Agri start-ups that serve the small farmer need more seed funding, incubation and mentoring to make an impact.

What is the need?

• Modernising Indian agriculture will require change in key elements of the sector - supply chains and markets; production support; credit and crop insurance.
• Indian entrepreneurs are developing new technologies and business models to meet this challenge.
• In 2018, the country had nearly 500 agricultural start-ups.
• In the past five years alone, these start-ups raised nearly $130 million from investors in about 70 deals.
• However, supply chains for perishable commodities such as fruits and vegetables still remain largely fragmented in India, with smallholder farmers earning low margins.
• Unpredictable demand, price volatility and post-harvest losses compound the risks.
• Hence, they need much more investment and support to fulfil their potential.

What are the successful business models so far?

• Supply chain efficiency – A number of start-ups are using data and technology to improve supply chain efficiency.
• WayCool, distributes fresh produce to sellers ranging from small shops to large retail outlets, reduces waste and inefficiency by using analytics, process management software and connected devices.
• Jumbotail, connects retail grocery stores with food processors and farmer producer organizations.
• Ergos, operates a chain of efficient and hygienic rural warehousing facilities that are located within easy access of small farms.
• Production support - A number of start-ups have created alternative channels to deliver inputs to farmers at low cost.
• AgroStar, created a standalone mobile app, a web service, and a customer call centre, through which farmers can obtain high-quality products for all of their farming needs.
• Most small farmers cannot afford to buy farm equipment.
• In such cases, some start-ups are offering on-demand rentals and enabling farmers who own equipment to rent it to others.
• Gold Farm, connects farmers who need equipment with farmers who own equipment using a cloud-based platform.
• Finance - Most small farmers lack access to collateral-free financing and crop insurance.
• To overcome, some start-ups use satellite imagery and machine learning to facilitate crop insurance for smallholder farmers that come with reduced premiums and more timely and accurate payouts.

What should be done?

• Agricultural start-ups in India have addressed systemic bottlenecks in the agricultural sector, instead of focussing on specific commodities.
• As a result, they have the potential to scale up nationwide.
• However, in addition to investment capital, Indian agricultural start-ups need technical advice and access to global markets and talent.
• Several venture capital and private equity funds are stepping in and applying their experience from other sectors and countries.
• Investments across the agricultural supply chain in India have averaged about $250 million in each of the last five years.
• But most of that capital has gone into front-end supply chain solutions, including branding, distribution and food delivery rather than farmer-focussed innovations.
• Thus, start-ups that serve small farmers need more seed funding, early-stage capital, incubation and mentoring to unlock their immense growth potential.
• If that is done, Indian start-ups can help define the future of Indian agriculture.