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ATM News Network: Investments in Indian agri-tech startups saw a sharp decline of 45% between the fiscal years 2021-22 and 2022-23. This drop is attributed to the impact of rising global interest rates and increased investor caution in the face of growing uncertainty, according to a report by consulting firm FSG. Concurrently, global agri-tech investments experienced a 10% decline between calendar years 2022 and 2023.
Looking ahead, FSG anticipates that the funding slump in the agri-tech sector will persist into FY24 but rebound in FY25. During this period, startups are expected to prioritize profitability to navigate the upcoming financial year.
Investors are likely to remain cautious, directing their limited funding toward established business models, particularly follow-on funding for mid-stream agri-tech companies. The report underscores the sensitivity of India's agri-tech sector to global economic trends and encourages startups to utilize periods of reduced investment to refine their business models and work towards profitability.
Rishi Agarwal, Managing Director, Head-Asia, FSG, commented on the trends identified in the report, emphasizing the importance of adapting to changing investment dynamics in the Indian agri-tech sector. The report, titled 'India's Unfolding Agri-Tech Story: Updates and Emerging Themes in India's Agricultural Technology Sector,' highlights the sector's record-breaking year in terms of venture capital funding in FY22, followed by a significant decline in FY23 amid a global funding slowdown.
While the number of investment deals increased from 121 in FY22 to 140 in FY23, the total funding raised by Indian agri-tech startups decreased from USD 1,279 million in FY22 to USD 706 million in FY23. The report suggests that the investment climate has become more cautious in the wake of the correction in FY23, after a boom in agri-tech startup investments in FY22 had driven valuations to unprecedented levels.
The report also reveals the maturation of mid-stream agri-tech startups, with investments primarily concentrated in growth and late-stage funding rounds. Notably, 56% of investments in startups focused on output linkages and quality management fell into the growth and late stages. For other mid-stream startups, such as those offering agri-carbon or agri-fintech solutions, the corresponding figure was as high as 91%. Many midstream tech startups have also embarked on inorganic expansion through strategic acquisitions.
