1 As an investor focused on supporting food and agricultural businesses, how have you seen the agritech landscape evolve in India, over the past five years?

What are some of the interesting trends and business models that stand out to you?

The Indian agricultural sector is ripe for transformation, and agritech startups are at the forefront of this exciting revolution. Estimates suggest that the Indian agritech industry has the potential to reach $24 billion by 2025. Fueled by rising farmer awareness, internet penetration in rural areas, and other initiatives by the government, the agritech landscape has grown exponentially, from under 50 startups in 2013 to over 1,300 in 2020.

During the last five years, we've witnessed a remarkable surge in this domain. Overcoming COVID times, India's agri-tech sector has seen a surge in investment in this period, FY22 being the most successful year where startups raised investments of over US$ 1.2 billion, followed by sharp contraction in FY 23, “Funding winter” an overall trend in the entire investment industry due to global factors.

Going forward, the true potential of Indian agriculture lies in the widespread adoption of new-age technologies like Artificial Intelligence, Machine Learning, Internet of Things (IoT), blockchain, and automation. These advancements hold immense promise for empowering farmers with data-driven decision making to improve yields and resource management. It also helps in optimizing time and costs across agricultural operations leading to revenue maximization and return on investment for farmers.

At NABVENTURES, we're particularly drawn to business models that strategically leverage technology to tackle some of Indian agriculture's most pressing challenges. These challenges include low yields, soil degradation, limited access to affordable and high-quality inputs, securing farm credit, mechanization gaps, and establishing stronger connections with markets. Our underlying objectives are to extend support to farmers' income and ensure food security with sustainable measures. We believe these businesses should not only address these challenges but also create value for all stakeholders involved, including farmers, consumers, and themselves, by building sustainable and profitable businesses.

NABVENTURES, inter alia, has supported such business models focussing on Precision agriculture and farm management (Satyukt, Krishitantra), Fintech for Agri credit (Jai Kisan and Advarisk), D2C models in agri value chain (Beyond Snacks, Eggoz), Blockchain for traceability (Tracex) and Deeptech solutions (KBCols).

The Indian agritech landscape is brimming with potential. By harnessing the power of technology and innovative business models, we can create a future of sustainable agriculture that ensures food security for all and empowers our nation's farmers.

2 The last two years have seen the sector witnessing a slowdown in VC investments in agritech businesses. How do you view this phase?

Could you share with us how NABVENTURES is evolving its investment thesis, given the relatively muted investment flows?

In the last two years due to global economic and geo-political issues, the investment in India by overseas investors has experienced slowdown and hence the companies are facing stretched runways and distance between the two investment rounds is stretched particularly in agri and food space.

If you go by numbers, the FSG report indicates that global agri-tech investments saw a decline of 10% from US$ 19.6 billion to US$ 17.7 billion between calendar years 2022 and 2023. The investment landscape in India has also gone slow due to global unrest. Between FY22 and FY23, investments in Indian agri-tech fell by a staggering 45% to US$ 706 million. With a more cautious investment climate, the Startups should use this period to refine their business models and drive towards profitability, sustainability and prioritize achieving long-term financial viability. Generally, the cautious investment approach would be there especially in case of startups with high burn rates and at the same time more funding would direct towards established business models.

To answer your question on the investment thesis, our core investment thesis remains unchanged. We back companies leveraging technology to solve critical challenges in Indian agriculture, with a clear path to revenue generation. Significant corpus of the Fund is already committed and we're currently focusing investments on mid stage companies while setting aside funds for potential follow-on investments in our existing portfolio.

NABARD is actively driving investments in the agritech sector. As on 31 March 2024, an amount of INR 729 crore is committed to 31 AIFs. Further strengthening its commitment, NABARD is collaborating with the Department of Agriculture & Farmers' Welfare, Ministry of Agriculture Govt. of India to establish a new INR 750 crore fund. This fund will be managed by NABVENTURES and its primary objective of the fund would be to create an investment-friendly climate for start-ups related to agriculture and allied activities and to accelerate the growth of start-ups in the agri ecosystem.

3 The agritech investment space has seen the majority of the investments directed towards downstream applications such as farm-to-fork models. Investments in solutions like agri equipment, agri inputs and food processing have remained relatively muted.

What would it take for upstream and midstream agri solutions to receive a similar traction? Are there any overarching ecosystem enablers that you believe will be required for such startups to become investment worthy?

Firstly, upstream and to an extent midstream solutions target farmers as their primary customer base. While startups may develop cutting-edge products with immense potential, still distribution of farmers remains a significant challenge as the farmer base is scattered and requires a large distribution channel to establish farmer’s connect.

Secondly, start-ups need to display quick adoption of their products and services to its investors may inadvertently frame farmer interactions as purely transactional. However, farmers prioritize trusted and established relationships while making purchasing decisions. A relationship, which goes beyond mere transactions.

With respect to downstream solutions, farmers act as vendors to corporations or end consumers, creating a more straightforward operational model for scaling a business. Additionally, downstream businesses often exhibit faster scalability, a key factor influencing venture capital investment decisions.

The overall investments in agritech have declined in 2023. However, as per AgFunder, Asia-Pacific agri food-tech startups in upstream raised $3.2 billion investment and increased 24% year-over-year.

To encourage investment in upstream and midstream agritech, a shift in perspective is imperative. Recognizing the significance of trust-building and fostering long-term relationships with farmers is paramount. Organizations like NABARD and NABVENTURES play a crucial role by providing support and infrastructure, facilitating trust, and fostering a more robust and sustainable agricultural ecosystem in India.

Recent trends suggest that, of late, technologies closer to the farmer or farm have started gaining traction. It is heartening to see both the central and state governments proactively launching initiatives to promote these technologies e.g the launch of Kisan Drones for promoting crop assessment, spraying insecticides, and digitization of land records (Agri stack), National Agricultural Market (eNAM),launch of agriculture accelerator fund to provide startups to launch their products, services, business platforms, etc into the market and facilitate them to scale up their products and operations to attain business viability are some of the initiatives that can prove transformative for Indian agriculture.

4 Can you tell us about NABVENTURES' investment thesis with respect to downstream investments and how you identify companies that align with it? Provide some examples from your portfolio. What is been your experience on scalability of these companies?

Sure. At NABVENTURES, we're passionate about backing companies that use technology and innovative ideas to tackle head-on challenges in the Indian agriculture ecosystem. It's all about creating value for everyone involved, from the farmers to the businesses themselves.

Vilcart, Eggoz, Beyond snacks are a few downstream companies where NABVENTURES has made investments. Vilcart is a B2B company that tackles the challenge of limited access to supplies for rural kirana stores (small, family-owned grocery stores). Vilcart provides a one-stop solution for these stores, offering a wide range of branded and unbranded products. They source, supply, and manage warehousing, storage, and deliveries, ensuring efficient product availability. Additionally, Vilcart takes value creation a step further by manufacturing certain commodities, such as spices, staples, soaps, detergents etc. Our initial investment in Vilcart's pre-series round (of ₹1.5-2 million) fueled their expansion from 15 districts in Karnataka to 25 districts across Karnataka and Tamil Nadu. This success attracted further investment from Asia Impact. Today, Vilcart operates in a staggering 100 districts, with their monthly revenue soaring from ₹12 crore to a remarkable ₹100 crore in a span of 3 years.

Eggoz is revolutionizing the poultry industry with a farm-to-fork approach. They partner directly with poultry farmers, offering a guaranteed buyback of their eggs. Farmers benefit from Eggoz's standardized operating procedures (SOPs), ensuring consistent quality. Eggoz takes care of the entire egg journey – procuring, grading, sorting, packaging, and logistics. They then deliver these premium eggs to various platforms, including quick commerce and retail stores. This creates a direct-to-consumer (D2C) brand for Eggoz and establishes a new category of branded, high-quality eggs. NABVENTURES, was part of Eggoz's initial investment round. At the time, the company was on a run rate of ₹20 crore. Today, Eggoz boasts an impressive ARR of ₹100 crore, showcasing significant growth.

Beyond Snacks goes beyond being just a D2C brand for delicious banana chips. Their strength lies in their deeply integrated farm-to-table model, particularly crucial for a perishable product like banana. They directly partner with farmers, offering a guaranteed buyback program. This creates a win-win situation: farmers benefit from assured income and reduced price fluctuations, while Beyond Snacks secures a consistent supply of high-quality bananas. Beyond Snacks sources bananas directly from farms in Tumkur, Karnataka, and Kerala. These bananas are then processed into their signature chips and distributed throughout India as a packaged product. Post-investment from NABVENTURES, the company's monthly revenue has impressively scaled by 4x, in less than a year, highlighting the success of their integrated model.

As you can see our experience with these companies has been incredibly positive. Their innovative models, combined with our strategic support, have unlocked significant scalability potential. We're confident that these businesses will continue to disrupt and revolutionize the Indian agricultural sector.

5 Your recent investment in KBCols Sciences, which is a biotech firm making natural dyes, is a graduation from the other investments in your portfolio. Could you share with us your thesis behind this investment?

Do you see home grown deep-tech innovations like KBCols now becoming commercially viable and investment ready?

Absolutely. Our recent investment in KBCols Sciences marks a fascinating new chapter for NABVENTURES. While our portfolio primarily focuses on ag-tech companies tackling challenges in the pre-production stages, KBCols represents a strategic expansion into the downstream biotech space.

Our investment thesis behind KBCols is multifaceted. KBCols' mission to develop eco-friendly, non-GMO natural biocolors directly aligns with our commitment to promoting sustainable practices in agriculture. Their innovative approach using India's rich biodiversity resonates deeply with us. Secondly, the use of agri-biomass waste for color production tackles two major challenges simultaneously, reducing environmental impact from discarded biomass and creating a circular economy. This aligns perfectly with our focus on solutions that benefit both farmers and the environment. Thirdly, KBCols has the potential to disrupt the large petrochemical-based dye industry with their natural and sustainable alternatives. This shift has significant implications for the fashion, personal care, and food industries, promoting a more responsible approach to product creation.

KBCols signifies a growing trend in India, the rise of commercially viable and investment-ready deep-tech innovations. We're witnessing a surge in homegrown deep-tech companies across various sectors, including agriculture. These companies are effectively leveraging cutting-edge technology to address critical challenges and develop innovative solutions.

At NABVENTURES, we're excited to be at the forefront of supporting these deep-tech pioneers. We believe KBCols' innovative approach to natural color production has the potential to revolutionize multiple industries while promoting environmental responsibility. We're confident that such companies will play a significant role in shaping a more sustainable and equitable future for Indian agriculture and beyond.

6 As a fund also focused on enabling rural financial inclusion, how do you view the space of affordable housing, which has also been receiving a special thrust from the government? Is there a pipeline of startups coming up for investments?

NABVENTURES is a strong advocate for rural financial inclusion, and we see a natural synergy between this focus and the growing affordable housing space. The government's emphasis on this sector presents a significant opportunity to empower rural communities.

One recent example of our involvement is our investment in Home Capital. This company operates in Tier 3 cities and beyond, specifically targeting the underserved and unbanked population. Home Capital provides crucial assistance with home financing for affordable housing.

Home Capital acts as a bridge, making financial solutions more accessible for low-income individuals who might otherwise struggle to secure home loans at affordable rates. The NBFCs operating in rural areas have higher interest rates due to scarce capital and high operational expenses, while large institutions like Godrej Housing Finance, Piramal Capital, etc may have low interest rates, but don’t have the on ground presence. Home Capital's platform “Bharat Housing network“ mitigates risk for larger financial institutions, allowing them to expand their reach into these underserved markets by partnering with smaller NBFCs and co lending alongside to reduce risk.

We believe this investment will create a positive ripple effect. By enabling more low-income individuals to achieve homeownership, Home Capital directly aligns with the government's housing and financial inclusion mission. This, in turn, can contribute to improved rural livelihoods, as homeownership fosters a sense of stability and empowers families to build a stronger future.

NABVENTURES is committed to playing a leading role in bridging the gap between rural financial inclusion and the affordable housing sector. By supporting innovative companies like Home Capital, we can empower more rural communities and contribute to a more equitable and prosperous India.

7 Recently, the Indian government announced the launch of a Rs. 750 Crore Blended capital Fund for Agricultural Innovation, which will be managed by NABVENTURES.

a) Could you help us with the fund structure, from the investee perspective - what is the blend of capital that the firm intends to deploy, to investees?
(Would it be a combination of debt & equity or a grant/technical assistance component as well)

b) What priority areas are you targeting through this fund, in the near term? What is the nature of support that Agritech startups can expect from NABVENTURES?

As of now, we can provide you selected points, keeping in view that the modalities of the scheme are being finalized. Ministry of Agriculture & Farmers' Welfare, Government of India has given approval for formation of a Blended Capital Support to Finance Startups for Agriculture and Rural Enterprise relevant for Farm Produce Value Chain with a corpus of INR 750 crores (Agri Sure) that is facilitated through NABARD and will be housed in NABVENTURES Ltd. The contribution for the Fund will come from a mix of sources, including the Department of Agriculture & Farmers' Welfare (GoI), NABARD and other institutions. There will be two main investment channels one investing directly into startups and other through a "Fund of Funds" route.

The fund is focused on promoting investments and creating impact for farmers and the related rural ecosystem. The fund is particularly interested in backing innovative and tech-driven ventures in agriculture and related fields. These often high-risk, high-reward opportunities have the potential to make a big difference. The fund will also extend support to startups that can strengthen the farm produce value chain, from input supply to getting products to market.

The fund aims to attract even more investment into the agri-rural startup ecosystem both by direct investments or by contributing to various Alternative Investment Funds (AIFs). This will ultimately help create a more robust and efficient agricultural system, leaving a positive mark for years to come.