About
NABVENTURES Fund
NABVENTURES Fund is a venture growth equity fund that invests in early to mid-stage start-ups in agritech, foodtech, agri/rural fintech and rural enablers (healthtech, edutech, ecommerce). The fund is focused on driving transformation in these segments by providing strategic and operational insights, patient capital and access to its extensive network.
01. NABVENTURES has embarked on its impact investing journey very recently. How has your overall experience been?
When we made our low-key entry in the investment arena in 2019, we were led up the garden path in the garb of impact investing. All sorts of ‘impact’ opportunities were showcased to us (remember the saying, a fool and his money are invited everywhere!) as people assumed that we were naïve investors.
We shied away from making investments in 2019 as a lot of startups including impact startups in agritech, foodtech, rural tech etc. were overvalued. If revenues were x, then the ask was for a pre-money valuation of 20-40x or even more in a few cases. We made our first investment in Jai Kisan, a category leading rural fintech, during the peak pandemic in August 2020. We have had a stellar run since then. Including the second round in Jai Kisan at 5x higher valuation in 9 months, we have altogether made 7 investments totalling INR 940 million. All this in a span of 11 months!
In the financial year ended March 2021, we were the no. 1 investor in new agri-foodtech deals (excluding follow-on) among the agri-food focused VCs. We are pretty happy with the progress made so far and we are excited to support more agri-foodtech startups. However, we have not had much success in identifying good startups in rural healthtech and edutech. Our journey proves that apart from generating impact, there is a lot of scope to generate financial returns in India. Our focus is on scaling up impact oriented startups in a sustainable manner so that even in a downturn these startups would be able to support farmers and other stakeholders.
02. Currently, NABVENTURES has raised funds from National Bank for Agriculture and Rural Development (NABARD), which is an apex DFI in India. How has been your experience of fundraising since the outbreak of the pandemic? Please share a few lessons.
The progress before pandemic was not as smooth as we had envisaged at the start of our journey. Since we did not make any investments in the frothy year of 2019, the LPs were not sure about our prospects. Our preference to keep ourselves under the radar in terms of our PR and media presence added to the image. At the onset of the pandemic, there was a huge amount of socio-economic dislocation and we got back into serious investing in high quality startups. We went berserk in October 2020 when we announced 3 new investments in agritech startups. This made the LPs sit up and take notice of the high quality of our portfolio. Soon enough, we got commitments from Life Insurance Corporation (LIC), the largest life insurer in India, SIDBI Fund of Funds and a few others. Presently, 75% of the base fund corpus of INR 5 billion is raised. We are looking to raise the balance and a green shoe option of INR 2 billion as well. We think that potential LPs care a lot about the quality of investments made by a first-time fund and therefore, it is very important to make the right investments. Just like a person is known by the company he/she keeps, in the same vein, a fund is known by the portfolio companies it invests in and the quality of entrepreneurs it supports. The entrepreneurs we have backed have become our goodwill ambassadors..
03. NABVENTURES invests in innovative, early stage companies in the agritech, foodtech and rural enablers (fintech, healthtech, edutech, ecommerce) space. Within the larger umbrella of agriculture and rural livelihoods, are there any particular sub-segments which are of keen interest to you? Are sustainable startups being created through impact funds?
The adoption of technology is bringing about a huge transformation in agriculture and rural businesses. We like the core agri-foodtech areas such as food quality testing, tech-based agronomy services which actually use AI and deeptech and benefit farmers. However, a lot of these segments have not been able to scale up rapidly while surprisingly, the valuations have run way ahead of fundamentals. Same is the case with somewhat scaled-up farm produce b2b market linkage startups. These have the potential to enhance farmer incomes but a few startups are chasing wrong metrics such as propped up revenues on wafer-thin or negative gross margins with a hefty dose of unnecessary PR campaigns in order to attract capital from sector-agnostic VCs. We are worried that if there is a market downturn causing liquidity shock, then a lot of such b2b market linkage startups will enter zombie mode and the farmers whose incomes depend on such startups will become vulnerable to income shocks. At NABVENTURES, we try to ascertain corporate governance credentials of startups before investing. We have a fiduciary duty to share the truths that we unearth with the LP community so that the impact startup ecosystem develops in a sustainable manner.
04. NABVENTURES’ investment thesis is centred on agriculture, food and rural livelihoods. Has the global health pandemic led you to make any significant change or alteration in your investment strategy?
Agriculture and food have been quite resilient during the ongoing pandemic. We are a child of the pandemic in the sense that all of our investments have been made during the pandemic. We have kept the farmers of India at the centre of our investment theses during the pandemic. In order to improve market access, market linkage and to protect rural livelihoods, we have actively backed two d2c onine startups: one in fruits & vegetables (Fraazo) and another in omnichannel meat and seafood (TenderCuts). The first one provides market linkage to farmers while the latter works a lot with goat and poultry farmers. Our investment thesis has gotten stronger as the pandemic induced lockdown resulted in fast paced changes in consumer behaviour as they moved online for food ordering and increasingly, the high physical touch points in the agri-food supply chain are moving online too. These changes are aiding in the creation of big data plays in Indian agriculture and creation of new business opportunities as the old traditional ways give way to the new. Noticing the acceleration of the digital transformation in agriculture coupled with the opportunity to reduce the number of zero/no value adding intermediaries (read: disintermediation), we have accelerated the pace of our investments in all things digital. Satyukt, our portfolio company in satellite data analytics, gathers near real time data on root zone soil moisture up to a depth of 1 metre (only the second company in the world to have this capability!), macro and micro farm level data regarding water, soil quality etc. and is the only company in India that can look through cloud cover as well. It is benefitting a lot of farmers in many states and is likely to emerge as a big data play.
05. Given your experience and knowledge of the agriculture sector, what is your value creation playbook for your portfolio startups?
Apart from strategizing, hiring, portfolio monitoring including impact monitoring from a value creation point of view, we deploy a unique impact playbook in our portfolio startups. NABARD is the most trusted name among farmers and other rural stakeholders in India. We are the only fund in India which can connect innovative startups to NABARD’s pan-India network of farmer producer organisations (FPOs), to NABARD’s development officers present in each district of India, more than 10 million self-help groups (SHGs), the lending subsidiaries of NABARD, regional rural banks etc. It is like connecting the startups to a large set of uniform customers (e.g. FPOs) which they would not have access to through any other VC fund in India. For instance, we arranged a debt deployment tie-up with Jai Kisan for a leading regional rural bank in India. This was the first of its kind transaction for a regional rural bank. Similarly, we have connected Unnati (agritech services and agri inputs platform) and Krishitantra (soil tech startup) to FPOs in many southern states of India. TenderCuts, a leading omnichannel meat and seafood startup, is working with FPOs in goat and poultry farming.
06. How does NABVENTURES plan to improve rural and farmer livelihoods so that true impact gets created at a large scale?
We believe that impact funds in an VC fund format have a sub-optimal capacity to improve or positively impact farmers on account of their limited fund life, 4-5 years holding period, exit pressures etc. With the support of NABARD, we are exploring the creation of a different vehicle to channelize impact investments for supporting mass innovations which benefit a lot of farmers but are not patentable. Further, we may initiate a hyperlocal program to provide genuine market linkage support to smallholder farmers. Our canvas can be much bigger than that of other impact funds. NABVENTURES Fund I is one among the many investment vehicles and options available to us for creating sustainable impact in the agri-food ecosystem. For example, we may look to create perpetual investment companies which do not charge management fees and can hold investments for more than 10 years. We would be happy to collaborate with like-minded global/domestic impact investors for such endeavours.