agritechs: Agritech startups trim teams, rework business models in funding winter

Industry executives and investors told ET that amid business model challenges and an overall squeeze on funding for privately-held tech companies, Aguri is on the list of companies that are downsizing their teams. Tech startups have joined.

Temasek-backed agriculture marketplace DeHaat laid off about 5% of its workforce last year, while other venture capital-backed firms including Bijak, Captain Fresh, BharatAgri and Gramophone have also recently laid off, sources said. A source told ET.

Indore-based Gramophone laid off about 75 employees in November-December last year to focus on achieving profitability in the next few quarters, said co-founder and CEO Tauseef Khan. told ET.

The company was in expansion mode after raising $10 million from investors including Z3Partners and Info Edge in October 2021. We currently have about 450 employees.

Captain Fresh, a meat farm-to-retail platform backed by Tiger Global, has been trying to shift its operations from the domestic market to international markets since last April.

The exercise has put 120 staff out of work, founder and CEO Utham Gowda told ET. The company’s valuation more than doubled to $500 million in March 2022 after raising $50 million.

BharatAgri, which offers AI-based services to farmers on a paid subscription basis, laid off 40 employees in August. The Bangalore-based company, which currently has 52 employees, attributes the layoffs to changes in how it sells its products and services.Also read: Layoffs spread across Dunzo, ShareChat, Rebel Foods and agritech companies

DeHaat said fewer than 100 staff members were laid off last year and all layoffs were based on performance and cultural fit, but Bijak, which also cut staff, did not respond to ET’s request for comment. rice field.

The previously unreported layoffs come after two years of intense fundraising activity. About 63% of the venture capital invested in agritech in India so far has been deployed in the past two years, according to a December report by investment bank Avendus Capital.

There will be $1.22 billion invested in 45 agtech startups in 2021, compared to nearly $796 million invested in 30 agtech startups in 2022.

Why these layoffs?

After winning investor capital, agritech start-ups stepped up their hiring efforts, but these companies are now streamlining their operations.

For example, BharatAgri had a model where there was a sales team that spoke directly to users to sell subscriptions and products. “Over time, our products have evolved to allow users to purchase services and products without having to make a phone call,” founder and CEO Siddharth Dialani told his ET, explaining the reasons for the layoffs. explained.

The Bangalore-based company last raised funding in September 2021. He raised $6.5 million in a round led by Omnivore, with participation from India Quotient and 021 Capital.

Gramophone’s Khan said, “The current environment is a boon for the agritech sector as it clears up a lot of the disruption in the sector and, without significant growth pressure, many companies will be stronger with better unit economics. I believe there is.

“Most companies have already taken appropriate steps over the last two quarters and we expect to start seeing results this year,” he added.

Business model challenges

“Broadly, we are back to pre-pandemic 2019 levels, including seed rounds of $2 million to $3 million. When asked about the current funding environment in the sector, he said: In other rounds, pre-money valuations are down 33% from their 2021 peak, he added.

Startups in the space are still finding the first challenges of their business models, according to industry insiders, investing aggressively to grow their gross merchandise value (GMV) without an aggressive focus on gross margins. Some companies have succumbed to house-led pressure.

GMV is the total value of goods sold by a company, and gross profit is the amount left over after deducting the cost of goods sold from net sales.

“When it comes to the business model that works for agritech, the input linkage works very well and the output linkage works well for fresh produce. It works well,” Khan said. “The business model of ‘buying vegetables from farmers and selling them to Kirana’ is completely dead.”

Fundraising in the past 68 months has been extremely difficult. His $60 million that DeHaat raised in December took a long time to complete, a source told ET.

“We can confirm that DeHaat’s current valuation after its Series E funding is between $700 million and $800 million, compared to its last funding round less than 13 months ago. It’s about 80% overpriced,” a company spokesperson told ET.

DeHaat is one of the top agritech startups in terms of revenue, alongside Waycool Foods & Products which claimed to record revenue of Rs 1.08 crore in the fiscal year ending March 2022 (FY22).

Also read: Looking back at 2022: Cash-strapped start-ups lay off nearly 18,000 employees

Based in Patna and Gurgaon, DeHaat’s revenue increased 3.6 times to reach Rs 1,274 thousand in fiscal 2022, according to a spokesperson.

“We are on track to more than double this number in FY23…More than 2.5 million farmers and 15,000 DeHaat centers are on the expected exponential growth trajectory by the end of FY23, with 22 As a well-capitalized organization, we aim to continue this growth path in FY24,” the spokesperson added.

DeHaat said it had hired 200 people by last year.

“There’s been a lot of growth lately, so companies have moved on and hired more people…because now not everyone who’s hired performs at the same level.” , just like big companies, hire a little extra and it’s great,” said Akanksha Malik, founder of Growth360, which helps startups recruit mid- to senior-level talent.

Bijak, which is backed by Omidyar Network India and Sequoia Surge, has also recently tightened its balance on marketing and labor costs, multiple sources told ET.

Three industry insiders have confirmed that Bijak has laid off a number of its employees. ET was unable to confirm the exact number of layoffs.

But Bijak investor Omnivore’s Kahn denied those allegations, telling ET that Bijak has years of funding runway left and no reason to cut its workforce. said.

The company operates a B2B agricultural commodity trading marketplace for agricultural suppliers and buyers. This is a somewhat crowded market within agritech, competing with the likes of Lightrock India-backed WayCool Foods and Products, Quona Capital-backed Arya, Prosus-backed Vegrow and Walmart-backed Ninjacart.

“There is no shortage of capital to invest in the sector … but the question is what price investors are willing to pay. Venture partner and ThinkAg co-founder Hemendra Mathur told ET.

(Graphics and illustrations by Rahul Awasthi)