India AgriFoodTech Investment Report marks 33pc YoY fall

AgFunder and Omnivore have released the fifth India AgriFoodTech Investment Report, detailing $2.4 billion in startup investment, which marks a 33% year-over-year decline from $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, says a press release. Startups innovating upstream, closer to farmers and across the supply chain, bucked the downward trend witnessed globally, raising $617 million, up 50% from $409 million in 2021. Farmtech investment also remained relatively strong, raising $1.1 billion in 2022, only a modest 15% drop from 2021.

Agribusiness Marketplaces & Fintech was the most popular upstream category among investors, the release said on Tuesday. Investor interest in downstream, food delivery startups waned with consolidation and little new innovation. 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 agrifood-tech 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% 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 M&A activity among existing companies," the release added.

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.”

On the other hand, Mark Kahn, Managing Partner, Omnivore, said, “Across India’s agrifood-tech 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, agrifood-tech in India will continue to surge ahead.”