Bangladesh's agricultural startups are facing significant challenges, primarily for a lack of funding and investor interest, despite the sector holding huge untapped economic potential.
Sources say financial institutions, including banks, tend to shy away from these ventures, perceiving them as high-risk, leaving startups reliant on seed funding or early-stage capital.
The agriculture sector, while critical, is not typically seen as lucrative by investors, especially as it battles increasing threats from climate change.
Flash-floods, cyclones, droughts, and erratic rainfall patterns are compounding the risks.
Despite these challenges, agricultural startups could play a key role in optimizing resources, eliminating middlemen, and boosting crop yields-crucial factors as the country contends with rising food insecurity driven by population growth and climate pressures.
"There are very few of us in the market because we need funding, and we lack investors," says Sakib Hossain, CEO of foshol.com.
He adds that there is a general lack of understanding about how startups work in the agriculture sector.
Foshol.com operates under a B2B model, procuring products directly from farmers and selling to wholesalers, including major outlets in Dhaka and Chattogram.
Founded in 2020, the startup raised $1.0 million in pre-seed funding from SOSV, South Asia Tech Partners, and angel investors, including Ambareen Reza.
Bangladesh's agriculture sector, valued at approximately $40 billion and encompassing horticulture, livestock, fisheries, and forestry, employs over 40 per cent of the labour force.
Despite its significance, the sector remains largely dependent on traditional methods in both production and marketing as machination of agriculture lacks necessary gear.
"Precision agriculture and innovations like modern tractors are virtually absent," according to the Department of Agricultural Extension (DAE) which is responsible for promoting new technologies and crops.
Dr Md. Abu Zafur Al Munsur, a deputy director at the DAE, notes, "Farmers cultivate based on intuition or learning from father or grandfather rather than informed decisions about soil conditions or weather forecasts."
Dr Munsur believes there is significant potential for modernization in the sector, given the widespread use of mobile phones in rural areas.
Data from the Bangladesh Bureau of Statistics (BBS) show that over 46 per cent of rural households own smartphones, and nearly 30 per cent have internet access. Basic mobile phones are even more prevalent, with 97 per cent of rural households.
While a handful of startups are making efforts to modernize agriculture, their impact remains limited.
Farmers, mostly marginal ones, face hurdles, including access to finance, fair pricing for goods, and the availability of quality inputs, such as seeds.
Apart from foshol.com, other notable players include iFarmer, which provides access to finance and free agricultural consultations, and WeGro.
WeGro, co-founded by Mahmudur Rahman (CEO) and Alvi Rahman (COO) in 2021, is an agri-fintech platform that links farmers with individual investors by providing inputs for specific crops, like potatoes.
Investors typically see annualized returns of 18-22 per cent. The platform has received positive feedback from both farmers and investors.
WeGro has invested in over 5,500 farmers, and more than 750 individuals have invested in the platform, with over 20 new investors joining each month. The startup also supports fisheries, poultry, and cattle farming, it said.
Venture-capital firms and financial institutions confirm that the agricultural -startup ecosystem in Bangladesh remains underdeveloped.
"There are very few agricultural startups in the country due to funding gaps and limited knowledge about the sector," says Md. Shawkat Hossain, CEO of Bangladesh Venture Capital, a leading venture capital firm.
He also points out lack of crop insurance, which deters investors due to the risk of weather-related losses.
Despite the challenges, some farmers have benefited from these startups.
Abu Sayed, a farmer from Islampur, Jamalpur, shared his experience with this correspondent.
"I had a bumper crop of capsicum in 2023, but there were no buyers in the local market. Foshol.com stepped in and bought all my produce," he said, adding that he now has a contract with the company to sell his entire harvest.
Bangladesh's startup ecosystem is largely dominated by e-commerce ventures, with Pathao emerging as a unicorn. However, the sector has also been marred by scandals, such as the Evaly case, which has raised serious concerns about financial mismanagement and consumer fraud.
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