The document provides information about accessing venture capital funding from SEAF India Agribusiness Fund for small agribusiness enterprises in India. It outlines the growth opportunities in Indian agriculture and food processing sectors. It then describes SEAF India Agribusiness Fund's focus on investing in food value chain companies and criteria for evaluating potential investments. Finally, it discusses the typical process an entrepreneur would go through to approach SEAF for funding, including understanding capital needs, preparing a pitch, undergoing due diligence, and collaborating post-investment.

1. Access to Venture Capital Funding for Small Enterprises
Hemendra Mathur
SEAF India Agribusiness Fund
NIABI, 2012
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2. Contents
 The Opportunity
 About SEAF India Agribusiness Fund
 How to approach Potential Investors ?
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3. The Opportunity
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4. Indian Agribusiness – Poised for Growth
 Agriculture and food processing contribute:
 25% to GDP; 13% of India's exports; 60% of employment
 Potential for substantial improvements in productivity with improved
infrastructure
 Rapid growth in consumption and investment as rural and urban
incomes increase
 Significant scope for consolidation and increasing strategic interest
 Investment by large Indian corporates such a Reliance, Bharti, 'Aditya Birla, Tata
 Entry of many multinationals such as Wal-Mart, Metro, Carrefour, Tesco,
Hershey’s, Okla. Foods, Lamaze, Total Produce, DANONE, Yakult, Del Monte,
Tyson Foods, Barry Callebaut, In Bev, Anheuser Busch, Sodexho, Dr. Oetkar has
given boost to food and agribusiness sector
• Significant development impact
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5. India’s production advantages
Milk
Largest Producer
109 Mn T Cattle / buffaloes
Largest in the world
283 million
F &V
#2 in the world Fisheries
205 Mn T Marine: 2.9 Mn T
Inland : 4.6 Mn T
Food Grains
#2 in the world Tea
(234 Mn T) Largest Producer
(0.9 Mn T)
Sugarcane
Goat & Sheep
# 2 in the world
182 million
(274 Mn T)
Source: FAO/NHB/Department of Animal Husbandry/Department of Agriculture and Cooperation
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6. Food demand evolving with economic progress
Diet / functional /
organic foods North America,
Japan, Western
Europe, Australia
Convenience Eastern
foods Europe
India, China,
Dairy, Meat, Bakery,
Confectionery Latin America Processed Food
Beverages Outsourcing (PFO)
Carbohydrate Africa – Sub-saharan
staples
Surviving Variety, Quality, Convenience, High Technology
Hygiene Health
Food Service
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7. ..demand pattern shifting in favour of value added (high
margin category)
2001 2015
18%
23%
4%
4%
2%
2% 14%
4%
5%
17%
7%
Source: NSSO, SEAF Analysis
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8. Consumption driven by income…..
 Growing middle class, estimated at 350 million consumers, which will increase to 650
million consumers by 2015
Distribution of Households by Income Group (million households)
Income in USD per year (PPP) 2001-02 2006-07 2009-10* 2014-15*
< 1900 24 17 12 7
1900 – 2600 33 20 14 7
2600 – 5200 74 82 81 73
5200 – 25000 46 76 95 127
> 25000 2 5 9 20
Source: NCAER for 2001-02 and 2006-07 estimates
* 2009-10 and 2014-15 are industry estimates
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9. ..and Increasing number of young & working population
Growth Rate of 15-24 years and 25-59 years age group
India
Mexico
Netherlands
UK
Japan
US
-6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4%
15-24 yrs 25-59 yrs
Source: NCAER and industry estimates
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10. …and health consciousness, nuclearisation, urbanisation, media
exposure, export demand
 Health consciousness
 Positioning on health platform - dairy, edible oil, fruit juices, organic foods
 Consumer willing to pay premium for health benefits
 Increasing number of small nuclear families with time pressures
 Over 50% in urban India
 Over 20% of women in urban middle class are working
 Urbanization – high concentration of target customers
 Top 10% towns have 60% of urban population
 Over 60 cities with more than one million population
 Will improve capital and labour productivity
 Media exposure
 76% of Urban and 33% of Rural India reached by TV
 About 60 million cable TV connections
 Indian exports of food products (approx USD 15 bn) growing at 17% per annum for last 5 years
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11. Government is facilitating reforms to develop demand driven
agribusiness
 Backward and Forward Linkages
 Estimated investment of USD 2 bn in 2006-2011 for developing a demand-driven supply chain for
fruits and vegetables with a target of doubling production to 300 mn tonnes
 Taxation
 Progressive reduction in excise duties on food products
 Credit Inflow
 Lending to food processing classified as priority sector
 Agricultural credit increased from USD 17.8 bn in 2004 to USD 60.0 bn in 2009
 Legislative reforms
 Model Law: to enable contract farming and direct sourcing – Implemented in most states
 Integrated Food Law: convergence in the laws dealing with food to facilitate single window
clearance – In the process of implementation
 Warehouse Receipt System: to encourage commodity trading - Implemented
 Futures trading: to enable transparency in price discovery - Implemented
 Infrastructure- 50 mega food parks planned with an investment of USD 23 mn per food park -
Process started
 World-class institute dedicated to food processing – National Institute for Food Technology,
Entrepreneurship and Management, near Delhi - Implemented
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12. Challenges remain.. Fragmentation in the supply chain
Hand Cart
Vendor
Village Market Wholesaler Sub-
Commission Commission Wholesaler Roadside
Farmer Agent Agent Vendor Consumer
Retailer
Trader /
Transporter
Supermarket
Contract F&V Marketing Company Intermediate Final
Cultivation Processor Processor
The markups by each
participant in the chain
cause the farmer to receive
approximately 35% of the
price paid by the consumer
for delivered product
Source: Industry estimates
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13. Challenges which affect productivity…
Low productivity -lack
of quality inputs and
adequate technology
Inefficient
Dependence
Marketing
on Monsoons
Systems
ORGANIZATION & SUPPLY
CHAIN EFFICIENCY
WILL LEAD TO
Poor SCALE & GROSS MARGIN Small Land
Processing IMPROVEMENT Holdings
Infrastructure
Limited
Poor
Access to
Infrastructure
Credit
Lack of forward and
backward linkages
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14. SEAF India Agribusiness Fund
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15. Overview
 Small Enterprise Assistance Funds (SEAF) established in 1989
 Invests growth capital together with technical assistance to SMEs in emerging
markets
 125 employees with a network of 20 offices located across 5 continents.
 26 funds (20 currently active) across 30 countries with aggregate committed capital
of $600 million.
 $380 million invested in 344 SMEs worldwide, with 186 exits since inception.
 Over 105 agribusiness investments. Exits from 40 investments in active funds have
realized IRR of 27% (3.0x capital).
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16. Our current global investment network
SEAF’S GLOBAL FOOTPRINT includes 30 countries on 5 continents.
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17. Background
 The only dedicated fund for investment in SMEs in the
agribusiness sector in India
 Investment focus on companies in the food value chain
 with strong management, demonstrated track having innovative and superior
technology for productivity improvement and value addition
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18. Investment Focus – Agribusiness and Food Processing
Food retail /
Inputs Post-Harvest Logistics Processing
services
• Seeds • Supply Chain • Cold storage • Dairy • Food retail
• Agrochemicals Organizer • Reefer • Bakery • Restaurant chains
• Farm machinery transport • Edible oils • Suppliers to food
• Cattle / Poultry Feed • Fruits & vegetable based retail / food
• Packaging products services
• Ingredients • Processed Meat & Poultry
• Sugar / ethanol / co-gen
• Spices
• Confectionery
• Beverages
• Ready to eat / convenience foods
• Organic foods
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19. Investment Criteria
• Growth potential, scalability and clear focus on value addition
• Management with integrity, track record and demonstrated execution
capability
• Capability to attain market leadership
• Innovative, differentiated or superior technology
• Strengths in supply chain management
• Strong developmental impact
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20. Post Investment -Systematic Value Added to Achieve Scaled Growth
Standard forms of MARKETING & - Develop marketing plans
business technical STRATEGY - Support marketing teams
support typically
provided by SEAF: GLOBAL - Introduce global business networks
NETWORKING - Support export and import strategies
OPERATIONS - Cooperatively identify areas for improvement
ASSISTANCE - Assist in R & D / commercialization of technology
- Facilitate visits by outside experts
- Identify new sources of financing
ADDITIONAL - Leverage relationships with local banks
FINANCING - Provide negotiation and contracting support
- Business planning and budgeting
FINANCIAL - Accounting and management information systems
CONTROL - Facilitate hiring and training of CFO
- Design of effective incentive structures
CORPORATE - Board of Directors oversight
GOVERNANCE - Legal structure
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21. How to approach the potential investors?
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22. Typically 5 step process
Understanding
your business and
Capital requirements
Approaching Investors
Due Diligence &
Negotiation
Shareholder Agreement
Post Investment
Monitoring & Exit
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23. Understanding your Business / Capital requirement
What is your business?
 Define clear boundaries of your business
 Define the market need that you are addressing / intend to address with your product/ service
What are your growth plans?
 Define clear vision and goals for your enterprise for at least five years
 What does this growth mean for the top-line/ bottom-line?
 How do you intend to achieve this growth?
How much resources you need?
 What is the kind of infrastructural investment required?
 What is the likely manpower required?
 How much working capital shall be needed?
 What sourcing model shall work? Which suppliers shall work?
Why do you need capital?
 Capital Expenditure
 New geography, new product, infrastructure investments
 Working capital
 Commercialising new product/ service
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24. Approaching the Investor
 Identify relevant Investors
 Evaluate & Short list
 Understand general requirements of the investors
 Prepare Pitch Book
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25. Due Diligence / Negotiation
 Discussions between investment manager & promoter/ promoters
 Evaluation of business & financial plan
 Plant visits by investor
 Discussion on & validation of key findings
 Presentation to Investment Committee by Investment manager
 Valuation
 Negotiations and preparation of term sheet
 Drafting of shareholder agreement including investors right and obligation
 Signing of shareholder agreement
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26. Post –Investment Monitoring/ Exit
 Working with investors for the first time – please understand VC interest and
alignment
 Transition from “Individual Control” to “Board Control”
 Increased time spent on shareholder communication
 Pressure of business plan growth projections
 Corporate Governance and Transparency in books of Accounts
 Work together to find a buyer for investor stake
 Provide a profitable exit to the investor
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27. Thank you .
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