Indian agri-tech start-ups reported a decline in investments by 45 per cent between the fiscal years 2021-22 and 2022-23, a report by consulting firm FSG revealed. The report stated an increase in global interest rates and intense caution exercised by investors amid volatility as the explanation behind the decrease.
The report added that agri-tech investments globally dipped by 10 per cent between calendar years 2022 and 2023, reported PTI. The consulting firm noted in it’s outlook that it expects the decline in funding to continue into the current financial year, but revive in the fiscal year 2024-25.
The report stated that start-ups should now continue focusing on profitability to fare better in the next fiscal year. It noted that investors are expected to remain cautious and focus their limited funding towards well-established business models, like follow-on funding for firms in the mid-stream agri-tech category.
Rishi Agarwal, managing director, head-Asia at FSG, commented, “The shift in investment dynamics highlights the Indian agri-tech sector’s sensitivity to global economic trends. Start-ups must use periods of slower investment to refine their business models and drive towards profitability.”
Citing the report ‘India’s Unfolding Agri-Tech Story: Updates and Emerging Themes in India’s Agricultural Technology Sector’, the firm stated that the Indian agri-tech sector reported it’s most successful year with regards to venture capital funding in the 2021-22 fiscal year. This success was followed by a major decline in FY23 amid a global slowdown in funding.
Interestingly, the number of investment deals increased from 121 in FY22 to 140 in FY23, however, the total funding declined from $1,279 million in FY22 to $706 million in the last fiscal year. The period 2021-22 saw a boost in investments in the sector, increasing valuations to significant levels, while the correction in the corresponding fiscal year 2022-23 created a more prudent investment climate, the report observed.
Commenting about the mid-stream agri-tech start-ups, the report pointed out that these start-ups have started to mature, with funding primarily centered in late stage rounds. About 56 per cent of funding in start-ups focused on output linkages and quality management was in their growth and late stages, while the same number for other mid-stream start-ups, like those providing agri-carbon or agri-fintech solutions, stood as much as 91 per cent.