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A comprehensive review of how agri-tech companies have responded to the pandemic and expected future trends in the agri-tech ecosystem
Agriculture has always been vital to India’s economic and social prosperity, with >50% of the population dependent on the sector for their livelihoods. Agriculture also contributes to 14-15% of the total GDP. Despite that, the sector has been plagued with problems, many of which like landholding sizes are only getting worse. Few key challenges that farmers face today include:
In the last few years however, there have been two major tailwinds driving the emergence of new and disruptive ways of doing business and solving these challenges
Smartphone penetration rose in rural India from 9% in 2015 to 25% in 2018, when it recorded a 35% YoY growth. Over 30M farmers use smartphones today – unlocking easier means of communicating with them and collecting live data from the ground.
Traditionally data costs used to be high and prevented fast uptake of internet usage. But in the last 5-6 years, with the falling data costs, internet penetration has increased rapidly, especially in rural areas.
These tailwinds have disrupted a sector that has traditionally been slow to embrace technology. Coupled with India’s rising entrepreneurial ambitions, they have resulted in several agri-tech companies being founded in the last few years, resulting in agri-tech becoming one of the hottest new spaces in India’s startup ecosystem. As founders and investors begin to look beyond the first 20 million consumers, agriculture as a sector presents multiple opportunities for technology first companies to disrupt traditional modes of working. The last 5 years have witnessed a strong surge in the development of this ecosystem, with institutional funding in the sector going up by more than 9X during this period.
Impact of COVID-19
The onset of COVID-19 in early 2020 in India disrupted industries, with several SMBs and startups bearing the brunt. The restrictions imposed on logistics, the shutting down of traditional retail channels, and the sharp drop in demand, led to an unprecedented slowdown for many companies. The agri-tech sector though has proved to be surprisingly resilient. Strong tailwinds formed by restricted movement, migration of labour, and increased consumer awareness of health, have helped escalate the adoption of technology throughout the farming ecosystem. Moreover, the classiﬁcation of agricultural products as essential commodities ensured business continuity for most players during the lockdown.
A survey of 67 agritech companies revealed a considerable uplift in demand for most players across the value chain during the lockdown with several of them expecting to see positive sales growth for the year
The uptick in demand translates to optimism around fundraising as well, with 60% of respondents conﬁdent about seeing increased investment activity in the sector in the next 6-12 months.
At the same time, while most companies are bullish on demand, fulfilling the increasing inbound leads has proved to be diﬃcult for a number of companies due to various challenges, especially around logistics.
We expect the strong momentum that the agri-tech sector is witnessing to sustain in the next 12 months, as the demand for reliable food supply and quality produce increases. We believe the rapidly maturing sector and the entry of more entrepreneurs will create a fertile ground for innovative strategic plays as a direct result of the COVID-19 induced lockdown and disruptions.
Future Trends in Agri-tech
In the post-COVID era we expect to see rising adoption of various agri-tech models. In particular, we expect 4 major trends to play out in the coming year
In the report "Post COVID Agritech Landscape in India", we analyse the response of the 15 largest agri-tech players to the COVID crisis in India.
We hope these case studies serve as inspiration to aspiring agri-entrepreneurs and help them learn from some of the best companies in the business as they seek to embark on their entrepreneurial journeys.
You can download the report here: