Report reveals $2.4bn in Indian agrifoodtech VC funding as investors move upstream to tackle climate change

Despite challenges, agrifoodtech in India is expected to continue progressing in 2023, offering opportunities for venture capitalists. AgFunder and Omnivore’s fifth India AgriFoodTech Investment Report reveals $2.4 billion in startup investment, a 33% year-over-year decline from $3.6 billion in 2021. The decline matches the global downward trend but there were bright spots where investors backed innovations focused on farmers and climate change.

Rising concerns around the impact of climate change on Indian agriculture have captured the attention of investors, catalyzing efforts to deliver affordable mitigation and adaptation solutions for smallholder farmers. Startups innovating upstream, closer to farmers and across the supply chain, bucked the downward trend witnessed globally, raising $617 million, up 50% from $409 million in 2021.

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Michael Dean, founding partner, AgFunder, said, “It is a challenging funding environment for startups globally and, as our report shows, India is no different. The relative increase in upstream financing is a welcome bright spot and reflects the urgency to fund technologies addressing the multiple inefficiencies in our food production and distribution systems that contribute to climate change and hunger.”

The relative increase in upstream financing is a welcome bright spot and reflects the urgency to fund technologies addressing the multiple inefficiencies in our food production and distribution systems that contribute to climate change and hunger

Michael Dean, founding partner, AgFunder

Farmtech investment also remained relatively strong, raising $1.1 billion in 2022, only a modest 15% drop from 2021. Agribusiness marketplaces and fintech was the most popular upstream category among investors. Investor interest in downstream, food delivery startups waned with consolidation and little new innovation.

Mark Kahn, Managing Partner, Omnivore, said, “Across India’s agrifoodtech ecosystem, 2023 will stress test startups, while also being an ideal vintage for VCs who can enter promising deals at cheap valuations. Despite the transient headwinds, agrifoodtech in India will continue to surge ahead.”

Across India’s agrifoodtech ecosystem, 2023 will stress test startups, while also being an ideal vintage for VCs who can enter promising deals at cheap valuations. Despite the transient headwinds, agrifoodtech in India will continue to surge ahead

Mark Kahn, Managing Partner, Omnivore

Capital availability in India has tightened along with the rest of the world, although not as steeply as in developed markets. Indian venture investors remain bullish on upstream agrifoodtech innovations – those operating on the farm and in the supply chain – that offer deep moats and deliver affordable solutions to smallholder farmers.

In contrast, despite attracting heavy funding over the past few years, investments in downstream startups plunged by 37% in 2022 year-on-year. Once the pandemic lockdowns ended, many downstream ventures struggled to maintain the accelerated pace of growth created by Covid-19 in 2020 and 2021. A highly saturated home delivery market has further reduced investor interest. In the coming months, we expect fewer players to enter the downstream market and more M&A activity among existing companies.

Other key insights in the report show that the total number of deals declined to 133 in 2022, compared to 230 in 2021. Meal marketplaces and eGrocery were the most funded downstream categories yet again. The capital raised by these two categories accounts for 54% of total funding in Indian agrifoodtech, with eGrocery startups landing the highest number of late-stage deals.

Downstream startups raised $1.7 billion in 2022, a 37% decrease from $2.6 billion in 2021. Swiggy’s $700 million late-stage deal made up the bulk of investment in this category.

eGrocery startups raised $776 million across 20 deals, accounting for 32% of overall agrifoodtech funding in India.

Midstream Technologies deal activity decreased though the category remains active with $178 million raised across 14 deals.

The Report highlights a challenging funding environment for startups globally, including India. However, there are bright spots in the sector, particularly in upstream financing and farmtech investment.

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Investors are increasingly drawn to innovations that focus on farmers and climate change, recognizing the urgency to address inefficiencies in food production and distribution. While downstream startups faced a decline in funding, the market is expected to witness consolidation and increased M&A activity.

Despite headwinds, agrifoodtech in India remains resilient and poised for growth in the coming years, providing opportunities for investors and startups to make a positive impact on the country’s agriculture and food systems.