Agri-food startups raised $1.6 billion in 2013-17: Report

Agri-food startups raised $1.6 billion in 2013-17: Report

Mumbai: Indian farm and food startups raised $1.6 billion in the five years to 2017 as they cater to the needs of the massive Indian middle class looking for convenience and new food formats, according to a report by AgFunder, a US-based farm investor, and agri-tech-focused investor Omnivore Ventures.

Agri-food startups raised $1.6 billion in 2013-17: Report

A relatively new sector, agri-food start-ups comprise a number of smaller sectors including eGrocery, restaurant marketplaces and cooking technology, says the report titled India Agri-Food Startup Investing Report: 5 Year Review. These start-ups have attracted funding from investors, including consumer funds, large multinational tech companies and generalist venture capital firms.

In the last five years, these start-ups have raised $1.66 billion across 558 deals, with close to a billion dollars ($996 million) being invested in food delivery start-ups alone. These are led by Zomato and Swiggy, which are currently engaged in a high-growth high-cash-burn competition.

Total investment in agri-food start-ups in India grew over the five year period to $342 million in 2017 from $89 million in 2013. The year 2015 witnessed peak investments in the sector at $681 million as VCs started writing larger cheques for early-stage agri-food start-ups, particularly at the consumer end of the supply chain.

Zomato, which began as a restaurant listings platform, was the most funded start-up in the space. It raised $217 million between 2013 and 2017 from Sequoia Capital, Temasek, Vy Capital and Indian tech conglomerate InfoEdge. Swiggy raised $156 million from Accel Partners, Norwest, Bessemer Venture Partners, DST Global, SAIF Partners and South African conglomerate Naspers.

A bulk of investments in the five-year period were in downstream start-ups, which are closer to end users, such as online restaurants, with downstream start-ups raising $1.47 billion. Upstream agri-food startups, which are closer to producers, such as farm management and farm robotics, raised just $189 million. In contrast, the global split between start-up funding downstream (58%) and funding to start-ups closer to the farm (42%) was more balanced in 2017.

Investments in downstream agrifood start-ups were led by the sharp growth in India’s burgeoning middle and upper middle class, where households increased from 24 million in 2005 (11% of population) to 57 million (21% of population) in 2016, the report said.

In addition, the increased penetration of smartphones, rising awareness of food quality and a willingness to experiment drove investments.

However, downstream investments have seen a continuous fall since hitting a peak in 2015, falling from a high of $641 million in 2015 to $265 million in 2017, according to the report. “Investment activity fell off in 2015 after the failure of multiple VC-backed startups in the hyperlocal food delivery space, including PepperTap, an online grocer that had raised more than $50 million, and TinyOwl, a restaurant marketplace that had raised over $30 million,” the report said.

source: livemint