Huge potential, but bigger challenges for agri startups

With increasing mobile penetration and Internet access in rural areas, startups are slowly emerging in the agriculture sector too, with a focus on solving issues concerning farmers.

With increasing mobile penetration and Internet access in rural areas, startups are slowly emerging in the agriculture sector too, with a focus on solving issues concerning farmers.

Startups like FreshWorld, Farmily, Awaaz De, Anulekh Agrotech and Sahaja Organics are disseminating farm information through mobile phones, bridging the gaps in agri retail supply chain, providing farmers with direct market access, besides weather, water and soil management services.

“Mobile agricultural apps have not seen traction in India due to challenges with engagement and last mile access. Farmers didn’t have a way to share what they knew and it was all informal or ad hoc. So we tried to leverage the mobile phone as a device for people to be able to access and share information with a voice message board,” Neil Patel, founder and CEO of Awaaz De told FE.

Awaaz De offers a mobile voice service over mobile phones to small farmers in India, sharing sustainable agriculture practices. The team has initiated a mobile advisory service called Krishi Mobile, wherein agricultural experts send relevant and timely agricultural information covering topics like plant protection, agriculture extension, agronomy, horticulture and animal husbandry, enabling farmers to access this information over the phone.

Agri startups are focusing on both production and marketing of agriculture produce. For instance, Bengaluru-based Farmily provides micro-sites for farmers to display their farm produce and brings consumers and farmers on a single platform. It allows buyers to order or express interest in purchasing the farmers’ produce on the Farmily platform, immediately upon which an SMS is delivered to the farmer. Farmers can respond to the demand and are able to negotiate and conclude deals online. Another Mumbai-based startup, Anulekh Agrotech, founded in 2012 by Sagar Bhansali, sells biochar-based (organic component) products.

“Selling products and technologies to farmers is a big challenge and it is one area where many startups have not figured out a successful model. Aligning with the farmers’ needs and committing to improve productivity is not an easy task,” said Nagaraja Prakasam, angel investor at the Indian Angel Network, adding, “In a developed country, farmers get up to 70% of what the consumers pay, but in India they merely get 30%. So the supply chain of farm to market is not efficient here. The potential is huge, but the challenges are even bigger.”

The investor community has started to show some interest, but this is a long way to go. Jinesh Shah, founding partner at VC firm Omnivore says what has worked in e-commerce will not work in the farm sector. “One cannot expect an early exit here. Indian farmers believe in what they see. So it will take time to adapt, and startups and investors should have patience. After all, the market for anything in agriculture is a multi-billion dollar one,” Shah said.

Karthik Natarajan of Farmily, who is in the process of raising funds for his company, believes that the food delivery startups, which are receiving a lot of traction currently, will soon directly source from farmers to reduce costs, and that is when investors will move towards this segment.

To avoid giving in to the demands of VCs, Bengaluru-based startup Sahaja Organics, which markets organics produce under the aegis of Sahaja Samrudha, has raised funds from farmers themselves. Started in 2010 with a capital of just R5 lakh, the company has around 750 farmers as its shareholders, and it has tried and tested various business models, changing from a retail concept to being a wholesaler entirely.

Over the past five years, its turnover has increased from Rs 50 lakh to Rs 3.6 crore, and the organisation has turned profitable lately. “To be fair to the farmers, who are also the investors in the organisation, the company never reduced the margins it gave them. In fact, the margins were always 15-20% higher compared to the traditional market,” says B Somesh, CEO of Sahaja Organics.

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