Last fortnight, DeHaat posted a 2x jump in revenue, growing to 350Cr, hot on the heels of the largest fundraising announcement for an Indian agritech.
Gathering Raw Materials for DeHaat
In 2012, when buzzwords such as “startups” and “funding” were just starting to gain popularity, Shashank Kumar, a young man from Chhapra, shifted his base to a rural village in Bihar.
His dream was to improve the livelihood of Indian farmers by changing the way they did their business.
That shift was a significant move for Shashank, because he had graduated from IIT Delhi in 2008, and was at the cusp of a glorious business consulting career. Entrepreneurship wasn’t a mainstream career option, and especially not for blue-eyed graduates from IITs.
Three years into his corporate career, Shashank was hooked on the idea of starting up on his own.
But where would he start?
Hailing from a farmer’s family, Shashank had his roots in farming. He would often get a chance to interact with farmers, and absorb a lot of passive knowledge about crop cultivation. Agriculture as a sector contributes to 14% of India’s GDP (a $350Bn industry), had 140M+ farmers employed and suffered a lot of problems that no one was willing to solve in 2012.
Shashank saw the potential to have a major societal impact in India, by improving the earning potential for Indian farmers, increasing the overall yield for the sector and enabling microentrepreneurs all over the country.
Shashank’s management consulting career also allowed him to work with Retail and FMCG on the problems they faced with their supply chains. He realised he could leverage his knowledge of technology and supply chain to mend a broken multi-billion dollar industry.
The third reason for him to jump onto this bandwagon was his conviction that the Internet would penetrate deeply into the rural ecosystem soon.
Consumer internet companies such as Flipkart and Jabong had had early wins in the Tier I cities. Jiofication was still unheard of, but the current was palpable.
Leveraging new-age technology was the only way forward to resolve this crucial challenge faced by farmers. Shashank was determined to use the Internet’s power to bring a revolution in an industry that for the longest time was ignored.
DeHaat (Hindi for Village) was born.
Planning for Monetary Harvest
In its early years, DeHaat did not have a product, let alone any PMF.
There was no business model, no path to profitability and no idea of how to get investors on board.
What Shashank was able to do was build a team that bought into his vision for DeHaat. Shyam Sundar Singh, Amrendra Singh, Adarsh Srivastava and Abhishek Dokania came on board to execute on their goal of bettering the lives of Bharat’s founders in any capacity possible.
Within a month of conceptualising the idea, the entire team found themselves in ground zero at a rural village in Bihar, Vaishali.
For the next two years, they focussed on interacting with as many farmers as possible, building a repository of knowledge about crop cultivation patterns, seeds and fertilisers procurement supply chain, inputs during the growing season and go-to-market post-harvesting.
In the process, they found themselves travelling ~250 km every day.
One day they would be listening to a farmer’s woes, the other day they would be advising a farmer on the best crop to sow for the season and the associated fertilizer inputs and on the third day, they actually are on the field training the farmers themselves.
Initially, the team was of the opinion that creating a farm to fork model by directly sourcing from the farmers and selling to the end customer could be a good business model.
The post-harvest supply chain had multiple inefficiencies (middle-men commission, damage in storage, unfavourable selling prices) that plague the system, and the lowest hanging fruit could be to solve for that.
But the gestation period had created so many insights that DeHaat was ready to provide a full-stack solution to the farmers. The solution would streamline the fragmented agricultural inputs channels, bring quality agri-inputs such as seeds, fertilizers, crop protection chemicals and equipment to farmers at a reasonable price, provide enhanced market access post-harvest and act as advisors to them all along this cycle.
An idea was forming, but the journey was not going to be easy.
Planting Seeds of Trust
For starters, farmers found it quite difficult to trust the words of 26-27-year-old “kids” who advised them to change their ways of cultivation, which they have been doing their entire lives.
Like with any innovations that hope to rework the way something is done, DeHaat’s stakeholders were resistant to change and set in their ways.
Convincing the farmers to adopt new farming practices and agricultural inputs was a steep hurdle. The fact that these “kids” came from premier institutes made it even tougher for them to gain trust.
Farmers thought that this was some kind of an “adventure” for these young men, and could soon disappear once the going got tough.
Secondly, only technology could provide a solution to scale this model.
But smartphone penetration was still low across rural India, and the medium of communication had to be vernacular so that the farmers were more comfortable.
The technological complexity of providing low data consumption web access in multiple languages was a challenge that would make any budding entrepreneurs shake in their boots.
Thirdly, logistics infrastructure required for streamlining input distribution (seeds, fertilizers) and output (harvest for sale) collection needed immense capital investment.
This wasn’t a low fixed-asset software or internet company that a few people could start in a WeWork or a garage. There were real costs upfront costs required to bring this idea to reality.
Due to the above, agri-tech was not a popular venture capital investment at the time of DeHaat’s founding in 2012. In fact, it would take years before it got there.
The chips were stacked against DeHaat, but this only motivated the team more.
Water and Sunshine for Farmers
DeHaat realised that to gain trust, they needed to demonstrate tangible improvements in the lives of their stakeholders – the farmers.
They would focus their resources on winning over and working with one farmer in the village. Once results kicked in, DeHaat had a loyal micro-entrepreneur who would become DeHaat’s cheerleader in the surrounding twenty village radius.
When villagers hear hearty stories from one of their “own”, it would result in user acquisition with zero CAC and very high retention.
The micro-entrepreneur model was a game-changer, enabling last-mile delivery of full-stack agricultural services to farmers.
To establish comfort amongst the farmers, DeHaat introduced helplines to engage with farmers in vernacular. Its Android app, owing to significantly greater penetration vs Apple iOS, was made accessible in multiple languages.
The logistics barrier was solved by enabling micro-entrepreneurs to act as a bridge between the platform and the farmers through a hub-and-spoke model.
For instance, DeHaat would receive delivery of high volume agricultural inputs (fertilisers, seeds) directly from the manufacturers in a warehouse/cold storage (hub) operated by itself. From there, DeHaat would transport the inputs to DeHaat centres (spokes), owned and operated by the micro-entrepreneurs.
These entrepreneurs would take care of the last-mile delivery, covering 600-800 farmers within a catchment area of 3-5 km.
In the upstream, farmers brought their produce to the allotted spoke and a micro-entrepreneur would collect the same. DeHaat would use a third-party logistics company to pick it up from the spoke (DeHaat centre) and deliver at a warehouse or cold storage (hub), where the produce is aggregated and stocked.
This final produce gets sourced by institutional buyers such as Grofers, Amazon, Cargill, Godrej and others. The warehouse or cold storage is managed by 10-15 DeHaat employees who have experience in supply chain and warehouse management.
By 2016, DeHaat had found their system.
Nurturing Budding Systems
DeHaat had become two separate yet parallel business models.
One was as a facilitator and marketplace for micro-entrepreneurs and farmers (an eBay/VC for Farmers), and the second was as a SaaS company that gives them the tools they need to conduct their business (an Operating System for Farmers).
What do we mean by eBay and VC for Farmers? Farmers needed to buy various inputs in order to make their crops viable.
Farmers needed “working capital” to keep their operations running, as they needed money to buy inputs and equipment to run the farm in the first place. DeHaat provided this to farmers in a micro-finance format, along with crop insurance and other financial services.
In addition, it built an online platform to connect them with the micro-entrepreneurs and place orders for same-day delivery – who supply seeds, fertilizers, equipment etc.
Finally, at the end of the season, it aggregated corn, wheat, rice, bajra, fruits, and vegetables from farmers and sold them to bulk buyers like Zomato, Udaan and Reliance Fresh.
As an operating system – farmers needed information and help during the process.
DeHaat’s mobile app contained customised knowledge on crops, pests, disease management etc as well as a call centre helpline.
After 5 years of existence, it would accumulate its first $100K in grants by 2018.
In Business Bloom
Unlike other “high growth” startups, DeHaat took years to see an upswing
The company first experienced real growth in 2018 and 2019 as the number of services increased and the tech improved. DeHaat grossed close to INR 45 crore revenue in FY19, up from INR 21 crore in FY18, while operating profitably.
It was clear their strategy of being a one-stop shop for all farmers and related goods and services was working.
The company’s singular focus on increasing the profitability of smallholder farmers was paying off. Their offline centres were helping build trust with the farmers and setting off a word-of-mouth flywheel that was ensuring sustainable scale.
Additional and free services, such as consultations and soil and nutrient testing, took off as the company gained trust in farming communities. A key aspect of the DeHaat model was to not start by telling farmers what to do and show the value instead.
As of the end of March 2019, the company had 126 DeHaat centres.
Riding this momentum the company saw its first institutional round of financing, raising $4.3MM. It took years for VCs to notice this resilient team building, but it finally arrived.
A year later the company had scaled its offline network footprint to 450, and it is when the company raised $12MM in a funding round.
By this time the company serviced a community of 210K farmers with access to over 3,000 agricultural inputs, combined with AI-based customised crop advisory content of pest & disease management for major crops delivered via mobile app and call centres.
DeHaat’s solution was working by now and their farmers were grateful to be associated.
In January 2021, the company raised $30MM in a Series C round on the back of 3.5x annual growth in the business for two years in a row. The company had 1,300 offline centres operational that serviced a network of 360,000 farmers.
Post the funding the company acquired Farm Guide – a SaaS-based platform to provide satellite-based insights & advisory to farmers. The company planned to continue to invest in technology to build unique AI/ML-based solutions related to crop advisory, last-mile supply chain traceability & B2B SaaS agritech platform for input sellers as well as output buyers.
With a flywheel that was spinning and now the capital to support it, DeHaat was ready to go.
But what really was DeHaat’s economic flywheel?
Rainbows and Growth Butterflies
DeHaats deep foundations over years had helped it set up for success.
DeHaat is currently hitting Rs 100 crore in revenues each month and expects to close the financial year ending March 31, 2022, at Rs 1,400 crore, a nearly four-fold jump from its Rs 352 crore revenue the previous year.
It also claims to serve over 6.5 lakh farmers and 3000 micro-entrepreneurs in Bihar, UP, Jharkhand and Odisha.
In an interview with Inc42, Shashank Kumar claimed that 69% of its overall revenue comes from the sale of produce to big buyers, 30% from the sale of agriculture inputs to farmers and 1% from financing services, whereas they did not charge any money for the advisory services.
The focus instead was on getting a cut every time a monetary transaction happened inside the DeHaat ecosystem. This means that DeHaat is incentivised to ensure that its participants – the micro-entrepreneurs and farmers, transact and interact more and more with each other.
As they benefit, DeHaat benefits too.
This creates a virtuous cycle, or “network effects” that you would see in an Uber. Farmers are incentivised to join DeHaat for access to buyers and inputs. Meanwhile, micro-entrepreneurs are incentivised to join for access to farmer customers.
The institutional buyers are incentivised to join for streamlined access to bulk produce. This three-sided marketplace creates a virtuous cycle of growth and a strong lock-in effect as well.
The cycle of growth had kicked into full gear, with DeHaat ready to benefit.
In October 2021, 9 months after its previous raise, DeHaat raised $115MM in its Series D round, the largest by an Indian agritech startup.
The estimated valuation for the round was $525MM, more than triple of the previous round.
Today, DeHaat claimed to be India’s homegrown, largest full-stack agritech company.
It connects all types of agribusinesses (input sellers, output buyers, cattle feed manufacturers, financial institutions, warehousing companies) to the farming community.
Over time the company has built a network of more than 3,600 franchised offline DeHaat centres operated by micro-entrepreneurs for last-mile delivery and aggregation mostly in north India, with an overall base of 650,000 farmers on its platform.
It has around 650 buyers who purchased from farmers, and around 150 sellers who sell various farming-related products to farmers.
Going forward the company plans to use the funds from its latest raise for network expansion, to ramp up its technological capabilities, grow value-added services and inorganic growth opportunities.
In 2021, the company partnered with banks and NBFCs to enable access to credit for farmers via its platform. Within the first few months of launch, the company had already enabled the disbursement of close to INR 75 Cr. of loans to farmers.
In January 2022, DeHaat announced the acquisition of Helicrofter, a B2B agri-input marketplace startup that has a network of 2,000+ Agri input retailers and 30 sellers across Maharashtra. The company was doing close to INR 50 crore in revenue when acquired by DeHaat.
Through the acquisition, DeHaat will be able to expand its presence in Maharashtra and other parts of West India.
Going to Market
After devoting years to fine-tune the business model, DeHaat is now targeting rapid growth.
The agritech player is banking on a simple strategy to earn higher revenue: more farmers and more offline centres. Besides inorganic growth opportunities, the company will leverage its capability to set up 400 DeHaat centres a month, given its franchise model to expand to newer parts of the country.
The company is also looking to expand its portfolio of products and services, starting with insurance and machinery inputs to deeper entrench itself in the ecosystem.
DeHaat’s ambitions don’t end with India. The founders are on a mission of building the world’s largest Agritech platform catering to every farming need.
But only time will tell how successful they are.
Thus far they have been thoughtful and deliberate in how they have expanded but that has happened in a world where they didn’t have to deal with the pressures of venture capital or high growth.
But between operating a full-stack model, expanding geographically and staving off competition, one hopes the company has not bitten off more than it can chew.
As far as competition is concerned, multiple firms have managed to crack parts of the agricultural supply chain. But DeHaat is the only player whose offerings cover the entire farming business, from seed to market.
Thus, DeHaat doesn’t have a like-for-like competitor. But competes with different businesses across each of its operating verticals. Besides the competition from upstarts DeHaat also has to compete with agri-initiatives from more established players like Tata, Godrej and ITC.
Both Tata and ITC have offline counters to connect with farmers and procure produce for ancillary businesses. Tata through its Rallis initiative operates 40,000 offline counters across 80% of India’s districts while ITC operates 6,100 kiosks across 35,000 villages in 10 states. Godrej too buys Agri products directly from farmers. All these programs benefit millions of farmers.
Will the benefit of the focus allows competitors to build better solutions or will DeHaat’s catch-all business model provide outsized value to its customers allowing it to beat off competition remains to be seen?
Agriculture is an important sector, not only because it helps secure India’s food security and could contribute to bridging the trade deficit gap by helping expand India’s food exports but also because it employs close to 43% of India’s workforce.
However, the sector is fraught with inefficiencies and a supply chain that is extremely wasteful as is evident by its disproportionate contribution to GDP which hovers between 17-20%.
The inefficiency is stark and obvious.
India needs to reduce its dependence on the agriculture sector for employment and increase its efficiency. The next generation of farming families is also keen to move away from farming as quickly as possible.
It is in everyone’s best interest that businesses like DeHaat are able to leverage technology to revolutionize farming, by increasing yields and income for farmers.
In a country that has deep roots in agriculture, DeHaat is planting the seeds that could spark a revolution in India and then to the world.
Writing: Chandra, Raj, Shiraz, Varun and Aviral Design: Omkar, Shelley and Terence