Why TDK Ventures Invested in Fasal
Siddharth Mehta, Investment Director
TDK Ventures
Challenges of Agriculture in the Modern World
Human society and progress owes its very origins to the science and art of agriculture. More than 10,000 years ago, the ability to successfully grow crops and raise livestock paved the way for humans to give up their nomadic roots and build permanent settlements. Surplus production supported previously impossible population growth. The rest, quite literally, is history — with agriculture being just as important today as it was then, providing most of the world’s food as well as textile fabrics supply [1].
Given how the agricultural sector is linked with humanity’s progress, unsurprisingly the industry as a whole faces challenges — both technical and otherwise that often mirror other aspects of societal development. In particular, modern agriculture faces issues of:
▪ Increasing yield and production efficiency to keep pace with increasing populations
▪ Increasing costs associated with labor and infrastructure technology
▪ Adverse consequences of climate change on crop growth and overall operation
▪ Inconsistent availability and latent adoption of modern technical solutions due to caution and/or cost
Worldwide, the agricultural market represents a more than $3.5-trillion value to humanity, which is expected to grow to almost $5-trillion by 2028 [3], a testament to its role in our everyday lives. Such challenges represent a resounding demand for innovation and a transformation in agricultural technology to ensure a key backbone industry of our world continues to progress and grow as we ourselves do.
Demand for AgriTech Innovation: India
There is perhaps no better example of such an AgriTech market ripe for innovation than that of India. In India, the under tones of global challenges present themselves locally as:
- Low-yield farming practices that are 35–50% below global need benchmarks
- Low levels of modern infrastructure and mechanization of farms (50% nationally, compared to 90% in more developed markets)
- Limited access to financing and credit to support investment, improvement, or expansion of farming operations
- Mismatch of value created and value delivered (due to things like incomplete demand clarity for the market, buyer/produce misfit, emotion-driven harvesting, etc.)
Many of these adversities can be partially attributed to the rural and disparate nature of farming in the region, as well as the small size of most farms, which is just over 1 hectare or approximately 2.5 acres, compared to the average in the US, which is about 180 hectares or approximately 445 acres. The small nature of such operations usually corresponds with limited capital through which to invest in infrastructure and modernization, particularly if there is limited access to financial backing. Limited infrastructure and support then limits the opportunity for numerically backed methods to improve productivity based on trends. In most cases, crop growth is driven by wisdom-based practices not necessarily linked to current economic or environmental trends, thus inconsistent or lower crop yield and perhaps of the wrong crop at the wrong time [4].
There are other environmental and economic factors as well to consider. Indian agriculture utilizes an astounding 85% of the country’s freshwater resources and causes 20% of the national CO2 emissions while utilizing 60% of the Indian land area. This represents a significant burden on national resources, and has motivated government and policy makers to enact policy in support of the agricultural sector and to improve conditions. But with increasingly adverse implications of climate change and skyrocketing labor and operational costs, progress is difficult under modern conditions.
These challenges seem daunting, but represent a market primed for innovation in which the right logical solution could make a rapid and meaningful difference.
Key Insights & Pathway Forward
While they seem daunting, these challenges actually paint a picture for exactly what solution could make all the difference. The right innovation in India would:
▪ Be simple and scalable to any size, priming easy adoption, including being a full-stack straightforward solution.
▪ Build trust with the farmer.
▪ Leverage the penetration of internet in rural India to drive integration and growth
▪ Utilize and accentuate the distributed economy of thousands of smaller farms to coordinate production and distribution to improve supply to market, and better suited for improved value return
This would not be a market-only solution, simply connecting buyers and sellers, but a more comprehensive AgriTech support that is tractable for a small farming operation to implement with a minimal learning curve, and that can help provide simple actionable objectives to improve crop growth, of the right crop, at the right time, and connected with the right market.
As part of our investment proposition at TDK Ventures, we look for Agri-deep-tech solutions with high gross margins; strong unit economics with a recurring annual SaaS cost of <$100; and a strong benefit-to-cost ratio implying capex breakeven within one crop season. In short, we are determined to invest in full-stack Agri solutions providing precision-farming answers and output market linkages, which are critical to farmers’ needs and enables farmers to earn greater profits.
Fasal: A King of the Hill in the making with deep roots
Precision Horticulture startup Fasal represents a revolutionary path forward bringing a comprehensive solution that, we believe, is perfect to change the game in Indian agriculture. Fasal was able to isolate a key catalyst: the plummeting cost of sensor technologies. It then had the idea of leveraging sensor data in conjunction with the distributed “shared” market economy of India in order to disrupt the prohibitive cost of precision-farming tech, and bring optimized production and unprecedented value to sellers and buyers alike.
The Fasal solution is tailor-made for the Indian farming ecosystem. Their 3-tiered platform consists of:
(1) hardware sensors, which monitor the agriculture environment including weather, soil moisture, pests, etc.,
(2) advanced software analytics driven by advanced AI, which interpret sensor data and provide farm, crop and crop-stage specific actionable insights actionable insights to optimize yield and minimize consumable use,
(3) integrated business analytics, which help sell produce at the best price through its B2B brand Fasal Fresh.
Together, these aspects help to optimize yield, improve revenue, minimize cost, and do so in a way affordable to the individual farmer — a win across the board.
Their strength is in their simplicity and affordability. From a farmer’s perspective, he can affordably implement Fasal sensors and download the app — and that’s it! After that Fasal handles the rest. Sensors measure key characteristics of the environment, including weather, soil moisture levels, sun exposure, and more, which are then uploaded into Fasal’s machine-learning models, with a unique model specifically for each one of their crops. The app then provides the farmer with simple actions and suggests to follow on things like when and how much to irrigate, when and how much to apply pesticides, and other operational guidance. The predictiveness of the models can also suggest any potential disease, expected yield, and the best place to sell.
What’s phenomenal is that many farmers already know Fasal and have seen the benefit. The Fasal team — led by co-founding engineers Ananda Verma and Shailendra Tiwari — have a deep and personal understanding of farming in India having been raised in the industry. They know how important farming is, why it is important, and who finds it important. They have been on the ground implementing their technology across the region and have built trust with their customers, which has grown tremendously, as they have demonstrated:
▪ 15–30% increased production
▪ Upto 20% reduction in Input Costs
▪ 40–60% less water consumption
▪ 54,965 metric tonne of GHG emissions avoided (as per Apr 2023)
▪ Traceability of over half a billion tonne of top quality produce
In short, Fasal has provided a simple solution that works for those that need it and brings improved product, improved value, and better sustainability. It is really a win for everyone.
Why is TDK Ventures is Investing in Fasal
As a human, this strikes a chord as to what true progress for a better society looks like. We all need — and should care about — Agriculture. AgriTech has key demand signals that are ripe for innovation and that modern technology and creativity can provide. Following key facts are known to us:
• Fragmented Agri market in India with small farm sizes (~1 ha v/s 180 ha in the US), low productivity per ha and low dollar value of output per agricultural employee.
• Commoditization and reduction in price of sensors and IoT devices (~25% fall in last 5 years and ~45% fall in last 10 years) and strong internet penetration (41%) in rural India driving technology adoption.
• Climate change negatively impacting quality and predictability of produce.
• Farmers are most concerned about quality and quantity of yield and selling the produce at best price. Thereby a full stack solution providing precision farming and market linkage will be sticky.
There are still uncertainties in the Agri sector, namely:
• Agri is a sensitive subject as a large segment (~50%) of population’s livelihood depends on it. Thereby government policies can be dynamic, protectionist, and sometimes even irrational.
• Building trust is crucial to acquire farmer as a customer and with deep tech solutions directly impacting their family income, they can big hit or a big miss.
We favored solutions with high gross margins; strong unit economics (LTV/CAC>3) and the recurring annual SaaS cost <$100. Solutions providing strong benefit to cost ratio implying capex breakeven within 1 cropping season to farmers were attractive. Our conviction was built around solutions that tied to a marketplace that incentivized farmers to earn more profits. Such marketplaces enabling >20% gross margins through enhanced quality produce and supply distribution network are critical to build a venture-scale company in our view.
Fasal has wasted no time in doing all the above. They have come up with a solution that is already making a difference in 100’s of lives, or if you track the food, then more like thousands or millions of lives. More so, it’s changing a way of life and making it a little easier for hardworking people that deserve to realize as much of their value as possible. So in a sense, humanity is exactly why TDK Ventures is investing in Fasal. While such things don’t always need to be classified into categories, if we want to consider where they intersect in our own vision and priorities — the answer is across the board. Such meaningful change in agriculture helps the environment, conserves energy, implements modern digital tech to optimize production, and more. To us that’s energy transformation, digital transformation, cleantech, sustainability, and Industry 4.0/5.0 all rolled into one. It is our pleasure to partner with Fasal. We look forward to seeing the impact they make on the world, and we will do everything we can to scale that impact.
References:
[1] The art and science of agriculture. (n.d.). Retrieved from https://education.nationalgeographic.org/resource/agriculture/
[2] What is a brief history of agriculture? (2017, May 13). Retrieved from https://socratic.org/questions/what-is-a-brief-history-of-agriculture#422410
[3] Agriculture — Worldwide | Statista market forecast. (n.d.). Retrieved from https://www.statista.com/outlook/io/agriculture/worldwide
[4] Avendus Capital. (n.d.). AgriTech Leading next decade’s tech-first value creation. Retrieved from Avendus Capital website: www.avendus.com/Upload/Misc/avendus-agritech-leading-next-decade-s-tech-first-value-creation.pdf
