What happened when scale met the farm reality

For a brief period, the agritech boom across Southeast and South Asia looked like a familiar venture capital story. Between 2020 and 2022, more than $750 million flowed into Indian agritech startups promising to digitise agriculture across emerging markets, said a report by agritech focused venture firm Omnivore.

The pitch was straightforward: millions of smallholder farmers, large agricultural output, and rising demand would combine with technology to produce venture-scale outcomes. By 2025, that thesis had come under strain.

Funding across the region fell sharply, deal activity slowed, and several well-funded startups struggled to sustain growth. What followed has often been described as a downturn. But data suggests something more structural: a correction in how investors understand agriculture itself. Nowhere is that more evident than in South Asia.

Unlike Southeast Asia, where fragmentation is geographic, South Asia’s complexity is embedded within markets. Countries like Bangladesh and Pakistan are dominated by smallholder-led staple agriculture, high-volume, low-margin systems with limited capacity for technology-led monetisation. Growth in these markets has historically come not from efficiency gains, but from increasing land use and labour inputs.

This has direct implications for startups.

The early agritech model, particularly direct-to-farmer platforms, assumed that scale could compensate for low margins. In practice, the opposite proved true. Customer acquisition costs remained high, farmer spending power limited, and distribution expensive. Even where adoption improved, the underlying economics struggled to hold.

The lesson has been consistent across South Asia: scale does not guarantee viability.

At the same time, cross-border expansion, long seen as the pathway to venture-scale outcomes, has proven even more challenging. Agriculture is deeply tied to local regulation, climate, and cropping patterns. A solution built for rice farmers in Bangladesh cannot be easily replicated for wheat growers in Pakistan or sugarcane producers elsewhere.

For investors, this has forced a recalibration.

The assumption that agritech companies could scale regionally—and justify billion-dollar valuations—has weakened. In its place is a more conservative model: smaller, market-specific businesses, with exits likely via corporate acquisitions.

While investors increasingly underwrite outcomes in the $200 million to $400 million range, the benchmark is less a reflection of realised exits than of constrained scalability and limited liquidity pathways.

This shift carries particular relevance for India. Unlike its neighbours, India offers something closer to a unified market, with shared regulatory frameworks, digital infrastructure, and scale. But the underlying constraints, smallholder fragmentation, price sensitivity, and complex supply chains, remain similar.

The risk is that India repeats the mistakes of the first agritech wave: overestimating the scalability of digital platforms while underestimating the cost of distribution and the limits of farmer monetisation.

The opportunity, however, lies in applying the lessons from across South Asia.

The most durable businesses are not those attempting to aggregate farmers at scale, but those addressing inefficiencies in productivity, logistics, and financing. Yield gaps remain significant. Post-harvest losses continue to erode value. Access to working capital remains constrained across supply chains.

These are not software problems. They are operational ones. And solving them requires a different approach to capital.

Increasingly, growth in agritech is being driven not by equity alone, but by a combination of credit, concessional capital, and strategic partnerships. Development finance institutions and local lenders are playing a larger role, particularly in funding working capital and enabling supply chain finance.

For Indian investors and founders, the implications are clear. The next phase of agritech will not be defined by rapid scaling or regional expansion. It will be shaped by local execution, disciplined capital deployment, and a closer alignment with the realities of agricultural markets.

In that sense, the correction is not a setback. It is a reset. one that brings the sector closer to the economics it must ultimately operate within.