This article originally appeared on LiveMint.com.
Earlier this year, two India-based agri-technology (AgTech) start-ups hit the headlines for raising millions in funding from private equity firms. AgroStar, which provides agricultural inputs directly to farmers, raised $10 million, and RML AgTech, which offers smart farming solutions, raised $4 million.
Securing access to funding for AgTech start-ups has been tough. Yet, this recent spurt may signify growing investor and corporate confidence in this nascent sector, known as farming-as-a-service, or FaaS.
A recent study, carried out by Bain Capability Centre, Bain and Co.’s offshore group supporting its offices worldwide, and the Centre for Innovation, Incubation and Entrepreneurship (CIIE) at IIM, Ahmedabad, pointed to increased activity in the FaaS space by venture capitalists, private equity funds and large Indian firms. Earlier this year, CIIE also launched the Bharat Innovations Fund with AgTech being a key focus area.
India suffers from low farm productivity due to a host of factors, not in the least, the lack of access to technology. Nearly 85% farmers hold less than two hectares of land and earn, on average, a meagre Rs6,400 per month. The demand for food has been growing but the supply is severely constrained due to marginal productivity gains in a majority of crops, shrinking arable land, erratic monsoon patterns, climate change, and supply chain inefficiencies.
The term FaaS has been coined after SaaS (software-as-a-service). FaaS seeks to provide affordable solutions to technical and mechanized farming. It makes the fixed costs variable for farmers, thus making it more affordable for a majority of small farmers. Its services are available on a subscription or pay-per-use basis in three broad categories.
Varun Grover is a senior group manager and Shivani Sehgal is a senior team manager with the Bain Capability Centre. Hemendra Mathur is a Venture Partner with Bharat Innovations Fund, a public-private-academia venture platform.