Investments in Indian agri-food tech declined 33% to $2.4 b in 2022: AgFunder-Omnivore report

Investment into Indian agri-food tech declined by a third to $2.4 billion during 2022 over the previous year’s $3.6 billion tracking global trends of tightening capital availability, a report by AgFunder and Omnivore said.

The ‘India AgriFoodTech Investment’ report said the 33 per cent decline in investments matches the global downtrend, but there were bright spots where investors backed innovations focused on farmers and climate change.

The report said that rising concerns around the impact of climate change on Indian agriculture have captured the attention of investors, catalyzing efforts to deliver affordable mitigation and adaptation solutions for smallholder farmers.

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Further, start-ups innovating upstream, closer to farmers and across the supply chain, bucked the downward trend witnessed globally, raising $617 million, up 50 per cent from $409 million in 2021.

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The total number of deals declined to 133 in 2022, compared to 230 in 2021, the report said.

Farmtech investment also remained relatively strong, raising $1.1 billion in 2022, only a modest 15 per cent drop from 2021.

Category performance

Agribusiness marketplaces and fintech was the most popular upstream category among investors. Investor interest in downstream, food delivery start-ups waned with consolidation happening in the segment 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 agri-food tech innovations — those operating on the farm and in the supply chain — that offer deep moats and deliver affordable solutions to smallholder farmers.

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In contrast, despite attracting heavy funding over the past few years, investments in downstream start-ups plunged by 37 per cent 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 report said.

Most funded downstream categories

Meal marketplaces and e-grocery were the most funded downstream categories yet again. The capital raised by these two categories accounts for 54 per cent of total funding in Indian agri-food tech, with e-grocery start-ups landing the highest number of late-stage deals.

Downstream start-ups raised $1.7 billion in 2022, a 37 per cent decrease from $2.6 billion in 2021. Swiggy’s $700 million late-stage deal made up the bulk of investment in this category.

E-grocery start-ups raised $776 million across 20 deals, accounting for 32 per cent of overall agri-food tech funding in India. Midstream Technologies deal activity decreased though the category remains active with $178 million raised across 14 deals.

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Michael Dean, Founding partner, AgFunder said, “It is a challenging funding environment for start-ups 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.”

Mark Kahn, Managing Partner, Omnivore said, “Across India’s agri-food tech ecosystem, 2023 will stress test start-ups, while also being an ideal vintage for VCs who can enter promising deals at cheap valuations. Despite the transient headwinds, agri-food tech in India will continue to surge ahead.”