Agritech Funding: Agritech startups trim teams, rework business models in funding winter

Agri-tech startups have joined the growing list of companies slashing their teams amid business model challenges and an overall squeeze in funding from private tech companies, industry executives and investors have told ET.

While the Temasek-backed DeHaat agricultural market laid off about 5% of its employees last year, other venture capital-backed companies like Bijak, Captain Fresh, BharatAgri and Gramophone have also made layoffs recently, sources told ET.

Indore-based Gramophone laid off around 75 staff in November and December last year to focus on profitability over the next financial quarters, co-founder and chief executive Tauseef Khan told ET.

The company was previously in expansion mode after raising $10 million in October 2021 from investors including Z3Partners and Info Edge. It currently has approximately 450 employees.

Captain Fresh, the retail farm meat platform backed by Tiger Global, has been trying to shift its business from domestic to international markets since April last year.

The exercise led to 120 employees losing their jobs, founder and CEO Utham Gowda told ET. The company’s valuation more than doubled to $500 million in March 2022, after raising $50 million.

Discover the stories that interest you

BharatAgri, which offers farmers AI-based services on a paid subscription basis, laid off 40 employees in August. The Bengaluru-based company, which now has 52 employees, attributed the layoffs to a change in the way it sells products and services.Read also : ETtech Morning Dispatch layoffs spread to Dunzo, ShareChat, Rebel Foods and agritech companies

While DeHaat said the number of employees laid off last year was less than 100 and all layoffs were based on performance and cultural adaptation, Bijak who also cut jobs did not respond. ET’s request for comment.

The agritech startups that cut jobsETtech

The previously unreported layoffs came after a two-year period of robust fundraising activity. About 63% of the total venture capital invested in agritech in India so far had been deployed in the past two years, according to a report by investment bank Avendus Capital in December.

While in 2021, $1.22 billion was invested in 45 agritech startups, approximately $796 million was invested in 30 agritech startups in 2022.

Why these layoffs?

After attracting capital from investors, agri-tech startups have stepped up their hiring activities, but these companies are now streamlining their operations.

At BharatAgri, for example, the company had a model where there was a sales team that spoke directly to users to sell subscriptions and products. “Over time, our product has evolved in such a way that users can purchase the services and products without a phone call,” founder and CEO Siddharth Dialani told ET, explaining the layoffs.

The Bengaluru-based company last raised funds in September 2021 – $6.5m in a round led by Omnivore, with participation from India Quotient and 021 Capital, which already had a stake.

Startup layoffsETtech

“We view the current environment as a boon for the agritech sector as it will remove a lot of clutter in space and without massive growth pressure many companies will come out of this stronger with better unit economics,” Khan said of Gramophone.

“Most companies have already taken the right steps over the past two quarters and we expect results to start showing this year,” he added.

Business model challenges

“In general, we are back to pre-pandemic 2019 levels for seed rounds, like $2-3 million rounds; there are some exceptions but few,” said Mark Kahn, Managing Partner of Omnivore, when asked about the current funding climate in the industry. For other cycles, pre-money valuations are down 33% from 2021 highs, he added.

Space startups are still grappling with early business model challenges, with some succumbing to an investor-led push to aggressively increase gross merchandise value (GMV) without an active focus on gross margin , according to an industry insider.

GMV is the total value of goods sold by a company, and gross margin is the amount remaining after subtracting cost of goods sold from net sales.

“In terms of business models that work in agri-tech, inbound links work very well and outbound links work well in non-perishables. For perishables and branded fresh produce, it only works well for exports,” Kahn said. “The whole business model ‘I buy vegetables from a farmer, then I sell them to a kirana’ with nothing else is dead.”

Raising capital has been difficult over the past six to eight months. The $60 million raised by DeHaat in December took a long time to close, people in the know told ET.

“We can confirm that DeHaat’s current valuation after the Series E funding is between $700 million and $800 million, representing an approximately 80% premium over the previous funding round which occurred there. less than 13 months ago,” a company spokesperson told ET.

DeHaat is among the top agri-tech startups by revenue, alongside Waycool Foods & Products, which claimed to have recorded Rs 1,008 crore in revenue in the fiscal year ending March 2022 (FY22).

Read also : Year 2022 in review: Fund-strapped startups laid off nearly 18,000 employees

Patna and Gurgaon-based DeHaat’s revenue grew 3.6 times to Rs 1,274 crore in FY22, according to the spokesperson.

“We are on track to deliver over 2x that number in FY23… we are on an exponential growth trajectory with over 2.5 million farmers and 15,000 DeHaat Centers expected by the end of FY23, representing 3x growth over FY22. Being a well-capitalized organization, we also aim to continue on this growth path in FY24,” added the spokesperson.

DeHaat said he employed 2,000 people until last year.

“There’s been a lot of growth lately that’s why companies have gone ahead and hired more people…now not everyone hired will perform at the same level so you hire a little more, just like big companies do and keep the best,” said Akanksha Malik, founder of Growth360, which helps startups hire mid- to senior-level people.

Bijak, backed by Omidyar Network India and Sequoia Surge, has also tightened its marketing and staffing costs in the recent past, multiple sources told ET.

Three industry insiders confirmed that Bijak had laid off numerous employees. ET could not determine the exact number of layoffs.

However, Kahn of Omnivore, an investor in Bijak, denied these claims and told ET that Bijak still had years of funding trail and had no reason to cut staff.

The company operates a B2B agricultural commodity exchange marketplace for agricultural suppliers and buyers, a slightly more crowded marketplace within agritech, competing with Lightrock India-backed WayCool Foods and Products, Quona Capital-backed Arya , Prosus-backed Vegrow, and Walmart-backed Ninjacart.

“There is no shortage of capital to invest in the sector… but the question is what price do investors want to pay. That’s where a lot of deals get stuck,” Hemendra Mathur, venture partner at Bharat Innovation Fund and co-founder of ThinkAg, told ET.

(Graphics and illustrations by Rahul Awasthi)