Karnataka agriculture startups struggle to bloom after seed funding phase

Hubballi: Nearly 80% of agriculture-related startups in Karnataka are finding it difficult to stay afloat after the initial seed funding phase.

In the state, agri startups are venturing into sectors such as precision agriculture, farm mechanisation, agri logistics and supply, organic farming, animal husbandry, fishery, among others.

The Department for Promotion of Industry and Internal Trade (DPIIT), a Union government agency, has registered over 2,000 agriculture-related startups in India.

Around 250 of them are in Karnataka, second only to Maharashtra (300) at the Pan-India level.

Taslimarif Saiyed, Director-CEO, Centre for Cellular and Molecular Platforms (C-CAMP), says only around 20% of the agri startups are able to scale up both in terms of finance and employment, while nearly 25%-30% of the rest face eventual closure due to the sector’s complexity.

He says that out of the 100 agri startups that are registered with C-CAMP, 25 have already scaled up in terms of revenue and global market share.

Lack of secondary financial assistance, gap in technology adoption, a lack of agriculture domain experts, high compliance, climate variability, need for user understanding of advanced technology, a lack of marketing network, and poor ideation are resulting in nearly 20% of agri startups winding up within two-three years of initiation, he says.

C-Camp hosts the Centre of Excellence for Agri Innovations, which is supported by the ITBT and agriculture departments of the Karnataka government, to comprehensively encourage agri startups. 

Ravi Shankar, an agro-consultant, says agriculture is a complex subject and is riddled with multiple problem statements. “The higher the problems, means more opportunity for startups to find solutions.”

He attributes this to changing market dynamics that are often driven by climate change, requiring the agri startups to be agile and responsive.

“Many of the startups that started in Karnataka were incubated in the urban set-up with a limited understanding of agriculture. A few of the startups also failed to capture the market and scale up as they lacked marketing experience.”

Experts say that large numbers of startups are fading out as they have limited access to funding, high upfront costs and long gestation periods. Though the state government has been providing Rs 5 lakh seed funds for a majority of startups, a poor business model has meant that they failed to get secondary investment.

Manjunath R, founder of Future Biotech, a Dharwad-based startup that was incubated at the Krishik-Agribusiness Incubator of University of Agriculture Science (UAS), Dharwad, says acceptance from customers is one of the challenges for organic-based products.

“It takes at least five to six years for a startup to stabilise. However, due to a fund crunch, many are unable to sustain till then,” he says, adding that the cumbersome license process is also hurting the cause.

The UAS-Dharwad in the last 12 years has incubated 136 startups. While 90 of them are still afloat, not many of them have been able to break the Rs 1-crore annual turnover bench, says S S Dolli, CEO of Krishik-Agribusiness Incubator.

Market expansion is another challenge for these startups. Sudhanshu Rai, founder of Bengaluru-based Fyllo, an agro-tech startup, says the agri-tech sector has huge potential. However, establishing a market is a challenge. “The government, which has been subsidising agriculture, needs to invest in technology related to agriculture and provide them long-term handholding to improve the income of farmers and sustain startups.”

Taslimarif says the government is making significant efforts to fund promising startups even after the initial seeding phase.

“We are working with investors from within and outside countries to fund sectors that can provide greater returns in future and also make agriculture sustainable.”