The problem with agritech startups in Bangladesh

Despite two-thirds of the country's population being involved with agriculture, the performance of agritech startups in the country has been disappointing. What is holding local agritech startups back?

Having graduated from a renowned agriculture university, Fuad Morshed joined an IT startup that provided remote advisory support to farmers. 

His job was to check the plant growth issues that the farmers posted through an app on their smartphones, call them for more details, and finally, give them solutions. The problems ranged from disease detection to climate change issues.

The young agriculturist was busy, and he was proud that he was helping farmers out.

"I had to talk to 30 to 50 farmers every day and resolve their issues. Our whole team was busy. We covered vast areas in the south and south-west," Fuad said.

The firm that Fuad worked with was funded by a global donor and a foreign university.

But the funding ended at one point.

After working for four years, Fuad had to leave the job.

Now the organisation is barely carrying out this project and is only active in a couple of unions. The training activity necessary for familiarising the farmers with the app also came to a grinding halt.

Why did a firm that used to attract a lot of users have to downsize?

"There is barely any profit in agriculture. As a result, the farmers were not willing to pay for the service they got, no matter how tiny the amount was. So, it is nearly impossible for agritech startups to sustain financially," the agriculturist told The Business Standard.

Despite agriculture being the third-highest contributing sector to Bangladesh's GDP, the growth and contribution of agritech startups in the country has been disappointing, according to startup enthusiasts and funding organisations.

"When you are dealing with procurement, you must procure in bulk. That means to serve one farmer, you need to find 10 customers. If you plan to deliver it to the doorsteps, a huge investment is needed in delivery, logistics, warehousing, etc.," Diptha Saha, co-founder and CEO of Khamar-e, an agritech startup that focuses on the supply chain, told TBS.

"And the margin derived from the grocery items is not enough to sustain that cost. So, you have to choose one, either to buy from the farmer or sell directly to the end consumers. Or selling to the businesses in bulk. But in Bangladesh, the super-shop culture is limited only to the big cities and the rest of the channels are mostly informal," added Saha.

Nothing quite new

There are only a handful of agritech startups in Bangladesh. Some of them are doing fairly well in terms of recognition and securing funding - iFarmer, Khamar-e, Integrated Precision Agriculture and Engineering Bangladesh (iPAGE), Krishi Shwapno, Bhalo Social Enterprises, Fosholi, to name a few.

Startups are supposed to be new business ideas that fundamentally change older business paradigms. The lion's share of current agritech startups in Bangladesh is mostly confined to digitising the supply chain. Many of these farms claim to be removing the middlemen and thus ensuring a better price for the producers.

In reality, these startups are just replacing traditional middlemen with tech-savvy youths.

While the convenience of online purchases has given an initial impetus to these supply chain startups, the unreliable nature of e-commerce has barred growth.

Some of these startups have been trying to adapt by changing themselves from Business to Consumer (B2C) to Business to Business (B2B) platforms in order to survive.

Some are trying their luck by diversifying their services. Some are trying to sell a wide number of products and services under the same umbrella.

Instead of providing the solution to solving one core problem, doing it well and scaling it fast so that the company can raise another round to take on the next step of the solution, they try to do everything all at once and most of it not well

Rahat Ahmed, Founding Partner and CEO, Anchorless Bangladesh

Investors seem to dislike this idea.

"Of the few agriculture startups we have seen, many have an issue where they try to do too much. This stems from a misunderstanding of how startups work, and how investors look at such companies," Rahat Ahmed, founding partner and CEO of Anchorless Bangladesh, a US-based venture capital firm wrote in a recent Facebook post.

"Instead of providing the solution to one core problem, doing it well and scaling it fast so that the company can raise another round to take on the next step of the solution, they try to do everything at once and most of it not well," Ahmed added, advising, "Focus on one product-based solution that scales before trying to solve everything."

Startups, like the one Fuad worked for, provide prescriptions for agricultural problems, a service that farmers get from the government's agriculture extension officials all the time. However, the online/over phone service is convenient, which explains the popularity of the service. 

Yet, becoming a subscription-based service proved to be impossible as the government is providing the service offline for free.

Some startups have tried to introduce and market newer technologies like soil testing devices and smart health tracking collars for cattle. Although these technologies seem essential for modern farm management, these attempts have hardly seen any success due to low profitability in the sector, and possibly due to reliance on local knowledge on the subject.

Dependence on funding instead of profit

The last half-decade has seen several new ventures in the agriculture sector that are trying their luck by doing things in new ways, tapping into the digital sphere. Some are reviving older, ecologically-friendly ways to do farming.

There are two major types among these ventures: ones that identify themselves as startups, and ones that do not.

Generally speaking, those not calling themselves startups are seen to rely on profits for the expansion of their businesses. Others are more intent on applying for grants and other sorts of funding.

This has been identified as an issue.

"An excess of developmental capital in the agriculture space creates inefficient markets where capital is not always held accountable. This includes grants and other methods of funding often given to 'feel good' stories that do not have scalable, structural impact. This is a trend across all sectors in the country, though agriculture is one of the sectors where we see it more visibly," wrote Rahat Ahmed.

Despite the myriad of problems facing agritech startups, the outlook on the prospect of such startups is mixed.

Saha believes that the Bangladeshi agritech industry is going to experience a boom soon. 

Fuad Morshed is preparing for his BCS examination.