The past year and a half have been tumultuous for investments across the Indian startup landscape. The AgTech and FoodTech sectors have also felt the heat, though have arguably experienced a smaller correction in comparison to other sectors. Late-stage checks in mature AgTech enterprises, that typically drove the investment values, have cooled significantly, leading to an overall drop in funding numbers. This is not surprising given that global capital flows have ebbed and large investors backed down from placing significant bets. D2C FoodTech brands, on the other hand, have bucked this trend and attracted a number of large-cheque deals.
Deal activity has held up across the board in 2022, with the number of AgTech transactions growing in number and FoodTech maintaining its deal levels. Zooming in, tech-enabled supply chain solutions in allied sectors have attracted investor interest and beverage as well as functional food brands have raised the bulk of the capital in FoodTech. AgBioTech innovations are experiencing a long over-due increase in deal activity and capital flows. The sector also saw emergence and investor support for several climate-resilience linked businesses ranging from carbon accounting and carbon market linkage to agri food waste to feed/energy/agri-input solutions. However, so far this hasn’t extended to the FoodTech space where support for Alternative Dairy and Protein solutions saw a slump in comparison to the previous couple of years.
Acquisition and consolidation were a key feature of both AgTech and FoodTech ecosystems in 2022, albeit in different ways. A number of brands in the FoodTech space, particularly Functional Food brands were acquired by FMCG companies looking to enter the segment. In the AgTech ecosystem, consolidation activity was driven by mature, monied AgTech startups acquiring smaller ones in order to pursue expansion up and down a value chain or across additional value chains or into new geographies, resulting in a ‘portfolioization’ of some solutions in the ecosystem.
While numbers tell us the overall story, they do not capture the sentiments and learnings of the market. ThinkAg typically garners on ground insights from ecosystem players. This year, we ran our first ever investor roundtable in Bangalore featuring a wide range of investment organizations. Key insights to emerge from this dialogue was investors’ interest in backing AgTech entrepreneurs who are: connected with on-ground realities, developing intellectual property, focused on their core business and leveraging partnerships, clear-eyed about their business model-geography fit, and lastly and most importantly – on a path to healthy unit economics.
Given the growing interest and investments in allied sectors, we also conducted a survey of Indian dairy farmers to shed light on their operations, challenges and the opportunity for DairyTech solutions. The pressing need for accessible credit and insurance solutions as well as value chain solutions that unlock price realization for dairy farmers – were two important insights to emerge.
Looking ahead, we can expect the state of muted capital flows to continue, as has already been the case so far in 2023. That said, solutions for allied sectors as well as innovation for climate resilience are both spaces to be watched out for.
Read about the innovations afoot, the sector’s funding landscape, perspectives from on-the-ground stakeholders and an outlook for India’s AgFoodTech ecosystem by downloading the report from https://bit.ly/ThinkAg-AgFoodTech-Report-2023-download
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