Dealflow | August 13, 2019

Rabobank and Caspian launch $2 million debt fund for India’s agtech startups

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, August 13 – India’s startup ecosystem is ripe with new tech ideas designed to improve access to services, financing and markets for 135 million smallholder farmers and their communities. But agtech startups themselves have trouble accessing financing, specifically debt, in India’s mainstream banking sector, whose risk algorithms aren’t designed for tech-based businesses.

Dutch banking giant Rabobank and impact investment firm Caspian have launched a $2 million, three-year impact debt fund to support early-stage agtech startups in securing working capital and other types of loans they need to get new contracts rolling and projects off the ground.

Rabobank’s Arindom Datta told ImpactAlpha that many of the startups in the fund’s pipeline have raised equity capital but that this would be entrepreneurs’ first linkage to a formal financial institution on the debt side—much like the farmers agtech companies serve.

“Small facilities [like this] force you to look for smaller and more difficult companies, to really go deep and look for the small gems which have a huge potential but are not seen as “bankable”,” he said.

The facility is being financed by Rabobank India and managed by Caspian. The partners expect the funds will be fully deployed in the next two to three months. Datta said he expects Rabobank this to be an initial phase for a larger lending initiative.

As for “impact”, the partners will look to track how the fund’s loans facilitate farmer access to better services and markets and establish pathways for them to formalize their businesses.