Investments in Indian agri-tech startups fell 45% between FY22 and FY23: FSG
FSG expects the funding slump to continue into FY24 before springing back in FY25. It expects that startups will continue focusing on profitability to tide over the next financial year.
Investments in Indian agri-tech startups fell by 45 per cent between 2021-22 and 2022-23 fiscal years, primarily due to a hike in global interest rates and heightened investor caution amid rising uncertainty, reveals consulting firm FSG's new report. Meanwhile, global agri-tech investments declined by 10 per cent between calendar years 2022 and 2023, it said.
Going forward, FSG expects the funding slump to continue into FY24 before springing back in FY25. It expects that startups will continue focusing on profitability to tide over the next financial year. "Investors are likely to continue being cautious and direct their limited funding towards established business models, such as follow-on funding for companies in the mid-stream agri-tech category," it said.
Commenting on the trends identified by the firm, Rishi Agarwal, Managing Director, Head-Asia, FSG, said, "The shift in investment dynamics highlights the Indian agri-tech sector's sensitivity to global economic trends. Startups must use periods of slower investment to refine their business models and drive towards profitability." According to the report 'India's Unfolding Agri-Tech Story: Updates and Emerging Themes in India's Agricultural Technology Sector', India's agri-tech sector witnessed its most successful year in terms of venture capital funding in 2021-22 financial year, followed by a significant decline in FY23 amid a global funding slowdown.
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While the number of investment deals rose from 121 in FY22 to 140 in FY23, the total funding raised by agri-tech startups in India fell from USD 1,279 million in FY22 to USD 706 million in FY23, it said. While FY22 witnessed a boom in agri-tech startup investments, which drove startup valuations to unprecedented heights, the correction in FY23 has led to a more prudent investment climate, it added.
The report highlights that mid-stream agri-tech startups have begun to mature, with investments primarily in growth and late-stage funding rounds. For example, 56 per cent of investments in startups focusing on output linkages and quality management were in their growth and late stages. The corresponding figure for other mid-stream startups, such as those offering agri-carbon or agri-fintech solutions, was as high as 91 per cent. Many midstream tech startups have also ventured into inorganic expansion through strategic acquisitions, it added.