The investment in Indian agrifood startups dips to pre-pandemic levels in 2023, plunging 60 percent from 2022 levels to reach just below $1 billion in 2023, a report said Tuesday.

AgFunder and Omnivore said in their released sixth India AgriFoodTech Investment Report that this reduction aligns closely with the global decline in agrifoodtech investments, which fell by 50 percent year-over-year.

It is noted the total funds raised of $940 million by Indian agrifood startups in 2023 were not far off from the $1.3 billion garnered in pre-Covid 2019, suggesting a normalization of market conditions after a period of excessive valuations.

A concerning trend is the limited participation of agrifood investors, with Omnivore being one of the few remaining, alongside generalist and climate-focused ventures, said the report.

It said that this scenario underscores the need for more committed investors across all stages.

However, India maintained a steady deal activity with 129 deals, only slightly fewer than 133 deals in 2022, indicating smaller deal sizes given the steep decline in dollars raised.

The report also showed more early stage deals closed in 2023 than 2022 indicating continued interest by investors in the category but at much lower valuations than in previous years.

The median deal sizes also dropped significantly year-on-year across stages and most dramatically at the late stages: 50 percent at the early stages (Seed and Series A), 39 percent at the growth stages (Series B and C) and 89 percent at Series D and later.

Both AgFunder and Omnivore said they continue to explore deals that push beyond traditional agrifood boundaries into adjacent sectors, highlighting the growing interconnectedness of food, agriculture, and other industries like climate tech.

Despite a decrease in the median deal sizes, they said the willingness to invest persists with lower ticket sizes.

The report also showed all parts of the supply chain received substantially less funding in 2023 than 2022, with midstream startups faring the worst with a 80 percent decrease.

EGrocery was still the most funded category, albeit with a 46 percent year-over-year drop to $420 million.

Meanwhile, agribusiness marketplaces and fintech was the second best funded category, raising $162 million, a more pronounced 62 percent decline.

Together, eGrocery and ag marketplaces and fintech accounted for 62 percent of the capital raised in 2023.

Besides, many later-stage startups raised follow-on bridge capital in 2023, resulting in smaller deals at the late stage.

This is in line with global agrifoodtech investment trends, where later-stage startups have raised down rounds and overall valuations have been severely corrected.

“The global downturn in agrifood investments is attributed to fewer and smaller deals, but the situation in India indicates a fundamental shift,

“Although the number of deals remains nearly unchanged, the investment approach in India has become more selective and merit-based, suggesting a gradual and promising revival of the sector,” said Louisa Burwood-Taylor, Managing Editor of AgFunder News.

Mark Kahn, Managing Partner, Omnivore, said that what they see unfolding before them is the return of realistic valuations that reflect the operational and financial achievements of the companies.

“From unbridled growth strategies, the focus is squarely on prioritizing building a strong business model, focusing on profitability, and creating value for customers and stakeholders,

“Like 2023, this year will be a great vintage year to invest in promising startups, especially for founders who are building differentiated and unit economically viable businesses from the beginning,” he added.

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