MVS Efarm Pvt. Ltd, which operates warehouses and a website that matches demand from customers with farmers, has sold about 25% stake in the company to Mumbai Angels, the first such investment by the grouping of 120 early-stage investors in a farm-related venture.

MVS Efarm plans to use the funds to hire people as it expands into Puducherry, Coimbatore and Bangalore, and set up low-cost collection centres close to villages and distribution centres in metros, said Srivalli Krishnan, chief executive and co-founder.

“We are looking at creating more collection centres and investments in logistics and IT (information technology),” said Krishnan, who declined to disclose how much the company has received from the stake sale.

Supply chain problems and lack of infrastructure such as warehouses and refrigerated trucks to transport the produce results in as much as 40% wastage in farm products such as vegetables, grains and fruits, said Krishnan. MVS Efarm is able to reduce wastage to 15% during the farm to kitchen journey, the start-up claims.

“Getting funded by a conventional investment group signifies that social ventures and farm-related ventures are now being seen as not just being socially relevant, but also financially viable,” said Anil Joshi of Mumbai Angels, who oversaw the transaction. He refused to divulge the amount invested in the company.

“With supply chain management becoming more and more important for the survival of companies, investors are excited to back such businesses as they can bring huge additions to the topline and bottom line,” said Joshi.

MVS Efarm was founded by Venkata Subramanian and his wife Srivalli Krishnan in 2007. Currently, it collects produce from 3,000 farmers and serves bulk consumers of agri produce such as hotels, caterers, retail chains, food processing industries and vegetable vendors, and also runs a retail outlet for the Indian Army.

Efarm, the supply chain platform, ties in farmers, intermediaries, logistics providers, distributors, small-time retailers and local roadside vendors to deliver farm produce. Currently, at least 95% of agricultural produce reaches the end consumer through unorganized marketing channels such as mandis (wholesale markets), which many a time leads to price fluctuations, wastage and poor quality, according to Efarm. Farmers often transport produce to mandis using carts and tractor trolleys, which not only delays the delivery process, but also leads to wastage.

 Getting funds, however, wasn’t easy for MVS Efarm. “We talked to many investors, they would pat us on the back, but nothing more,” said Krishnan. “Investors felt that as we were dealing with perishables in an unorganized market, the business could be risky.”

Sanjay Anandram, who has mentored start-ups such as Pilani Soft Labs Pvt. Ltd (that runs bus ticketing service redBus.in), Insta Health Solutions Pvt. Ltd and Ozone Media Solutions Pvt. Ltd—all of which have raised venture capital funding— said the agriculture sector, particularly logistics and supply chain management, are going to be attractive for investors as they are realizing that any initiative that can help curb agriculture wastage will find huge takers in the market.

There is, however, a caveat for small investors backing such firms, according to Anandram. “The issue is how can one make money in this businesses given the distribution bottlenecks and infrastructure issues,” he said. “Such companies need a lot more capital to overcome these hurdles. I am not sure if such businesses are ideal for small investors as they need a fair amount of capital intervention.”

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