Climate Change Spurs Investor's Interest in Agri Capture

According to a recent report by AgFunder and Omnivore, Indian agrifood tech venture capital funding has reached a significant milestone of USD 2.4 billion. This surge in investment can be attributed to investors shifting their focus toward addressing climate change challenges in the agricultural sector. 

The report, titled 'India Agrifood Tech Investment,' highlights the growing concerns surrounding the impact of climate change on farming and how it has sparked investor interest in developing affordable solutions for smallholder farmers to mitigate and adapt to these challenges. Despite a modest 15 percent decrease from the previous year, farm tech investment remained robust, raising USD 1.1 billion in 2022.

"Among investors, the agri-business marketplace and fintech sector emerged as the most sought-after category in terms of upstream investments. Conversely, downstream investments in food delivery startups experienced a decline due to industry consolidation and limited innovation," the report stated.

While capital availability in India has tightened, mirroring global trends, the impact has been comparatively less severe than in developed markets. Indian venture investors maintain a positive outlook on agri-food-tech innovations focused on upstream operations, encompassing activities within farms and supply chains. These innovations are highly valued for their ability to create strong market positions and provide affordable solutions for smallholder farmers.

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Despite receiving significant funding in recent years, investments in downstream startups experienced a substantial 37% decline in 2022 compared to the previous year. The end of pandemic lockdowns resulted in difficulties for many downstream ventures to sustain the rapid growth witnessed during the Covid-19 pandemic in 2020 and 2021.

The decline in investor interest can be attributed to the highly saturated home delivery market. Therefore, fewer new players are expected to enter the downstream market in the upcoming months, while an increase in mergers and acquisitions among existing companies is anticipated, as highlighted in the report.

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Michael Dean, the Founding Partner of AgFunder, remarked, "In today's startup funding landscape, both globally and in India, securing investments can be a daunting task. However, our report demonstrates a positive development in the form of increased upstream financing. This surge is a promising indication of the pressing need to support innovative technologies aimed at tackling the numerous inefficiencies prevalent in our food production and distribution systems. These advancements hold the potential to combat climate change and alleviate hunger."

In 2022, there was a significant 33 percent decline in total investments compared to the previous year. Late-stage investments experienced a 34 percent drop, while early-stage investments saw a substantial decrease of 46 percent. However, growth-stage deals remained relatively stable, with an 8 percent decline in capital flow.

Mark Kahn, Managing Partner at Omnivore, expressed that the year 2023 will serve as a stress test for startups within India's agrifoodtech ecosystem. Simultaneously, it presents a favorable opportunity for venture capitalists to enter promising deals at affordable valuations. Despite the temporary challenges, the agri-food-tech sector in India is expected to continue its strong growth trajectory.

- BusinessWorld 

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