The Exchanges

Q Great, Mark. And on the background of Omnivore, uh, why do you think an, like, you could have done agriculture with some other verticals also. Why only agriculture? Like.

A So, so to be clear, when we, when we say that we're, we're, you know, First of all, we like to use the term Agritech because, um, you know, we're definitely not investing in, in farms, um, or in sort of traditional enterprises. Um, but when, you know, what we look at, um, when we see, uh, agriculture in India is we see. You know, core agriculture, allied, the related financing, the, the risk management, the insurances, um, all of the food processing. And when you add that all up, it's, it winds up being about 25% of the Indian economy. So we always like to say at Omnivore, we're investing in about 25% of the Indian economy, and we're investing in about 50% of the Indian population that lives on farms. So in practice, it is huge. I, I don't need to do Agri plus something else because we're talking about, you know, huge numbers of, of people and, and a massive part of, of, of what is India and, and startups and new technologies and solutions for all of that. So we look farm to fork. Uh, we look at everything that surrounds agriculture, uh, innovative food, and the rural economy. In practice, we have never struggled with, with deal flow or pipeline. We've always seen great entrepreneurs, and we've always been, uh, deluged with, with opportunities to look at. So, um, very happy for our focus, actually. I think the other thing that's probably, I think the other thing that's probably…

AI assessment note: “I don't need to do Agri plus something else because we're talking about”

Q The end customer in most of the agritech startups is the farmer or the consumer. In some cases, the, the distributors or the retailers as well. Am I right, Mark?

A I mean, it, it really depends. You see, you see many startups that we would characterize as, as agritech startups that are B to B. Right? So a terrific example of that is one of our portfolio companies, Intello Labs. Intello Labs is building, um, the world's largest, um, fresh produce quality system. Um, they're, they're essentially using AI and ML to, to develop a digital quality standard in fruits and vegetables. Most of their customers are large retailers. Um, or food processing companies, or food service companies, and, and so, um, so Agritech is about farmers, but it's about much more than farmers. It's about the entire food system that, that we see all around us. Uh, you definitely have, uh, many startups for, that are focused on farmers. Uh, you know, one of our better known ones is Dehat. Dehat has more than three lakh farmers Uh, on a platform, uh, in, in Eastern India and Bihar UP, Jharkhand and Orisha, uh, Odisha. Um, and, and they are engaging with those farmers and helping them to access better inputs and, um, sell at higher prices and, uh, secure lower cost finance, all coupled with farm advisory. Um, but I think it varies. You see B to B, you see B to F, right? Business to business. You see business to farmer. You see B to B to F, uh, some startups that, that Reach huge numbers of farmers, but do so by selling to other businesses that then in turn, um, give them …

AI assessment note: “it really depends. You see, you see many startups that we would characterize as, as agritech startups that are B to B.”

Q Do you also work with the Indian government? Because a lot of agriculture initiatives are taken by the government.

A We, we do frequently, we do frequently work with the government. We certainly, um, stay in close touch with them. Um, we're involved in many, we're, we've done work with Nithya Yog in the past. Um, we're very active in FIKI and CII. Um, Which engages from a policy perspective with the government. We're, we're in touch with many state governments. So, so yes, we, we do have to stay, um, kind of closely in tune with what the government is doing in agriculture. Um, but you also have to appreciate that the Indian government is not active in all aspects of agriculture. They are primarily active in, in grains, much more so than in horticulture. Um, they are Active in fertilizer and sugar. And then when you move away from that and you move towards, um, you know, when you move towards towards horticulture, livestock, um, aquaculture, there are many spaces that they, uh, I don't want to say they ignore, but they are much less actively engaged with.

AI assessment note: “We, we do frequently, we do frequently work with the government.”

Q So, uh, from the outset, it looks very attractive to be in agritech. So, for most of our listeners, you know, uh, agritech seems to be most related to farmers. Can you describe in your definition what actually is agritech? Who are the various stake players in agritech?

A Sure. Um, so, You know, we, we like to talk about, um, it's gonna sound, it's gonna sound like the beginning of a long rant, but we talk about nine core themes in that, that, that we see as, as defining agritech, and I'm gonna kind of summarize them. So there are four of them that have seen the most amount of investment over the course of the last five years, um, and those are farmer platforms, Um, B to B agri marketplaces, rural fintech, and farm to consumer, uh, brands. When we say farmer platforms, we're talking about things like Dehat or Agrostar. When we're talking about B to B agri marketplaces, we're thinking of things like, uh, like Ninjakart, Farmly, um, Clover, When we're talking about, um, rural fintech, we mean things like samunati or gram cover, and when we're talking about farm to consumer brands, um, it could be things that are more FMCG oriented, like why cook, but also licious and farm to home and fresh to home. So those are the, the biggest themes in, um, in agritech, uh, in terms of where funding has gone, and you can understand how Um, those themes fit well into generalist VC theses, right? Farmer platforms are, are what they sound like. They're platforms. They, they access farmers directly, and they, you know, help them buy inputs, um, support their sale of outputs, uh, provide advisory, provide finance. B to B agri marketplaces, right, are, are marketplace…

AI assessment note: “we talk about nine core themes in that, that, that we see as, as defining agritech”

Q So one of the points is, how are, how is Omni helping its portfolio companies to grow and shape the future of agriculture in India? What's your help besides the chapter?

A So look, as I, as I've mentioned, we've built a team of, of real experts who all have background in, in agriculture, agribusiness, food processing, rural development. Um, so when we, you know, and examples of that are our venture partner, S. Nagarajan, Naga as we call him, who used to run Mother Dairy. We have Rahim Roy, who's our partner in Chennai, who used to be with the UN's International Fund for Agricultural Development. Abhilash Sethi, who joined us recently from Mahindra, where he helped set up their precision farming division. So, so the omnivore team comes from the space, and so when we engage with agritech startups, first of all, we understand them. We understand their challenges. We understand their business models in a way that that generalist VCs take longer To, to kind of get up that curve. Generalist VCs can add a lot of value to agritech startups. Um, we think when we work together with them collectively, we create much more value because we come with that subject matter expertise. We understand who they're sourcing from, who they're selling to, and we can help them tremendously with, you know, improving their, their strategies. Um, You know, with a tremendous amount of business development, um, with linking with the right players in the ecosystem, right? I think it's the same way that, that many generalist VCs have incredible linkages, um, in, in the global di…

AI assessment note: “business development is the single largest value add that we bring to our portfolio.”

Q Can you elaborate more on the investments you have made, Mark, on all the companies, and, and what's your thesis on, let's say, a few of the companies?

A Uh, sure, sure. So, um, you know, one of our, one of our better known investments is, uh, is Stellapps. Uh, that was an investment we made in 2013. Um, it was a, uh, a really strong team. Uh, five senior folks at Wipro had come together and had decided to build the first dairy, um, focused startup in India, a dairy technology focused startup, and their logic was very simple. Uh, dairy is four percent of India's GDP. Right? It's about, uh, it's a huge part of, of the economy. India's the world's largest milk producer. Uh, there was very little technology adoption in the dairy industry, and so Stellapps went at the process of building a, a, you know, an application layer across dairy using IoT. And, uh, it's been, uh, it's been a great journey. The, the, the company now has, you know, billions of dollars of milk flowing through the, uh, network of digitized collection centers that they've built. Uh, they've been able to provide financial services and market linkages, uh, to those farmers. They're able to drive transparency and quality and food safety and traceability. Um, You know, that's, that's just one portfolio company of ours, but it's, it's, you know, emblematic of, of where we saw an incredible opportunity to deploy technology in a space that had never seen the application of technology before, and that's a lot of what we see in agritech, is these startups are leveraging A…

AI assessment note: “one of our better known investments is, uh, is Stellapps.”

Q So what has changed, you know, in the lives of the farmers since Omnivore debuted in 2011?

A So I think the farmers that have worked with our portfolio companies, um, have been able to really transform the, the, the profitability of their farms. You know, at Omnivore, we, we have a theory of change that, that governs what we invest in. We always look for One of three things in every startup that we invest in. They should be either improving farm, farm profitability, which is very different from farm productivity or farm yield. We're always looking at the bottom line of the farmer as if they have an income statement for their farm. So you can improve their profitability by increasing the price that they sell at, by lowering their costs, by lowering their cost of finance, um, Many different ways by, by raising their yields. We look at startups that are increasing agricultural sustainability. And finally, we look at startups that are boosting the resilience of, of farmers. Um, you know, whether it's stronger market linkages that take the, the risk out of farming or insurance or FinTech, um, You know, we look across all of these spaces, and, and when we see what's happened to farmers that have engaged with, with our portfolio companies, we're able to see this improvement in profitability, resilience, and, and sustainability. You know, um, a typical farmer that works with Dehat, uh, in, in, you know, of the three lakh farmers they have on their network right now, um, they a…

AI assessment note: “they're increasing the profitability of the farmers on the network anywhere from 50 to a hundred percent”

Q So have you figured out any mass distribution channel for your startups?

A So every again, it depends on generalizing Indian farmers is like generalizing urban consumers in India. Right? Um, you have to build distribution channels, and some exist, right? There are, there are some startups that are targeting traditional distribution channels, and some startups are building their own, right? We invested in Mitra, which has, has now been acquired by Mahindra, right? And they built their own distribution system for, for selling automatic precision sprayers, uh, for Indian horticulture. Um, Dehat, Right, has their dihat centers, hundreds of them across UP, Bihar, Odisha, and Jharkhand. There are dealers and distributors in the traditional trade, but they're not great at dealing with innovative products. So most agritech startups that are looking at doing direct farmer sales have to build a channel, and they probably want to build an innovative channel because the traditional channel struggles with innovative products.

AI assessment note: “most agritech startups that are looking at doing direct farmer sales have to build a channel”

Q situation has completely changed what was looking three months ago. Everybody was making their goals and plans for 2020, including, you know, every stage of the startups. With tough times like COVID 19, when startups in tier one cities are finding ways to cope up, how is agriculture the backbone of the country riding through these tough times? And what are the agri-tech startups still are able to serve them?

A So, so what I would say is that agriculture is on a slightly stronger footing than many other spaces. Um, you know, it's certainly been a difficult week. Um, food supplies have been disrupted. Um, you know, the police have been especially, uh, overzealous about maintaining the curfew. To be clear, um, I think they, they just, uh, are doing what they thought they were supposed to do. Um, I think the good news is, is sitting here later in this week, um, permits are now being given to allow food distribution, um, food processing to continue, uh, unimpeded. And I think agri, as agri and food as a space, um, while being disrupted and struggling like everyone is in these times of COVID 19 is on a slightly stronger footing. I don't know if you've noticed, but Pretty much everyone has had to go food shopping this week. Right, and one of the only things that you can go out and do and still shop for is food. Farmers are going to continue to farm, consumers are going to continue to eat, and agriculture is going to continue marching on because it has to or everyone starves. Um, so as a result, I think agritech startups over the course of the next year are relatively well positioned, you know, versus many other sectors Uh, to continue growing, um, to finding solutions to ensure that agri-value chains continue despite all of the adversities, um, and helping people get through this very diffi…

AI assessment note: “agritech startups over the course of the next year are relatively well positioned”

Q A lot of big names are now investing in Agritech, including Tiger Global and Bloom. What is the thesis behind the shift?

A You know, I, I think, um, I've seen this shift, uh, in a huge way in the last few years. Um, we've done two deals with Bloom. We're doing a third right now. We've done deals with Sequoia, with Excel, with Mayfield, with Nexus, with Kalari, um, There definitely has been a shift. Um, I have a theory about it, which is, um, I mean, there's, there's the joke, and then there's the actual point. The joke is, I joke that Indian VCs have, have discovered Maharat, right? They've rediscovered their own country over the last few years, and recognized that there is more to startups than just serving the needs of the top 25% of urban Indians. I think more seriously, um, I think in 2015 and 16, there was a point of exhaustion that was reached in B to C startup investing. People had made multiple overlapping bets in Uh, restaurant platforms, um, you know, food delivery, e-commerce, all of these, these spaces began to get a bit saturated, and if you see what happened at that time, all of a sudden you saw the birth of B to B, um, focused, um, SME startups, right? Players like Uran, Ah, Jumbo Tail, you know, and others of that, of that ilk, and I think Indian, because of that pivot, you know, forget about the pivot of startups, the pivot of VCs, It's not just looking at B to C, but also looking more seriously at B to B and specifically B to B focused on SMEs opened up the eyes of the venture com…

AI assessment note: “opened up the eyes of the venture community to the fact that... a quarter of the Indian economy is related to agriculture”

Q So everybody talks about, you know, the market size in agritech, which is, I believe, one of the largest, larger than e-commerce has ever fathomed. But one of the challenges investing in agritech startups, what is the incubation period? So think is it longer than the normal tech businesses or e-commerce businesses? And what are the challenges your portfolio companies face on ground, closely working with the various stakeholders?

A So look, I think it depends whether you're a B to B oriented or a, a business to farmer, uh, oriented, you know, B to F as we like to say, um, oriented startup. So if you are B to F, if you are directly engaging with farmers, right, you have to overcome the challenge of the fact that, you know, a lot of farmers are, are, you know, not very wealthy. Obviously it's important to understand in, in agritech that, um, Farmers can be segmented just like any group of consumers in the same way that most urban, um, B to C startups didn't focus on, you know, um, the urban poor, right? They focused, you know, initially on the top 10%, then the top 20%, then into the middle class, right? Um, Agritech startups are usually focused on the top 20% of Indian farmers that own about half of the land in the country. And are more progressive, and have surplus income, and can invest. But anytime you're doing direct to farmer engagement, right, you have to figure out, um, you know, how you're going to do that. Is it a purely digital engagement, or are you going to have to have an on-the-ground component? And most people have to have an on-the-ground component. So figuring out how to scale that in a cost-effective way is, is critically important. But it's also important to, to figure out How to leverage digital technologies to facilitate that onboarding and lower the cost of it. For B to B players, um,…

AI assessment note: “anytime you're doing direct to farmer engagement... are you going to have to have an on-the-ground component”