Do you know why Israel, despite water shortage and arid and semi-arid geographic features have developed so rapidly?
This miracle is due to innovation in agriculture, or the cross section of technology and agriculture called agritech. From drip irrigation to deep tech driven bee farms, Israel has done it all and have become one of the major exporters of agritech to all the world.
The size of Israeli agritech sector has grown consistently over the years, attracting investments from all over the world and have helped the nation to portray itself as a world leader in innovation and tech development.
The above-mentioned example of Israel is important because a lot of other developing countries around the planet have been growing at unforeseen pace and so are their populations. With dwindling resources and other socio-economic problems, food security is always at the forefront of the agenda.
Let’s take the example of India, with the population scale soon to reach out to 1.5 Billion, it would be hard to ensure food security for the coming generations until and unless some concrete measures are implemented, and action is taken. India can take a leaf out of Israel’s playbook and focus on agritech as a solution to its food shortage problem.
We can divide agritech into three sub spaces, Upstream, Midstream and Downstream according to the stage at which innovation is applied during the production cycle.
Upstream is the stage where inputs come in. Innovation in seeds using advanced bio tech, mechanics and other precision agriculture techniques can be coined as upstream. We have a very handy example of HYV seeds and their impact in India during the Green Revolution of the 1960’s. Upstream has seen a lot of interest over the years because of it being a strategic match for deep tech and innovation. In the category globally, Beyond Meat had a highly successful IPO while Ynsect, AeroFarms and Infarm were able to raise big rounds in 2019.
Midstream is the stage where operations and farm management come in. In simple words this the stage where production happens. Irrigation techniques, Data driven farm management solutions, farm tracking and weed management using AI and other data driven techniques are some examples of innovation in midstream agritech. One of the biggest example of innovation at this stage is the unique drip irrigation methodology which was developed in Israel during the 60’s to ensure the most efficient use of water. Ventures like Labelbox which use a data driven technique to manage weeds in the farm have done considerably well and are expected do well in the space.
Downstream is the stage where we incorporate supply chain, last mile connectivity solutions and food processing in the scenario. In-store restaurant and retail, E Grocery, Marketplaces, Home & Cooking are some examples of areas to innovate in downstream. E Grocery has seen some brilliant solutions come up both internationally and domestically. Big Basket and Grofers have done wonderfully in last couple of years to change the investor and consumer mindset towards the sector. While other direct farms to consumer solutions like dairy focused Milkbasket have raised well recently.
One of the biggest reasons why agritech was earlier not a preferred destination for investors was that investors didn’t really understand agriculture.
A Raconteur report in 2015 rightly addressed the problem the agriculture is seen as a alternative rather than mainstream investment for investors investing in private markets. This has changed drastically in the time being, with investors now more aligned to capture the growing yields in the agritech space. Thus, making agritech as a profitable space where investors can put their money in.
One major reason behind this change in investor mindset is the advent of ESG focused funding and the more and more onus of the same in portfolio building. ESG investing in last 10 years or so have become the mainstream focus of many investors around the globe and this has helped agritech to come from the hindsight to the fore front of global investments. Impact funds who are solely focused on creating an impact on the planet and to improve the condition of human life on the planet, have also helped the sector a lot.
In total agri-food tech last year attracted roughly about 20 Billion USD as investments in the above mentioned 3 sectors, with downstream being the major benefactor by attracting about 60% of the total.
Covid-19 induced pandemic has resulted in a fumble for the agritech startups. With broken global and domestic supply chains, cash crunch and other problems. Last few months have been harsh for all the sectors not just agritech, though downstream solutions have benefitted from the same and have been able to create value, improve their numbers together. E Grocers like Big Basket and Grofers are clear examples of the same.
The pandemic has also acted as a validator for the whole agritech value hypothesis by showcasing that how important it is for the whole human race is to ensure food security for all. This is only possible by making sure that innovation keeps on prospering in the sector hence making it more efficient and productive at all the levels.
Majority of the agritech startups have seen a V shaped recovery according to Omnivore’s Mark Kahn, the largest Agritech focused Venture Capital firm in the country. The same sentiment has been resounded by the global investor community around the world. We expect that as the pandemic induced lockdown exposed the cumbersome nature of existing supply chains, more and more ventures will come up with a solution for the same. Regulatory steps like agri marketing reforms initiated by Government of India will also help to strengthen the investor belief in the sector.
Source: Live Mint
We expect strong innovation in all the spheres of agritech to come up in the next few years and attract major investor interest and support.
Agritech coupled with other impact inducing sectors like renewable energy and financial inclusion etc, should be one of the most preferred sectors, as the future of our society depends on these strategically important sectors. The trend has been favourable for Agritechduring the last decade or so and we hope it would improve much more in the coming years.
Written by Ayush Dadhich & Manas Vashistha
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