Boosting farm prosperity through investments in Ag Tech start-ups

Agriculture has always been a key part of India’s growth story, with the country ranking among the top 3 in terms of agri output. As a significant agrarian economy, agriculture employs more than half of the country’s population.

According to the ministry of statistics, the agriculture sector’s contribution to GDP has risen from 17.6% in 2018-19, to over 20% in 2020-21. This indicates that the sector can still play a key role in achieving the Government’s vision of building a $5 trillion economy by FY25, with increasing investments in the sector.

Despite agriculture’s key role in bolstering the country’s GDP and offering employment, fundamental challenges in the sector remain, and it is still fraught with business risks such as bad weather, pest and insect attacks and market price fluctuations. Significant efficiency gaps, and multiple productivity losses in the agri-value chains over time due to persistent structural and operational challenges, have resulted in the sectors declining share in the country’s GDP.

By decreasing human errors and providing a deeply integrated digital framework for operational management, technology can assist offset these productivity and profitability losses in food value chains and reducing agrarian stress.

Factors such as the availability of mobile phones and high-speed internet connections have accelerated the adoption of technology on farmland. However, accessibility and affordability of high-end technology remain key issues for several farmers. Hence AgriTech firms can play a key role in addressing these issues while driving investments in the sector.

According to a PwC report, India stands third after the U.S. and China in terms of AgTech funding. Also, according to industry estimates and a recent PWC report, start-ups in Indian AgTech are likely to receive a record $1 billion this fiscal, taking total investments to $2.5 billion since 2012 with a further $10 billion expected in the next decade.

With India’s digital ecosystem witnessing healthy tailwinds through affordability and availability of high-speed internet and maturing digital content, it presents exciting opportunities for innovation in agriculture with the leveraging of next-generation technologies such as AI, ML, IoT and Software as a Service (SaaS). The Government is also using this window of opportunity as evidenced by its proactive initiatives on conceptualizing a national agri stack and developing a regulatory framework for the use of drones in agriculture.

The AgTech sector is abuzz with the increasing flow of growth capital into start-ups that play across the value chain from market linkage to financing, to precision farming, to mechanization services. This fast-growing start-up ecosystem is bringing new business models that seek to address several legacy challenges in the industry.

But what will it take for start-ups to translate buzz and big valuations into the meaningful on-ground impact that materially contributes to doubling farmer income?

Here are 5 pointers for Ag Tech start-ups in order to boost Farm Prosperity

  1. Need to see real value in money terms.

All roads lead to value creation for farmers. Unless technology-based solutions can deliver incremental value add for farmers they will neither adopt nor stick with those solutions. While the acceptability of digital solutions will no doubt be aided by the rapid increase in rural smartphone usage and the increased comfort level of using digital devices, the truth is adoption requires a clear demonstration of incremental value. One needs to focus relentlessly in ensuring farmers and other adopters in the ecosystem see a positive impact on their income per acre and a rapid payback on their initial investment.

  1. B) Phygitizing the model

Agriculture is intrinsically a physical activity and despite the pandemic triggering spur to move digital, most farmers still require physical validation and presence. To trigger changes in farmer behavior, on-ground solutions and activities have to come together with digital ones. On-ground advisory and rental solutions and Takneek plots (demonstration plots) create empirical evidence for farmers, build trust and local relationships and make physical transactions easier. Digital solutions by several start-ups meanwhile bring in a unique set of insights and use cases for farmers and other stakeholders. For instance, an AI-powered advisory app enables farmers to diagnose pests and diseases in real-time and get a remedial measure. An IoT solution for rental entrepreneurs enables them to remotely monitor their machine activities through an app, in real time.

  1. C) Beware of growth hacks

As start-ups it is easy to fall into the trap of short-cuts and often unsustainable solutions to drive growth in key metrics. Start-ups need to ask themselves whether they are growing by creating long term value for users or by enticing farmers and users with unsustainable offers. A good way to create a business for the long term is to ensure that all key activities genuinely address the big problems in Indian agriculture. This way shortcuts can be avoided.

To be successful an ag tech start-up needs to anchor its efforts around delivering higher income for farmers and ecosystem players through better agronomy, better mechanization and better use of new advanced technologies. Hyper scaling is still possible through creative on and off-line operating models.

  1. D) Partnerships for success

From earlier experiences it is best to work with and in a web of partnerships, closely working with technology partners who bring expertise in remote sensing, imagery analytics, IOT and AI. Working closely with them helps translate cutting edge technologies into farmer solutions quickly and frugally. Also working with a network of on-ground service providers who collaborate with us to educate and influence farmers, deliver on ground services, and improve farmer practices. We consider them technology partners too from a go-to-market perspective.

  1. E) Offer integrated solutions

For start-ups focused on helping farmers and B2B customers cultivate better and get more from an acre, it is vital to offer integrated solutions. To deliver tangible on-farm outcomes there are start-ups that integrate agronomy, equipment rental, apps and precision farming. Creating an integrated but simple farmer experience is a rewarding and ultimately winning strategy as it creates loyal farmers and a more productive agriculture sector. It is our belief that start-ups that excel in delivering superior per acre outcomes for farmers will be better placed to attract partners from other players in the Agri value chain.

In Conclusion

AgTech start-ups are here to stay and with their innovative approaches, there is no doubt that the agriculture sector will transform in the years to come. The speed of transformation is difficult to predict but the die is certainly cast, and new manufacturing and service opportunities are already emerging. It is energizing to think that the growth of AgTech start-ups can power a new wave of economic growth – driving India to its goal of becoming a $5 trillion economy by FY25.



Views expressed above are the author’s own.


Leave a Reply

Your email address will not be published.