

Sequoia Capital India led its $12 million series A round in April. This makes DeHaat the seventh highest funded agritech startup in India and the only one in the top 20 that’s in eastern India, according to data by Tracxn.

Base in Bihar

Several reasons favoured the choice to start up in Bihar. For one thing, Kumar comes from a farming family in Basahi village near Chhapra. So he was attuned to the local farming culture.

Bihar and Jharkhand also saved the startup from hassles in procuring farm output because these states had junked the Agriculture Produce Market Committee (APMC) Act. In most other states, farmers are required to sell their crops to traders in mandis. So a startup like DeHaat, which deals in both staples like rice and wheat as well as fruits and vegetables, would have to register itself as a trader, get a licence to buy crops from farmers and pay a market cess, which varies from state to state.

The central government recently issued ordinances to free farmers from such restrictions, but these still have to be ratified by state governments. “If the ordinance gets executed, the way forward will be easier for people like us. Otherwise we’ll just have to get the procurement licence in states where it’s required," says Kumar.

Other than regulations and home advantage, eastern India’s cropping pattern had an allure for the DeHaat founders. It was far more mixed than the monoculture prevalent in western and southern India. “More crops meant more touch points and a greater need for the services we were offering," points out Kumar.

The backwardness of the region’s farming increased the scope for DeHaat to make a difference. “This is one of the most fertile regions of India; it’s in the Gangetic belt. The area under cultivation is high. Unfortunately, productivity for crops being grown is far lower than the national average," says Kumar.

As the startup has grown, so has its backend analytics to help farmers choose what to grow and how to do it for better returns. Soil testing, weather tracking, input management and pricing insights all come into it.

Just as in Vaishali at the start of the journey, when the founders themselves ran the first two DeHaat centres, the thrill for Kumar comes from engaging with farmers and winning their trust, which can take two or three years of showing results.

“It gives me a good feeling that we’re now working with nearly a quarter of a million farmers. But Bihar itself has a million farmers and India has over 100 million. So everyday we ask ourselves how we can create a robust and scalable model," says Kumar.

It’s the same question that occupied him when DeHaat signed up 900 farmers for its first two centres around Vaishali.