Why Are Agtech Start-ups Not Turning Unicorns?

With 63 unicorns, the Indian startup space is a raging success. However, a closer analysis reveals the chunk of the pie is taken by EdTech and MedTech startups. The agritech space in contrast has seen little success with respect to crossing a Billion Dollars in valuation. In a country where about three fourth of the population is engaged in agriculture, it is surprising that a problematic situation like this should come up.

What’s the matter? 

While there are many reasons why this is the case, industry veterans have an interesting take on it. Alok Duggal, Co-founder, and COO, Faarms says, “The young urban who are mostly the ones in the start-up space, have lost touch with agriculture over the years. They might have had some of their ancestors in the field, but they have all moved away from agriculture into tech and other businesses in the cities.” Given the distance between the generation and the farm, their knowledge about challenges, what is required, how things work on the ground is very low. Hence the entire process is challenging even if there is interest from their side. These factors when taken together, make this space intimidating for them.  

Further, given the distance between urban start-ups and rural farmers, lack of mutual trust and dependency emerges as a major factor. In fact, many agriculturalists use old-school harvesting and threshing methods, making them agnostic towards new-age machinery. Not only are they aversive, but also see machinery as a threat to their livelihood. In an industry that runs on minimal profit margins and old-school technology, trust and human relationships become pivotal. Also, the farmer tends to trust dealers or investors they have known for decades.  

In addition, given that Agritech is not exploded the way EdTech has, it will also require research and technological advancement, which in turn will require massive investment from investors. While this may seem simplistic, most venture capitalists or angel investors will be apprehensive because the crop cycle of about 100 days cannot be shortened, thus delaying profits for them. Given the time taking process, it naturally is, their exit may not be smooth either. Add to this in the unorganized logistics industry in India. A lot of times sourcing materials for agriculture-based end products is delayed in reaching in its destination locally, while products sourced from international destinations are quick to arrive. Adding to this is the relocation of labor due to Covid 19 and its aftermath, making manpower difficult to come by. 

Another interesting factor is land dispersal across the country. Given that agriculture is a land-consuming business, it needs a vast expanse of the continuous area under cultivation. However, given the land distribution in India, this is not possible. Instead, we have small pockets of land spread across the country. Similarly, the business owners and investors may not be at the same location as the business owner or the cultivator. This setup seems problematic when compared to a location like Silicon Valley in the United States where the majority of the players are within a 70km radius of each other. Even if we advance in research and development, and employ new mediums of technology, the handicap of location still prevails.  

Is It A Lost Cause? 

Industry leaders do not believe so. “I believe that every industry and business have the right time to thrive. And I also see that the time for agritech businesses to flourish is here. The success of the Zomato IPO shows the readiness of Indian bourses to accept local internet and tech companies with the same enthusiasm as traditional companies like manufacturing, FMCG, etc. The growth momentum of the agritech industry will be accelerated by a conducive environment facilitated by the policymakers and government with an agri-digital push. Given these factors, I think, an agritech unicorn will be a reality soon.”, says Amith Agarwal, Co-Founder And CEO, Agribazaar. Agarwal’s optimism is not in vain. The pandemic has helped demonstrate the resilience and dependability of agritech businesses. These factors helped in establishing trust in these start-ups, especially among farmers. It is also noteworthy, that there are a handful of brands that are doing exceptionally well which have been recognized by not just the investor community but the government as well. It would be not wrong to say that in the next 10 years or even earlier we would see unicorns from this space. 

What is the government doing? 

Both the center and the state governments have designed schemes to help the Krishi through various Project Implementation Partnership models with various start-ups to serve the farmer community. In June 2020, the Indian government amended its National e-Governance Plan in Agriculture (NeGPA) to extend support to the State Governments for pilots involving the use of these new technologies. Another major initiative that has been recently started is the engagement of leading agritech, agriculture, and start-ups for building proof of concepts. 

Keeping this in mind, some of these start-ups like Agribazaar are collaborating extensively with the government. Talking about the same, Agarwal notes, “Our MoU with the Department of Agriculture, Government of India to build & promote Digital Agricultural Platform (DAP) among Indian farmers is a good example in this context. Likewise, Agribazaar’s recent MoU with Central Warehousing Corporation (CWC) to provide e-auction and sales facilitation services for the agri-commodities stored at the latter’s warehouses across the country, is another example of our collaboration with the government.” As a part of this collaboration, Agribazaar will leverage its world-class technological capabilities to create standardized, verified data for agristack, profile agricultural land, develop a generalized advisory platform, enable access to an integrated farmer marketplace for the broader stakeholder ecosystem & facilitate better access to financial services for farmers. The Union Ministry of Agriculture will provide sourcing assistance, resources, information, data sets & cooperation from local authorities/state governments/government institutions.  Taking into account the proactive outlook of the government, Faarms is also collaborating with the central and state government, “We are currently in 30,000+ villages of Punjab, Haryana, Chandigarh, West UP, Uttarakhand, Rajasthan & Gujrat and aim to reach 1 lakh villages by end of 2021.”, notes Alok Duggal 

Seeing the first movers, there are a lot of others getting involved, bringing in their tech knowledge, knowledge of climatology, their out-of-the-box thinking, to create a difference in the fields. Since agritech has just got attention in the last three to four years, we have to wait for eight to ten years to see a real impact on-ground.