This venture capital firm connects investors and rural farmers in India — and not a moment too soon
It didn’t take long before Mark Kahn figured it out.
Fresh out of Harvard Business School, Kahn had landed a job with Syngenta, a leading agribusiness company in Switzerland. He then moved two years later to India where he oversaw strategy and business development at Godrej Agrovet, another leading agribusiness company.
It was there that he saw that many early stage agribusiness companies in need of funding were being overlooked by mainstream venture capital firms. Kahn decided to take a risk, and with his partner Jinesh Shah, launched Omnivore, their own agritech-focused venture capital firm in 2011.
“[Agritech] barely existed when we started in India,” Kahn says. “I recognized that the Indian mainstream venture ecosystem was really only focused on startups that were addressing the needs of the top-core tier of the Indian urban population… We‘d like to think that we helped catalyze it.”
Omnivore was born with a mission to fund the startups that are building technologies to help make Indian farmers self-reliant and farming practices climate-resilient. Widely considered the pioneer of agritech investing in India, Omnivore is now the largest agritech-focused venture capital firm in the country, with over 20 startups in its portfolio.
An emerging market
According to NASSCOM’s latest report, of the world’s roughly 3100 agritech startups, more than 450 are in India. The growth rate of the sector has soared to 25% per year and, in 2019 alone, raised more than $248 million in funding, an astounding 300% higher compared to the year before. In all, India added over 1300 startups, including 7 unicorns in 2019, making the country the third biggest startup ecosystem in the world behind China and the US.
Omnivore is now the largest agritech-focused venture capital firm in the country, with over 20 startups in its portfolio.
“In many of the developing markets, there are tremendous opportunities because they are in some ways leapfrogging development and moving ahead very rapidly,” says Stephen Heintz, president of the Rockefeller Brothers Fund, a sister foundation of the Rockefeller Foundation, one of Omnivore’s investors. “In India, we think that sustainable agriculture and sustainable water use are hugely important issues, and are ways of both contributing to a more sustainable future, and finding profitable investments.”
In a nutshell, the idea behind agritech is simple: increase efficiency and sustainability on the ground through updated technology in the office. It helps farmers boost their yields, even in the face of climate change, and thus become more profitable and greener.
Overburdened farmers
Both are sorely needed.
Rural farmers, many of whom are already living in extreme poverty, are dependent on favorable weather for their livelihoods. Unlike the United States, where only 11% of the population rely on the farming business, a threat to farming in India would be disastrous. Nearly 58% of its 1.4 billion people depend on agriculture as their primary source of income.
But droughts, floods, heat waves and recent plagues of crop-eating locusts — by-products of human induced climate change — are threatening their very existence.
For some farmers, it’s a life or death situation. Roughly 10,500 farmers resort to suicide a year.
To make matters worse, agriculture globally contributes approximately 23% of heat-causing gases that contribute to the greenhouse effect that leads to the changing climate, according to an IPCC report. This creates a vicious feedback loop — unsustainable farming practices compound the effects of climate change, which then disproportionately affects the farmers themselves.
For some farmers, it’s a life or death situation. According to the most recent Accidental Deaths and Suicides in India report, roughly 10,500 farmers resort to suicide a year.
A green test
Given the sense of urgency, in choosing its portfolio companies, Omnivore determines if the company passes its “impact filter.”
“For the most part,” Kahn says, “We’re a financial-first impact fund, meaning that we’re targeting market-rate returns. But right up front we look and see if a company fits within our impact thesis. Is this company working on problems that fit within our theory of change?”
In particular, Omnivore is looking for companies that are dedicated to improving three things: farmer profitability, farmer resilience, and agricultural sustainability in India.
“And if something has nothing to do with any of those things, then we don’t do it,” Kahn says.
One company that did pass the test was Clover Ventures. They are building India’s first branded fresh produce supply chain, adapted to the challenge of climate change, by creating a network of greenhouses, many of which already exist but are woefully underutilized.
In particular, Omnivore is looking for companies that are dedicated to improving three things: farmer profitability, farmer resilience, and agricultural sustainability in India.
Clover helps farmers with standardizing yields, reducing waste of perishable products, improving productivity, and ensuring consistency in the product. By using the greenhouses, farmers can grow fresh produce in a controlled micro-environment, thus ensuring reliable year-round produce in a world plagued by rising temperatures and erratic weather.
“The entire focus on greenhouse farming is around environmental sustainability…[issues] like requiring less land, water, and chemicals,” says Avinash BR, co-founder of Clover. “We are trying to largely make cultivation weather/climate-neutral and thereby ensure there’s no volatility in production or quality.”
Optimistic future
In a relatively short period of time, Omnivore has bridged the gap between big money from the developed world to the farmer in rural India.
It all started with Kahn’s ability to see a need.
Named after “The Omnivore’s Dilemma,” the best-selling book that examined how advancements in agricultural technology have affected the eating habits of the modern-day American, Omnivore received early funding from Kahn’s former company Godrej.
Their first fund in 2012 and 2013 raised $40 million exclusively from domestic Indian investors. The Indian government also played a significant role in jump-starting agribusinesses in general and Omnivore in particular. Under the Startup India program, the government created the Fund of Funds for Startups, that injected roughly $1.3 billion of funding. One of those recipients was Omnivore.
In 2019, Omnivore successfully secured its second fund of $97 million, and the Rockefeller Foundation was among its limited partners. It also featured other names like BASF Venture Capital, the U.K. government’s development financial institution CDC Group, Dutch development bank FMO, the Swiss Investment Fund for Emerging Markets (SIFEM), Japan’s Mistletoe, and German fund manager Sonanz.
“So Rockefeller is investing in Omnivore, Omnivore is investing in startups, startups are benefiting farmers,” Kahn explains. “Everyone’s kind of aligned here. The nexus between the small farmer and Rockefeller is an agritech startup.”
Kahn is pleased with the rate of return that Omnivore is getting from its portfolio companies, many of which are now making profits. “We’re aiming for market rate returns which average 20%,” he says.
“There’s a growing recognition by the government and by large corporates in India that agritech is critical to advance the agricultural ecosystem and improve conditions for Indian farmers”
“Today, you have, I would say, on average, better founders starting agritech companies, you have much more interest from mainstream generalist VCs, from impact VCs, and from strategics,” Kahn says. “There’s a growing recognition by the government and by large corporates in India that agritech is critical to advance the agricultural ecosystem and improve conditions for Indian farmers.”
Kahn readily admits that much work remains to be done.
In its recently published Vision 2030, Omnivore’s ten-year vision is bold and calls for the complete revolution of the Indian agricultural industry – with agritech leading the change, “driving a transformation .. towards profitability, resilience, nutrition, and sustainability.”
“Agritech has barely scratched the surface of the agricultural economy,” Kahn says. “When we see that 50% plus of Indian farmers are directly linked to agritech companies, then we can say we’ve arrived.”
Right now it’s still very early in the story.
