Caspian Equity’s Agriculture-focused fund to target pre-Series A ventures

Caspian Equity has launched Leap for Agriculture Fund (LEAF) with a focus on investing in early-stage revenue-generating Food & Agri start-ups. The fund, which has a size of Rs 52 crore, will invest in up to 12 seed and pre-series A start-ups with ticket sizes ranging from ₹1 crore to ₹5 crores.

The Fund aims to combine the access to equity funds in the critical years of transaction and scaling up of start-up operations with close operational support and oversight on governance structures. The intention is to invest and support start-ups that contribute significantly to improving the agricultural value chain on the upstream segment and address pain points across different elements and stakeholders of the agri value chain. We also plan to tap into potential synergies and integration opportunities between the portfolio companies and encourage collaboration and long-term partnerships.

The need for the fund

Between 2018 and 2022, $11.1 billion was invested in food and agriculture in India. Of this, downstream businesses captured the major share with over $9.5 billion of investments. Upstream companies, which solve structural issues in the sector, witnessed inflows of just $1.6 billion, as this segment requires domain expertise and grassroot footprint to be successful. While the investments in upstream segment have been improving over time with the increased participation from generalist VCs, most such investments have been into growth- and late-stage businesses, which have grown from $0.85 Bn in FY2018 to $4.2 Bn in FY2022. Investments in the early stage have only grown from $0.14 Bn in FY2018 to $0.40 Bn in FY2022. While incubators and accelerators support pre-revenue start-ups, institutional capital becomes available only at the growth and late stages. Caspian LEAF is well-positioned to bridge the gap between pre-revenue stage and late stage.

The target segment

Broadly, the entry criteria of potential investee companies will be based on their ability to address production side challenges and improve realisation at the farmgate level. The potential investee companies will be supporting sustainable and resilient practices, enabling technologies and better agri-infrastructure. Moreover, they will be high-impact, close to farmers, providing solutions to improve efficiency and eventually add value to producers. Some of the start-ups in our pipeline include companies that aim to improve input use efficiency, reduce information asymmetry, reduce the dependence on labourers and associated costs through farm mechanisation, processing facilities at the farmgate level improving the commercial value of the produce, addressing potential frauds and wastages in supply chain by leveraging technology and support additional sources of income for farmers and producers through improved productivity and better value realisation in livestock farming.

The changing agri-tech scenario and the challenges

The Agri-tech Landscape report of ThinkAg has brought home the fact that under 10 per cent of farmers have seen any significant positive impact in their income and about 44 per cent see minor improvements from adopting agtech solutions. This indicates the long road ahead for agri-tech firms in India. Issues such as low knowledge of digital technologies, low trust element, capital constraints for farmers and language barriers are key challenges for farmers in accessing agri-tech solutions and the scalability of early-stage start-ups in the sector. The fund plans to look at companies that work towards solving systemic issues in the agri-value chain and are mindful of the above-mentioned challenges in the sector.

- Emmanuel Murray, Investment Director, Caspian