According to new research from consultancy firm FSG, investments in Indian agritech firms decreased by 45% between the 2021–22 and 2022–23 fiscal years as a result of higher global interest rates and increased investor skepticism amid escalating uncertainties.
The paper, titled “India’s Unfolding Agri-Tech Story: Updates and Emerging Themes in India’s Agricultural Technology Sector,” claimed that, following a similar trend, worldwide agritech investments also decreased by 10% between calendar years 2022 and 2023.
According to FSG, startups will continue concentrating on profitability to get through the upcoming fiscal year and the funding crunch will last until FY24 before improving in FY25.
According to the report, investors “are likely to continue exercising caution and focus their limited resources on well-established business models, such as follow-on funding for businesses in the mid-stream agri-tech category.”
Rishi Agarwal, managing director, head-Asia, FSG, commented on the patterns noted by the company: “The shift in investment dynamics underscores the Indian agritech sector’s susceptibility to global economic trends. Startups must take advantage of times of slower investment to hone their business plans and move in the direction of profitability.
According to the research, the 2021–22 fiscal year was the most prosperous year for venture capital investing in India’s agritech sector.
While the overall cash raised decreased from $1,279 million in FY22 to $706 million in FY23, the number of investment deals increased from 121 in FY22 to 140 in FY23.
While agritech startup investments soared in FY22, pushing startup valuations to previously unheard-of heights, the correction in FY23 has resulted in a more cautious investment environment, it noted.
According to the research, mid-stream agritech businesses have started to mature and have received investments largely for expansion and late-stage funding rounds.
In their growth and late stages, firms concentrating on output connections and quality management received about 56% of investments. The survey noted that the similar figure for other mid-stream businesses, including those providing agri-carbon or agri-fintech solutions, was as high as 91%.
“The emphasis on climate-smart agriculture and sustainable solutions, supported by government backing, signifies a fundamental paradigm change. The shift in agri-tech toward sustainability is not just a fad; it is an urgent requirement. Future expansion and resilience of the industry are expected to be fueled by innovations in sustainable agricultural methods and technologies. Businesses that prioritise environmentally friendly options and climate-smart procedures now will not only satisfy customer needs but also guarantee the sector’s long-term existence, he continued.
