How Agritech Will Shape Up In 2023 Determining the path to profitability will be crucial this year, say experts

Agritech continued to be one of the resilient sectors in 2022 too. As per a recent report by Avendus Capital, Indian agritech is expected to lead the next decade's technology-first value creation opportunity, growing at a CAGR of 50 per cent over the next five years and addressing a $34 billion market by 2027. It is expected to replicate the success of other tech sectors, creating unicorns in the next couple of years.

Here is a look at how the sector will be in 2023.

Healthy unit economics has been difficult to crack in agritech, given the fragmented landholdings and supply chain issues. However, the sector's resilience towards external disruptions has brought the attention of investors to it. The next challenge would be the path to profitability, which will be crucial in 2023. "Going forward agritech sector would need to prove their resilience on profitability as well. As the world population continues to increase, so will the constraints on resources, innovation in Agritech will only become more critical," said Rohit Sood, Partner, Bertelsmann India Investments.

Over the years, there have been many discussions about how startups can leverage advanced technologies to reinvent agriculture. However, the growth in this space has been slow. Will such advancements propel growth any time soon? "Reinventing how a sector works, especially one as large as Indian agriculture is a herculean task involving countless stakeholders. It is as much a matter of advanced technologies as it is of behavioral change. While the beginning of this change has been gradual, the next few years will see accelerated growth in this space," said Reihem Roy, Partner, Omnivore.

There has been a rapid development of precision agritech solutions over the past few years, which is expected to help farmers reduce expenditures, solve the labor shortage, and navigate erratic climatic conditions. Automation is another area steadily gathering momentum. "With the deepening impact of climate change on Indian agriculture, risk mitigation linked to erratic weather conditions by distributing and creating more insurance products for farmers is crucial for the agri community," he added.

Finally, he feels, agrifood life sciences (AFLS) is the need of the hour and can be the most effective weapon in our arsenal to fight climate change. "When we say AFLS we refer to four broad categories: agricultural (Ag) biotechnology, novel farming systems, bioenergy and biomaterials, and innovative foods. BioPrime's work with ag biologicals is a great example in this category," he added.

The next question is will we see more capital pouring in 2023? "Our entrepreneurs are solving real problems in India's rural economy, driving agricultural prosperity and transforming food systems. The transformation of India's agricultural sector will not stop because of temporary economic slumps, and the outlook for agritech remains strong," said Roy.

Even though funding levels have reduced across sectors, high investor interest in agritech seems to have continued this year too with key themes being market linkages, sustainable agriculture, and supply chains. According to news reports, this month, CropIn raised $14 million from Google, Impact Assets, Chiratae Ventures, and others. In October, DeHaat raised $46 million in a funding round led by Sofina Ventures. In June, Waycool raised $40 million, in May Absolute raised $100 million and recently AI-based agritech startup Intello Labs raised $2.82 Mn in Series B funding round.

This capital inflow is expected to continue in 2023 as well. "Contrary to what many might say, we believe there is enough capital available for agritech startups but the benchmarks have risen. Startups solving real problems that have a tangible impact on the value chain will have access to capital against equity. Investors would want to see proof of concept, defensibility and strong numbers - that ask will be stronger than before. Startups that can address these asks, will see capital pouring in," said Akash Sharma, co-founder and CEO, Farmley.

"Capital will keep pouring in this segment. However, my guess is in more capital-efficient companies. Also, some of the high burn thin margin models will find it difficult to raise funds at older multiples. There are a number of exciting companies in this space. This will be a year of strong buildup and cleaner growths," added Ashok Prasad, co-founder and CEO, Unnati.

Lastly, when it comes to segments within agritech, financial services, and precision farming, and market linkage is expected to keep growing and become larger. Further, this year, we will see more innovations in newer categories such as bio-pesticide, hydroponics and animal nutrition.