The influx of Agritech start-ups in the past 4-5 years has changed the landscape of Indian agriculture that is considered to be one of the most technology-resistant and backward sectors. Farmers are removing the blindfolds of technology ignorance post understanding what these Agritech solutions have to offer, creating a viable business model improving the farmer’s income.
However, many of the Agritech enterprises, despite tasting success initially face hurdles to expand their businesses that finally end in closure. Here are some of the reasons why Agritech start-ups in India can fail:
Many of the Agritech enterprises, despite tasting success initially face hurdles to expand their businesses that finally end up in closure.
Probable reasons for Agritech start-ups failing in India
1. Price wars with the retail giants
2020 saw conglomerates Tata and Reliance aggressively enter the retail space with an acquisition. Fresh produce and grocery are a lucrative segment where players are building their private labels of farm produce which they procure at cheaper rates and sell at predatory prices giving them good margins.
This hurts the revenues of major Agritech players with their USP as organic produce which they cannot sell at lower prices.
2. Lack of commercial guidance
The existing incubators and accelerators in India lack the expertise to guide farm-oriented start-ups, unlike IT, Health tech and e-commerce.
3. Not taking the D2C channel
In the current pandemic situation where big retail stores are operating erratically, it will not be wise for Agritech start-ups to opt for retail channels. Opting for a D2C channel will help the start-up gain complete control of the control chain.
A recent example is that Clover, a supplier of perishable fresh produce, changed its approach from B2B to B2C by adapting to the D2C approach in the pandemic. Clover could provide customers high-quality produce at competitive prices under a traceable supply chain. Clover’s sales grew 3 times in the Covid by turning to D2C.
4. Reluctant investors due to the slow turnaround of profits
Lack of funds leaves the Agritech start-ups cash strapped as it fails to lure investors since ROI in Agritech relatively takes time and does not meet market expectations. Also, add is the uncertainty in weather conditions which makes it a high-risk proposition for investors. Agritech innovations in India need patient capital and an ecosystem that has the appetite to programme these innovations for scale and success.
5. Lack of visibility
Supply chain visibility and efficiency are the keys to running a viable agriculture-based business. Given the perishable nature of the products and the sensitive timelines associated, every stage of the supply chain in agriculture comes with integration issues, security vulnerabilities, and other problems.
Therefore, the right technological intervention at the right stage of business will enable solutions that preserve product quality, reduce waste, improve traceability, transportation and storage.
6. Lack of technical know-how
Most Agritech start-ups lack the technical know-how about the health concerns of cattle or crop produce that lands them in major trouble causing low productivity levels.
Agritech players should collaborate with large technology players that can provide an innovative solution for instance MoooFarm a Gurugram based start-up collaborated with Microsoft to tackle mastitis using Machine Learning (ML) and helped farmers save US$500 million per year.
7. Low internet connectivity in rural areas
Several remote rural locations lack strong reliable internet connectivity preventing Agritech start-ups to apply smart agriculture techniques using IoT, Artificial Intelligence (AI), and ML at such places. Start-ups before serving the geographies must do in-depth research about the available internet connectivity.
8. Uncertain climate conditions
Hailstones, heavy rainfall, or drought impacts the crop produce directly affecting the revenues. Adoption of crop monitoring technologies AI and ML improves agriculture outcomes in adverse climatic conditions. With the right technology, a farmer can give each crop individualised care, utilise resources in exact quantities, and can grow more with less.
9. Logistics and last-mile delivery
Logistics and last-mile delivery is key to the operation of Agritech start-ups that do not find cold storage remote sensing and digitisation of field-level data as economically viable. Also, the backward integration of services in agriculture does not attract many investors thus leaving Agritech start-up with scarce facilities.
10. Expensive Infrastructure
Agritech start-ups end up investing money in establishing lavish offices, expensive cattle shades and other infrastructure which mounts debts. In the initial days, one should not spend money on infrastructure, only the necessities and essentials should be the building blocks.
Agritech startups are nascent in India. The idea that agriculture can be monitored using AI, ML and IoT devices is an alien concept to the farmers, therefore its gradual acceptance will lead to slower turnaround time for profits. Keeping in mind that not many investors are interested in investing in agritech, the startups should be wary of spending excessively on luxurious infrastructure. It will be imperative for startups to begin with the basic essentials of infrastructure and spend more on enhancing the tech capabilities keeping in mind the uncertain nature of climate the sector is heavily dependent on.