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Investments In Indian Agri-Tech Start-Ups Fell 45 per cent between FY22 and FY23: Report

According to the report, the agri-tech sector witnessed its most successful year in terms of venture capital funding in 2021-22 financial year

Investments In Indian Agri-Tech Start-Ups Fell 45 per cent between FY22 and FY23: Report
POSTED ON September 26, 2023 4:30 PM

Amid the funding winter experienced by the start-up landscape in recent days, the news is coming out that the investments in Indian agri-tech start-ups 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 start-ups 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 of Head-Asia, FSG, said, "The shift in investment dynamics highlights the Indian agri-tech sector's sensitivity to global economic trends. Start-ups 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. 

While the number of investment deals rose from 121 in FY22 to 140 in FY23, the total funding raised by agri-tech start-ups in India fell from $1,279 million in FY22 to $706 million in FY23, it said. 

While FY22 witnessed a boom in agri-tech start-up 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 start-ups have begun to mature, with investments primarily in growth and late-stage funding rounds. 

For example, 56 per cent of investments in start-ups focusing on output linkages and quality management were in their growth and late stages. The corresponding figure for other mid-stream start-ups, such as those offering agri-carbon or agri-fintech solutions, was as high as 91 per cent. Many midstream tech start-ups have also ventured into inorganic expansion through strategic acquisitions, it added. 

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