Agri start-ups that serve the small farmer need more seed funding, incubation and mentoring to make an impact.
What is the need?
Modernising Indian agriculture will require change in key elements of the sector - supply chains and markets; production support; credit and crop insurance.
Indian entrepreneurs are developing new technologies and business models to meet this challenge.
In 2018, the country had nearly 500 agricultural start-ups.
In the past five years alone, these start-ups raised nearly $130 million from investors in about 70 deals.
However, supply chains for perishable commodities such as fruits and vegetables still remain largely fragmented in India, with smallholder farmers earning low margins.
Unpredictable demand, price volatility and post-harvest losses compound the risks.
Hence, they need much more investment and support to fulfil their potential.
What are the successful business models so far?
Supply chain efficiency – A number of start-ups are using data and technology to improve supply chain efficiency.
WayCool, distributes fresh produce to sellers ranging from small shops to large retail outlets, reduces waste and inefficiency by using analytics, process management software and connected devices.
Jumbotail, connects retail grocery stores with food processors and farmer producer organizations.
Ergos, operates a chain of efficient and hygienic rural warehousing facilities that are located within easy access of small farms.
Production support - A number of start-ups have created alternative channels to deliver inputs to farmers at low cost.
AgroStar, created a standalone mobile app, a web service, and a customer call centre, through which farmers can obtain high-quality products for all of their farming needs.
Most small farmers cannot afford to buy farm equipment.
In such cases, some start-ups are offering on-demand rentals and enabling farmers who own equipment to rent it to others.
Gold Farm, connects farmers who need equipment with farmers who own equipment using a cloud-based platform.
Finance - Most small farmers lack access to collateral-free financing and crop insurance.
To overcome, some start-ups use satellite imagery and machine learning to facilitate crop insurance for smallholder farmers that come with reduced premiums and more timely and accurate payouts.
What should be done?
Agricultural start-ups in India have addressed systemic bottlenecks in the agricultural sector, instead of focussing on specific commodities.
As a result, they have the potential to scale up nationwide.
However, in addition to investment capital, Indian agricultural start-ups need technical advice and access to global markets and talent.
Several venture capital and private equity funds are stepping in and applying their experience from other sectors and countries.
Investments across the agricultural supply chain in India have averaged about $250 million in each of the last five years.
But most of that capital has gone into front-end supply chain solutions, including branding, distribution and food delivery rather than farmer-focussed innovations.
Thus, start-ups that serve small farmers need more seed funding, early-stage capital, incubation and mentoring to unlock their immense growth potential.
If that is done, Indian start-ups can help define the future of Indian agriculture.
