Rapidly rising mobile and internet penetration, even in swathes of rural India, has disrupted the consumption story, with startups embedding technology at every stage of the consumer's journey. And now, it is moving to the backbone of India's economy—agriculture.
Agriculture as a sector is the largest employer in India, contributing 17% to the GDP. Yet it is considered one of the riskiest sectors to be employed in because of its dependency on uncontrollable factors such as weather, topographical conditions and constantly changing government policies. Therefore, it becomes imperative to embed technology in the complex and diverse agriculture sector, with a keen focus on simplifying agriculture and farmers' logistics—from production to distribution.
Time-starved consumers, who have developed a strong desire to have healthy, non-adulterated food options, are getting easy access to farm-fresh products.
While technology innovations have existed in this sector for a long time, they always lacked the penetration factor and hardly reached small farmers. Now, with technology-driven startups coming into the picture, existing challenges are gradually, fading away, providing farmers with direct market access and information, besides weather and soil-management services.
What are agri-tech startups doing?
Technologies in agriculture are answering two main challenges. First, providing correct information, techniques, and efficiencies to farmers both for pre-harvest applications and post-harvest use cases. Second, removing the pilferage in the existing agriculture supply-chain using internet as a medium to connect various stakeholders—farmers and consumers—in the agriculture ecosystem.
While the former existed for many years, it is the latter where lots of new ventures and startups have been launched recently. Where farmers are benefiting from information, direct and better access to the market and easy connect with all the stakeholders, time-starved consumers, who have developed a strong desire to have healthy, non-adulterated food options, are getting easy access to farm-fresh products.
However, this space is quite operation intensive and requires significant on-ground effort by ventures and their teams. It is a tough job to reach out and convince farmers of the benefits of technology and how it can significantly improve their returns on investment. But low-cost smartphones, internet penetration, and a strong urge to get better ROIs is gradually changing this mindset. For instance, there are many farmers' WhatsApp groups, where they discuss their pre- or post-harvest issues and are given real-time solutions within the community.
While the agri-tech space is slowly but surely witnessing increased entrepreneur activity, the investor community has so far been slow in showing interest. Only a few VCs have invested in agri-tech till date; the others appear to be waiting and watching.
The real push will come when a few mainstream VCs start investing in agri-tech startups.
However, with the emergence of new business models and strong unit economics, a lot of fence-sitters might start moving to active investments. The real push will come when a few mainstream VCs start investing in agri-tech startups.
Additionally, there is need for consumers to be willing to pay a premium for farm-fresh differentiated produce. Take for example, farmers' markets in the US, which sell farm-fresh produce at supermarket rates, or at even higher prices in some cases, but still manage to get consumers due to a lifestyle shift towards healthier and fresher food options. Already, companies like paalak.in are selling fresh fruits and vegetables to urban consumers and the trend is only expected to grow.
In India, we often hear from urban consumers about how they consume healthy dals, fruits, and vegetables when they visit their native places but miss such stuff in their urban homes. While the trend has already started to emerge in organic and dairy products, it will soon be converted into large-scale adoption, resulting in an inflection point for the industry at large.