'We Are in Third Wave of Agritech With Lot More Focus on Real Breakthrough Innovation' In a recent conversation with Entrepreneur India, Mark Kahn, Managing Partner, Omnivore talked about the changing landscape of Agritech and where the venture firm is eyeing to deploy its third fund. Edited excerpts.
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Ever since they entered the space in 2010, the Agritech start-ups have seen a massive growth. However, the next set of start-ups in the space will be the ones with a lot more focus on real breakthrough innovation, according to Mark Kahn, Managing Partner, Omnivore, an Agritech focus fund. "We are in the third wave of Agritech. I think the first wave was from 2010 to 2017, where it was a very idiosyncratic category, where we had entrepreneurs who had visions of building new technologies without really much of a theme but across the board. So there were start-ups like Stellapps building for the dairy sector, Ecozen building hardware, Eruvaka which we've since exited. It was a very small ecosystem, really, until about 2017."
After that there was second wave of Agritech for about five years, which was really dominated by tech enabled businesses, focused on platforms and marketplaces trying to use a startup approach to growth to capture the hyper decentralized farm ecosystem, usually with honestly fairly simple business, building marketplaces for the inputs, marketplaces for the outputs, a Fintech layer for financing.
In those five years, a bunch of companies raised a ton of money. And then 2022 was the beginning of another change. During that time, we saw a number of companies reach scale like DeHaat, Arya, and from players outside of our portfolio, like NinjaKart. But really all of the tech enabled putting a digital layer of payments and information layer over again this hyper decentralized farm sector, mostly focused on farmers sometimes focused on retailers on Kiranas. But ultimately very similar business models."
Now we're seeing a different kind of entrepreneurs come into the space and different kinds of problems being tackled. There's a lot more science, deeptech, focus on real breakthrough innovation, as opposed to just digitizing trade and commerce. So, there would be much less of a focus on GMV, the vanity metric of the last era, and much more I would say on deeper use cases.
Betting on rural fintech
Kahn tells us that Omnivore's recent closure of funds at $150 million in June this year, will see deployment in climate, deep tech, and agri food life sciences, said Kahn. "We are very interested in climate, deep tech, as it relates to agriculture, food and rural. We're very interested in agri food life sciences-people who are working on biological solutions for crop inputs, on bio factories and bio refineries to create more value added products out of the farm ecosystem, and even out of foreign waste. We're also interested in sustainable materials, and novel ingredients."
Besides this, the venture capital firm is also doing a lot in rural fintech. "We're taking two or three bets in that space right now that will be announced over the next few months, because we believe that's a space that has been undercapitalized. There's been a lot of urban fintech,, there's been a lot of agri platforms and marketplaces, but real financial solutions for the rural sectors, there haven't been many," he shares.
Funding scenario getting back to normal
Kahn believes that winter funding is coming to an end. "We are seeing a number of our portfolio companies now raising series A and B. It's not easy. It's not 2021. But it's not 2015 either. I feel like we're getting back to normal. The last normal year was really 2018-19. And I would say we're coming back to that."
When quizzed if early stage investing is riskier than late stage investing, Kahn says it is more of a risk when the risk is not priced in. "In theory, if you have a diversified portfolio of early stage investments and you're coming in at a low valuation that's defined as the diversification offset and the pricing, the risk. The problem in 2021 is people coming into deals and valuations that didn't reflect the release date. And that creates problems later on."