Farm-focused startups attract capital even as agritech funding declines 58% in 2022: Report

Agritech startups closer to the farmer and the supply chain (upstream) saw a 24% year-over-year increase in investments, overtaking consumer-facing companies (downstream) for the first time in years, as per Asia-Pacific AgriFoodTech Investment Report 2023.

In 2022, farm-to-fork agritech startups in the Asia-Pacific region garnered a total of $6.5 billion in funding, marking a significant 58% decline from the record-breaking $15.2 billion raised in 2021.

Upstream startups raised $3.2 billion in 2022 versus the downstream's $2.7 million, as per the report by AgFunder, the Bill & Melinda Gates Foundation, Omnivore, and AgriFutures Australia. This shift towards upstream innovation appears to be continuing in 2023, according to preliminary data on 2023 funding flows, it added. During the first half of 2023, investments totalling approximately $2.6 billion were completed, representing a nearly 50% decrease compared to H1 2022.

As per the report, downstream food delivery innovation, once beloved within the Asia-Pacific agritech ecosystem, particularly in China, has lost its appeal as the sector is now dominated by clear leaders, and mid-sized companies vie for market share among themselves.

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India and China in agritech race

In terms of deal value, India briefly overtook China in 2022, securing the top position with a total of $2.3 billion in funding. However, in the first half of 2023, China reclaimed the lead after raising $861 million, while India closely followed with $712 million.

In 2022, upstream startups operating in agcricultre biotechnology category secured a total of $813 million in funding. Notably, this category received a significant boost from the $100 million Series D round raised by India's microbial and biomolecule discovery optimisation platform, Absolute Foods. China's Zhongxin Breeding also made a mark by securing $327 million in its seed round, marking it as the largest deal of the year. There was also a noticeable increase in deal activity within this segment, specifically focusing on on-farm inputs for crop and animal agriculture.

E-grocery retained its status as the largest category in agritech funding for 2022, raking in a total of $1.6 billion.

A $200-million investment into Zepto led by StepStone Group, and fish and meat retailer FreshToHome's $104 million Series D round led by Amazon Smbhav Venture Fund were some of the top deals globally in 2023. However, Blinkit's $150 million debt raise was the largest downstream deal in 2022, as per the report.

In 2022, Tridge, an online trade platform, emerged as the sole non-Indian company to secure a position in the top deals for Series D and late-stage investments. Notably, the late-stage landscape prominently featured quick-delivery categories, with e-grocery standing out as a mature market segment in India. However, the presence of DeHaat and Waycool among the top deals suggests that significant investments are also flowing into midstream and upstream sectors.

Midstream technologies startups—which connect farmers and food producers to retailers, agro-processors and other clients—collectively raised $620 million in 2022, with substantial investments benefiting India's WayCool and China's Mojia Biotech.

WayCool, a Chennai-based agritech startup, made headlines in June 2022 by securing a $25 million equity investment led by 57 Stars LLC, a Singapore-based independent global alternative investment firm. Additionally, WayCool introduced BrandsNext to power its fast-moving consumer goods (FMCG) business in April of the same year.

In the agribusiness marketplaces and fintech category, DeHaat secured the top deal for the second consecutive year with a $60 million late-stage deal led by Sofina Ventures and Temasek.

In 2022, Indian startups not only led the pack in the top deals but also secured the largest number of deals, totalling 31, while Indonesia held the second-highest number at just nine. India's significant population and expansive geographical presence are likely factors contributing to the country's sustained leadership in the category, the report said.