Indian Agri-Tech Startups See 45% Investment Drop Amid Global Economic Uncertainty, Reveals FSG Report
According to the FSG report, investors are expected to exercise caution by directing their limited funds toward established business models, per their findings.
A recent report by consulting firm FSG has revealed a substantial drop in investments in Indian agri-tech startups, indicating a 45% decrease between the fiscal years 2021-22 and 2022-23. This decline is primarily attributed to the impact of rising global interest rates and a heightened sense of caution among investors amid increased economic uncertainty.
Interestingly, investor caution is not unique to India, as global agri-tech investments have also encountered a 10% reduction between the calendar years 2022 and 2023, as highlighted in the same report.
FSG's projections suggest that this trend of reduced funding is likely to continue into the fiscal year 2024 but could potentially see a revival in the subsequent fiscal year. Furthermore, the report indicates that startups are anticipated to shift their priorities towards achieving profitability in the upcoming financial year.
Rishi Agarwal, who serves as the Managing Director and Head-Asia at FSG, stressed the interconnected nature of India's agri-tech sector with global economic dynamics. He advised startups to seize the opportunity presented by decreased investment to refine their business models and work toward profitability.
In the report titled “ India’s Shifting Agri-Tech Horizon”- Current Advances and Upcoming Trends in the Indian Agricultural Technology Sector,' the focus is on the direction in which India's agri-tech sector is headed. Although the number of investment deals increased from 121 in FY22 to 140 in FY23, there was a noteworthy decline in the total funds secured by Indian agri-tech startups, decreasing from USD 1,279 million in FY22 to USD 706 million in FY23.
In addition, the report says that the maturation of mid-stream agri-tech startups, with investments predominantly being channeled into growth and late-stage funding rounds. For instance, 56% of investments in startups focused on output linkages and quality management were in their advanced growth and late stages. Similarly, other mid-stream startups, including those offering agri-carbon or agri-fintech solutions, saw a substantial 91% of their investments occurring at these advanced stages.
Another notable finding is that many midstream tech startups are venturing into inorganic expansion through strategic acquisitions, underscoring the evolving landscape of India's agri-tech sector.
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