Agriculture in India is a $370 Billion Sector, but there is Little Application of Technology to Improve Productivity and Lift Millions Out of Poverty. Now, a Clutch of Entrepreneurs is Looking Out of their City Offices to the Countryside to Change this.

Hi Everyone Today We Will Talk About How Startups Are Looking to Raise Agricultural Productivity With Tech & Automation.

Scope for Agriculture Startups

When One of the Founders of Stellapps Pointed to the Problems in Dairy Management, Including that Milk Stored in Regular Containers Become Non-Consumable After a Few Hours. Organic Dairy Farmers are Facing Troubles Managing their Cattle and the Supply Chain. They liked the Idea so Mukundan (Founder), and the Team Spent the Next 8 Months at the Dairy Farm and Also Visited Farms in Uttar Pradesh, Madhya Pradesh, Punjab & Odisha. Their Company, Stellapps, Used their Learning’s to Develop Automated Dairy Solutions, and Now Works with Milk Cooperative Societies such as Aavin, Milma and Tirumala. Its Products are in 250 Farms and are used by 3 Lakh Dairy Farmers.

Most Companies Faced Resistance when they First Set Up their Equipment. “Our Work Exposed the Malpractices of Middlemen,” says Mukundan, Who is Now Recruiting Sales People in Delhi and Gujarat. The Company is Looking to Expand to Allied Sectors such as Fisheries where Perishability is High.

Flybird Agri Innovations Places Sensors in the Soil to Detect Moisture Content and Control Irrigation. It’s Installed Sensors in 45 Villages in Karnataka to Help Farmers in the Drought-Hit State Optimize Irrigation. The Company is Supported by Villgro, a Social Impact Fund Backed by Dell Foundation.

Entrepreneurs Are Looking to Raise Agricultural Productivity with Technology & Automation

In a Country where More than Half of the Population Still Survives On Agriculture, Fruit and Vegetables Worth $2 Billion are Wasted Because of Lack of Supply Chain Management and Cold Storage Facilities. “The Big Cold Storage Products of the West are Not Affordable for Many Indians,” says Kahn. He has Investments in 11 Agriculture Startups, Including Skymet, which Analyses Weather Patterns and Predicts Risk in Agriculture for Every Season.

Rohtash Mal, a Former CEO of Tractor Firm Escorts, has Established EM3, which Provides Farm Machinery Vehicles on Demand. “Only 10% of the Country’s Farmers Can Afford Farm Machinery and Ours is a Pay-per-Use Model. We Wanted to Reach 90% of the Farmers,” says Mal, who has 15 Centres in MP, Bihar and Eastern UP. The Price is Based On the Farm Hold Area Measured Using Satellites. Each Centre Sends Machinery to a 20km Radius and Mal says 95% of his Customers Come Back.

“Government Policies Treat Agriculture as a Poverty Alleviation Method Rather than a Means to Enhance Productivity and Raise Incomes, and this Keeps Entrepreneurs Out”

– Rohtash Mal

Abhishek Bhatt, co-founder at The Agrihub, which sells Agricultural Equipment including Crop Covers, Sowing Trays and Greenhouse Instruments on its Online Platform. Says “The focus for us is the low hanging fruits, which are the hi-tech farmers, while we try to get the marginal farmers to adopt our platform.”

Funding

Investors Tend to View Agriculture as a Risky Proposition

Despite the Need for Technological Intervention, there’s Not Much Funding Coming to Startups in this Sector. Funding for Indian Agriculture Startups Declined to $56 Million in 2015 from $123 Million in 2014, According to Data from Tracxn. In 2015, Also a Drought Year, Just 20 Agriculture Related Startups Raised Money, but $6 Billion was Invested Overall in Tech Startups that Year. Agriculture Startups Attracted less than 1% of the Total.

“The Agri Funds in the Country are Mostly Early Stage Investors, and the Startups Struggle to Raise Subsequent Rounds of Funding, thus Prolonging their Scale Up,” says Hemendra Mathur, An Investor in Agri Businesses and Former Managing Director of SEAF India Investment Advisory.

Experts believe agri-startups need to carve out a self-sustaining business model that can rest on farmers paying for the service. This present model cannot run long on investor money. On the one hand, while information and advisory services are added cost to the startups, farmers are not willing to pay for these since local shops and agricultural officers at Krishi Bhawans serve as free counsellors.

“Most Investors Don’t Understand Agriculture”

– Srikrishna Ramamoorthy, Partner at Unitus Seed Fund

The road ahead, however, is not easy and the next step for these agri-startups is to ensure scale. Online sales are yet to pick up in all sections of the farming community, especially among marginal farmers who form the biggest chunk of the lot. “A lot of these products or services find early adopters in wealthier and progressive farmers with large land holdings, not the small and marginal farmer. The real business lies in getting your services adopted by the small farmer because that is where scale is going to come from,” says Srikrishna Ramamoorthy, partner at Unitus Seed Fund, which in 2015 pumped in Rs 1.2 Crore in VillFarm Agrisolutions along with Zurich-based Rianta Capital and Sifi founder R Ramaraj.

“Most Small Farmers are Not Willing to Try Technology, and Even the Large Farmers Find the Equipment Too Expensive.” Ramamoorthy added.

Mathur says that Funds like Omnivore, Villgro and Aspada Give him Hope, and Entrepreneurs are Trying to Start Agri Businesses. “The Slowdown in E-commerce and the Entrepreneurial Energy will Spur a New Wave in Rural and Agricultural Innovation,” He says.

“Very Often, It is Not Whether the Technology is Available. The Problem is Whether there are India Specific Solutions,” says Mark Kahn, Founding Partner of Omnivore Partners. It is Backed by Agri Business Firm Godrej Agrovet, SIDBI and SBI Among Other Financial Institutions. It has Invested in Stellapps & Ecozen, a Micro Cold Storage Facility that Works On Solar Power and can be Installed Even in Small Farms.

MARK KAHN

Founder, Omnivore Partners, An Agriculture Technology Fund

Kahn was Earlier Head of Business Strategy and Mergers and Acquisitions at Godrej Agrovet and Found that Most Agri Technology Startups Struggle to Raise Funding. He Convinced Godrej to Anchor a Fund to Support More Firms and thus Omnivores was Founded in 2011 with a Corpus of Rs 260 Crore.

HEMANT GAUR

Founder, SV Agri

These Funds Work with the Startups for Several Months Before Committing to Investments. Hyland, for Instance, Worked with Pune Based SV Agri for 8 Months before Investing. SV Works with Potato Farmers in Maharashtra and Gujarat to Improve Productivity by Providing Better Seeds, As Well as Working on Supply Chain and Processing. It Supplies Potatoes to ITC, Marico and Pepsico for Chips. “Not Many Big Companies or Startups Want to Do Backward Integration When it comes to Agriculture because they don’t want to get their Hands Dirty,” says Hemant Gaur, Founder of SV Agri.

The Unconventional Approach

More farmers are shopping online but for agri-input startups trying to disrupt the conventional channels of distribution, the road to increasing engagement and scaling up is filled with challenges.

New Startups are attempting to make deeper inroads into the agri-inputs sector with new enthusiasm. They are trying to disrupt the traditional channels of distribution local retail shops and co-operatives closely associated with the farmers for ages but which have inherent challenges such as non-timely availability of products, non-transparent pricing and fake products. Among these: AgroStar, which raised $10 Million in funding led by Marquee Venture Firm Accel Partners; and BigHaat, which 5 Months ago raised money from Ankur Capital and Green Agrevolution. These companies compete with several other bootstrapped startups including The Agrihub and Destamart.

There can be different ways of reaching the small farmer. “Although there is a market for online sales of agri-inputs since the farmer is willing to pay for convenience, I don’t see the direct-to-farmer model working out,” says Basil of VillFarm. “But a business-to-business approach, selling to those who can aggregate orders from farmers, such as contract farming groups backed by processing companies such as sugarcane processors, or a pharma company wanting to source turmeric, can work out.

The biggest factor giving the much-needed impetus to these startups in this highly challenging sector is the gradual uptake in technology adoption and smartphone penetration in the farming community. This acts as a big enabler to build a bouquet of services around supplying key agri-inputs to farmers through tweaked E-commerce models. As per a Boston Consulting Group study, The Rising Connected Consumer in Rural India, internet penetration in rural India is on the rise and by 2020, about 315 Million Indians living in Rural Areas will be connected to the internet, as compared with about 120 Million now. Farmers form a very significant chunk of this population.

Why is this Space Attractive?

“A lot of technology intervention has happened in the post-harvest stage cold chains and other platforms for procurement. But if you look at seed to pre-harvest, there is no big distribution platform in India. This is a huge space,” says Prashanth Prakash, Partner at Accel Partners. Also, whereas other models in the agri space such as farm-to-fork are very fragmented, the rate of adoption of newer models and change on the agri-inputs side is much higher. Rema Subramanian, managing partner at Ankur Capital, says, “Demand is increasing in niche areas such as High Quality Seeds, export-oriented crops, specialised organic inputs many of these are seeing double-digit growth.”

Big Idea is to Solve the Information Asymmetry in the Farming Community.

For Accel-backed AgroStar, which says it is connected to a Million farmers, the journey that started with a missed call service on feature phones in 2013 is transforming into farmers’ increasing reliance on its app for online purchases and lesser dependence on the voice-commerce platform. But it has been a long haul. “Demonstrating that we can add substantial value over what farmers have been getting from traditional channels has taken us a lot of time and patience,” says Shardul Sheth, CEO at the Pune-based AgroStar. The company’s mobile app for farmers, launched 6 Months ago, has already registered 150,000 Downloads and accounts for about 10% of its orders.

AgroStar, which sells products from brands including Dow Chemicals, UPL and Monsanto, is now busy building a lighter app in other regional languages besides the 3 it is available in. Sheth says farmers who have smartphones now have at least one agri-app on their phones as an essential. The next steps for the company involve building features such as predictive recommendations that can help farmers with notifications on, say, how a certain watermelon crop is likely to be affected by a certain disease due to unseasonal rainfall. It is also working on 30-second cartoon clips to feature in the app as visual aids for the not-so-tech savvy farmers on matters such as applying the right dose of fertilisers or how to do inter-crop cultivation.

Startups Also Aim To Provide Credit Services for Online Purchases

These startups also aim to provide credit services for online purchases since farmers get easy credit from local shops. “It is more of a platform rather than a technology approach. The complexity of the knowledge deficit among farmers is a lot bigger, so he needs a lot of support in terms of content and decision-making for purchases, all on a unified, single platform,” says Accel’s Prakash.

BigHaat, founded by 2 Farming Background Entrepreneurs, has seen a U-turn in the ratio of online versus offline orders from farmers. While in fiscal 2015-16, it was 30% online and 70% offline orders, this ratio flipped over the next fiscal year to 70:30. Engagement with farmers via multiple means including advisory services during the sowing season delivered in the form of audio and text messages in local languages has been key to this.

The company now plans to roll out more services. “This year, we will launch weather forecasting and disease management on our app as well as features like allowing farmers to post pictures of their crop to get suggestions on which disease the crop could be affected by,” said SateeshNukala, CEO at BigHaat, which has on-ground presence in Andhra Pradesh, Telangana, Karnataka and Rajasthan. To provide pre & post-sales support, BigHaat has identified potential agri clusters and employed local agricultural experts to meet farmer groups and provide advisory services. “Most farmers are not aware of how to select crops and seeds in a market that has thousands of hybrids and companies of all sizes,” says Nukala.

Agro Products Need New-Age Distribution Models

– Prashanth Prakash, Accel Partners

Green Agrevolution a Patna-based Startup, which deals in selling agro-inputs and connecting farmers to institutional buyers, inputs contribute to 25-30% of the business and are likely to grow to over 40% in the near-term. The startup is backed by the Rural Innovation Fund of the Government Run National Bank for Agriculture and Rural Development (NABARD) and has operations in Uttar Pradesh, Bihar and Odisha. It reaches out to farmers through app-enabled micro entrepreneurs at offline centres, called DeHaat, who help farmers place orders online as well as through a toll-free number.

“We saw that 10-12% of our 16,000 registered farmers are comfortable placing the orders by themselves instead of depending on the micro entrepreneur,” says CEO Shashank Kumar. Also, the startup believes that merely providing advisory services will not help crack the model with farmers. “We plan to add services such as crop insurance and credit to farmers by tying up with financial institutions.”

“For the model to succeed, while initially you can have feet on the street for creating branding and credibility and take the missed call-call back approach, the farmer needs to be confident of doing it himself after the second or third purchase. That is important for the model to scale up in larger numbers in the future,” says Subramanian at Ankur Capital.

How do you think Agri-Startups can Crack the Market?

The important thing is to build a new-age distribution model for agro-products. We need to provide a new way for the farmer to buy products and get information as well as credit on one unified platform. Merely giving them content on an app is not going to work. You cannot do these things from day one without a direct touch with the farmer and handholding. Companies have found that touch with support from local entrepreneurs. This is much required to get the farmer to adopt your solution and trust you as a brand. Technology is just one component; it is what will make the model scalable with time.

It is unusual for Mainstream Venture Capital Firms to Back Agriculture Startups.

Agri-inputs carry a lot of promise in terms of scale. E-commerce aspects of reach and distribution are much valid here. The stickiness of these customers can be very good. Smartness lies in getting your solution to be adopted by the farmers. That involves a lot of local brand-building with the farmer and will involve doing things like setting up mobile interaction centres to engage with farmers in groups.

What are the top 2 or 3 Important things for Scaling Across States?

Startups have to make sure that their apps are the just-in-time companions for farmers localised and personalised to the region the farmers belong to. Also to provide and integrate other solutions, say, instant disease recognition or credit to the farmers. The key is making the farmers smarter in what they buy in terms of nutrients or crop protection any content related to that puts a lot of power in the farmers’ hands.

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