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| GRI-STARTUPS: GATEWAYS TO INNOVATIONS-1 | | | Dr. Parveen Kumar, Dr. D. Namgyal
Agriculture plays a vital role in India’s economy. It is the biggest employer in the country. Over 58% of the rural households depend on agriculture as their principal means of livelihood. India is the largest producer of many commodities and leading producer of many others. At 157.35 million hectares, India holds the second largest agricultural land in the world. With 20 agri-climatic regions, all 15 major climates in the world exist in India. The country also possesses 46 of the 60 soil types in the world. The food production in the country has touched an all time high. India is among the 15 leading exporters of agricultural products in the world. India is the largest producer of spices, pulses, milk, tea, cashew and jute; and the second largest producer of wheat, rice, fruits & vegetables, sugarcane, cotton and oilseeds. Despite all this, it is one of the riskiest sectors to be employed in because it is dependent on factors like weather, market fluctuations and topographical conditions which are beyond human control. Efforts are being made to give this sector and its workers a much needed boost and the biggest way of doing this is through advancements in agriculture technology. Modern techniques and methods have the potential to elevate agriculture to the next level and ease the burden on farmers. This therefore creates a huge scope for Agriculture Startups in the country.
Why Agristartups?
The agricultural sector in India employs half of our population and we are greatly dependent on the farmers and agricultural labourers to provide us with a means of sustenance. The Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales. The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. The Indian market size is huge and the problem faced by the farming community can be solved by appropriate Agristartups in relevant fields. By setting agri start ups it is possible to create multibillion dollar opportunities. Youths are three times more likely to be unemployed than adults, most youth find it unattractive profession. Agristartups can be one of the activities that can attract and retain the youth in agriculture. The ICAR is also having a scheme ‘Attracting and Retaining Youth in Agriculture (ARYA)’ to suggest ways and means to attract and retain youth in agriculture. Transformation of agriculture to agri-business through agri startups is one of the important strategies where enterprising farmers practice profitable agriculture. It will result in farming community becoming become job providers instead of job seekers. The infrastructure set up by agri start ups at the villages will definitely lead to development of these rural areas.
What constitutes a Startup?
According to the department of Industrial policy and Promotion, Ministry of Commerce, Government of India, an entity shall be considered as a startup up to five years from the date of its registration/incorporation; if its turnover for any of the financial years has not exceeded rupees 25 crores and if it is working towards innovation, development, deployment or commercialization of new products, processes or services drive by technology or intellectual property.
PHASES OF A START UP:
i. Ideation: It is an initial idea on how it would create value, an entrepreneurial ambition on a potential scalable product or service. This idea can be of one person or a vague team with no confirmed commitment or right skills to put in practice their idea
ii. Concept: It defines the mission and vision for initial few years with a strategy on how to get the product/service with some more members joining the process as cofounders or experts.
iii. Committing: This involves commitment on the part of every member with a shared vision, values and attitudes and the ability to develop the initial product/service
iv. Testing: In this phase assumptions are tested to validate solutions for further demonstrating among the initial users. The Key Performance Indicators (KPIs) are identified
v. Scaling: After the testing is done and results are satisfactory, it is the time for next stage to scale up the startup. Scaling usually involves looking for bigger markets, more customers and at the same time attracting more financial resources.
vi. Establishment: Now it is the time for establishment of the startup; achieving growth that can be expected to continue and to work for it. Once established the start up will easily attract financial and human resources. This will depend on vision, mission and commitment of the startup. At this stage, many founding members and investors can exit from the startup.
At present many Business Planning and Development Units also called as Agribusiness Incubators (ABIs) are set up across the country in different ICAR institutes and State Agricultural Universities (SAUs). Different ventures have successfully been graduated from these incubators.
START UP GRANTS: Government supports agricultural startups with a variety of modes. Technology Development Board’s grant, BIRAC’s BIG Grant, NIDHI-PRAYAS, MSME etc are few names in the list of funding agencies. The entrepreneurs either have to directly apply to these agencies or they have to apply through business incubators. The grant-in-aid is generally given for product and market development
i. Government of India: The Government of India also earmarks a certain amount of fund for supporting tech driven startups and agriculture is one focus area for this. The fund is being management by Small Industries Development Bank of India (SIDBI). SIDBI is investing this fund in SEBI registered Alternate Investment Funds (AIFs) and they have given 605.7 crores to 17 AIFs as on Jan, 2018. Apart from this, Technology Development Board also provides equity capital to agricultural startups.
ii. Incubators: Business Incubators also provide funding to startups from their pool of funds and charge equity against it. e. g Villgro, CIIE Ahmadabad etc.
iii. Angel Investors: These are individual investors who have an urge to invest in startups with their surplus money. Now they are also associated with some consortium of angel investors and collectively select as well as invest in startups. As they enter at the seed stage of the company, they bear the highest risk after the founder and hence they charge handsome amount of equity from the founder up to 30 per cent. They also bring expert mentoring to the startup along with funds.
iv. Venture Capitalists (VC): Venture Capital funds are pool of funds collected from different entities and bodies i.e., PPF, Corporate Pension Funds, Insurance Companies, Foundations, Fund of funds etc. These are being managed by General Partners. There are many Venture Capitalists firms who are providing funds in agriculture i.e., Omnivore, Aspada, Ankur Capital, Unitus Seed Funds etc.
v. Private Equity: Private equity may be termed as a more mature investment where alike any other options given above, the investors invest in mature firms and buy major stakes and control of the company. They provide working capital for its diversification, expansion, new product development, new market development etc. India Value Fund is one such firm providing private equity in Agriculture.
vi. Venture debt funding: It refers to debt funding being given to venture capital backed companies in their later stages of development. It is given to companies who have already captured a good market share, raised equity finance and are in expansion stage. Here, the companies have a decent repayment capacity and risk is also lower as compared to other stages. Many venture capital and private equity firms provide funding at this stage.
(To be continued) |
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