AgFunder and Omnivore have released the fifth India AgriFoodTech Investment Report, detailing US$2.4 billion in startup investment in 2022, a 33 per cent year-over-year decline from US$3.6 billion in 2021. The decline matches the global downward trend but there were bright spots where investors backed innovations focused on farmers and climate change.
Rising concerns around the impact of climate change on Indian agriculture have captured the attention of investors, catalysing efforts to deliver affordable mitigation and adaptation solutions for smallholder farmers. Startups innovating upstream, closer to farmers and across the supply chain, bucked the downward trend witnessed globally, raising US$617 million, up 50 per cent from US$409 million in 2021.
Farmtech investment also remained relatively strong, raising US$1.1 billion in 2022, only a modest 15 per cent drop from 2021. Agribusiness marketplaces and fintech were the most popular upstream category among investors. Investor interest in downstream, food delivery startups waned with consolidation and little new innovation.
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Capital availability in India has tightened along with the rest of the world, although not as steeply as in developed markets. Indian venture investors remain bullish on upstream AgriFoodTech innovations – those operating on the farm and in the supply chain – that offer deep moats and deliver affordable solutions to smallholder farmers. In contrast, despite attracting heavy funding over the past few years, investments in downstream startups plunged by 37 per cent in 2022 year-on-year. Once the pandemic lockdowns ended, many downstream ventures struggled to maintain the accelerated pace of growth created by Covid-19 in 2020 and 2021. A highly saturated home delivery market has further reduced investor interest. In the coming months, we expect fewer players to enter the downstream market and more merger and acquisition (M&A) activity among existing companies.
Other key insights in the report
The total number of deals declined to 133 in 2022, compared to 230 in 2021. Meal marketplaces and e-grocery were the most funded downstream categories yet again. The capital raised by these two categories accounts for 54 per cent of total funding in Indian AgriFoodtech, with e-grocery startups landing the highest number of late-stage deals.
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Downstream startups raised US$1.7 billion in 2022, a 37 per cent decrease from US$2.6 billion in 2021. Swiggy’s US$700 million late-stage deal made up the bulk of investment in this category. e-Grocery startups raised US$776 million across 20 deals, accounting for 32 per cent of overall AgriFoodTech funding in India. Midstream technologies deal activity decreased though the category remains active with US$178 million raised across 14 deals.
Michael Dean, founding partner, AgFunder, said, “It is a challenging funding environment for startups globally and, as our report shows, India is no different. The relative increase in upstream financing is a welcome bright spot and reflects the urgency to fund technologies addressing the multiple inefficiencies in our food production and distribution systems that contribute to climate change and hunger.”
Mark Kahn, Managing Partner, Omnivore, said, “Across India’s AgrifoodTech ecosystem, 2023 will stress test startups, while also being an ideal vintage for VCs who can enter promising deals at cheap valuations. Despite the transient headwinds, AgriFoodTech in India will continue to surge ahead.”
This report, produced by AgFunder in partnership with Omnivore, includes spotlights on the startups – Agrizy, Ecozen, Varaha, Loopworm and S4S Technologies.