Agripreneurship journey in smallholding contexts is not for the faint hearted. In feudal countries like India, you set out to build a business where culturally, agriculture is not treated as a business.
Lokesh Singh is currently in his third agripreneurship journey and has navigated both for-profit and not-for-profit worlds. Earlier, he rode the MFI (Microfinance Industry) wave of 2011-12 and the Agritech 1.0 Wave.
This is an extremely moving conversation of honest acknowledgement of failures (technically speaking, failures are no longer failures when its learnings have been composted back into the soil), hard won lessons and a relentless quest to explore what constitutes innovation in smallholding agriculture.
Although I hate takeaways, here is an edited takeaway from the conversation for those who don’t have the patience to go into the greyness and nuance we explored in the conversation. Always remember: The Map is not the Territory.
Venky Ramachandran: If you were to look in the mirror and ask yourself who is Lokesh Singh, what would be your most honest answer?
Lokesh Singh: I would not call myself a born entrepreneur. I was an accidental entrepreneur. I was born in 1980 in Roorkee, Uttarakhand, where there were only two choices, either become a doctor or an engineer. I chose engineering because I was afraid of dissecting a frog. When I graduated in 2001-2002, most jobs were pure coding at Infosys, TCS, Wipro. That wasn't my calling.
So I decided on an MBA. I knew about IIMs, but I wanted a low-cost option. That's how I ended up at IRMA. And IRMA changes you.
Venky Ramachandran: They do something magical. They evangelize people towards impact.
Lokesh Singh: They have this induction fieldwork where you stay with a village family for seven days. You can leave after that and get your fees refunded, but most of us get transformed. I stayed in a tribal village in Gujarat's Dahod district where only one family had steel utensils. Everyone else ate from earthen pots and leaves.
IRMA asks for three years of your life. I said okay, three years. It's been 21 years now, and I'm still in the same field.
Venky Ramachandran: Tell us about your first venture into microfinance with SKS.
Lokesh Singh: After IRMA, I joined Nandi Foundation doing water projects in Krishna district, Andhra Pradesh. But I had to resign when my boss arbitrarily transferred me without logic. I was unemployed for one and a half months when someone told me about SKS Microfinance. This was December 2004. Vikram Akula wasn't there yet; he came back in 2005.
They didn't have an opening, but they liked me and created a position: "Manager Planning and Monitoring." I was their first Hindi-speaking staff. They got their NBFC license in January 2005, and when Akula returned from McKinsey, he asked me to start Karnataka operations. I went to Bidar, then Maharashtra, creating the blueprint for expanding microfinance into new areas.
But after they raised private equity from Sequoia in 2005, everything changed. The condition was to either go for IPO or get acquired in four years. They started expanding at breakneck speed, diluting the culture. Our daily allowance jumped from 80 rupees in 2006 to 1200 rupees in 2007. The working environment went for a toss. That's when I decided to exit in 2007.
Venky Ramachandran: That led to your own microfinance venture. Tell us about that journey and its eventual shutdown.
Lokesh Singh: I saw how microfinance could create instant impact. You give money, someone starts a business, if they're good at it, money comes back home. Unlike other interventions, microfinance gives very quick results.
I started discussing with my IRMA batchmates. We raised about a crore in eight-nine months from friends and family, purchased an existing NBFC license, and started operations in November 2008 around Lucknow. We made several innovations. Group sizes of three to six instead of the standard five, male groups alongside female groups, short-term three-month loans instead of one-year loans for working capital needs.
Venky Ramachandran: Even today, male groups aren’t trusted.
After a year, 40% of our loans were going into dairy, so we started a separate dairy company with 50 lakh rupees. We bought milk, processed it manually into khoya and paneer, sold it through 17 pushcarts along with vegetables. Fixed prices, digital weighing machines. We innovated there too.
But then came 2011 and the AP crisis. RBI's Malegam committee recommended minimum 5 crore capital for NBFC-MFIs. We were at 2 crore. We couldn't raise the additional 3 crore because the market knew we were in a dire situation. We tried merging with similar-sized NBFCs, selling the portfolio separately. Nothing worked.
Venky Ramachandran: That must have been incredibly stressful.
Lokesh Singh: Those were the most stressful days. Looking back, I think I was depressed, though I didn't realize it then. Every day someone would call asking for their money back. People who had invested 5-10 lakh rupees started saying, "We gave money in your name, now you need to repay personally"
I lost my own money, my relatives' money. I had to mortgage my house. We lost almost 1.25 crore out of the entire venture. Some people are still angry; we don't talk anymore.
Venky Ramachandran: What was the key lesson from that failure?
Lokesh Singh: Never mix friendship and business. When you ask for investment, be very clear: they are investing in the business, not in you. If the business does well, they get their money back threefold, fourfold. If the business fails, that business is going to lose. You are not going to repay personally. That's a very fine line people miss. When things go well, everyone's happy. When things go bad, they start saying "I gave money to you" as if it was a loan, which it wasn't.
Venky Ramachandran: Given your experience in both worlds, what's your view on for-profit versus non-profit approaches to agriculture and rural impact?
Lokesh Singh: I'm very biased toward for-profit. My first reason against not-for-profit is accountability. If it's someone else's money, you can be frivolous. If it's your own money or people who will question you, you make decisions more suitable to the business.
There might be areas unsuitable for for-profit businesses, like places with market failure. Those obviously need to be not-for-profit, but then that shouldn't be your career option. You should only be in that if your heart beats for that cause, not looking at it from a money-making point of view.
My grudge against the not-for-profit sector is that you say you're in it for the greater common good, but then you try to make money through other perks. Setting up training centers your wife runs, employing relatives. I'm against that.
IRMA taught us that if it's business, it will be sustainable. If it's not business, you'll always be asking for money. Resource mobilization is a very tedious activity you need to do day in, day out. But if it's a sustainable business, you don't have to do this.
Venky Ramachandran: Today we're seeing significant challenges in microfinance again. Delinquency rates rising, over-lending issues. If you were to meet RBI Governor Shaktikanta Das tomorrow, what three-point reform would you suggest?
Lokesh Singh: First, understand the history. There have been crises every three-four years since 2006. After every crisis, RBI has been reactive, not proactive. The real disease was always over-lending, not interest rates. Interest rate difference between lowest and highest is 6-7%, which on a 10,000 rupee loan translates to just one or two rupees per week difference.
Who can do over-lending? The larger NBFCs, not smaller ones. But RBI's diagnosis was that smaller NBFCs created the problem, so they mandated 5 crore minimum capital. This killed innovation because innovation comes from new entrants trying to break into saturated markets through something innovative.
Now you're left with only large players with deep pockets. 200, 300, 400 crore equity. They have deep pockets for lending but don't know restraint. You'll find 13-14-15 NBFCs working in the same village, lending to the same 40 people who've become conversant with the policies.
My three suggestions: First, household-level credit bureau checks rather than individual-based, because the challenge is household-level debt. Second, differentiation in loan products. There's no innovation now, everyone does the same vanilla product. Third, make investor exits longer-term rather than the current 2-3 year horizon, which pushes for quick returns over sustainable practices.
Venky Ramachandran: You also had quite a journey with Farmart in the AgriTech wave. Walk us through that story.
Lokesh Singh: In 2015, I was with MicroSave consulting firm. Alekh (now CEO of Farmart) was in my team. We were in Hyderabad waiting for an Ola cab, tracking it on the app. We started discussing. If we can track Ola, could there be something similar for farmers?
Both of us had farming backgrounds. His grandfather was a farmer, my uncles are farmers. We knew tractors were a problem. Our market research showed 91% of farmers depend on someone else for agricultural operations because they don't own tractors.
We got a company registered in 2016, started pilot in Saharanpur district. We enrolled tractor owners already in business, told them: "Whatever business we generate, you keep 90%, we take 10% commission. We'll generate orders and collect money."
The pilot seemed successful. We pitched to Indian Angel Network in July 2016, got commitment for 1.6 crore at $250K for 25% equity. Money was supposed to come by November, I was to join by January 1st. Then demonetization happened on November 9th. One anchor investor developed cold feet, saying farmers don't have money to pay us now. We were in a lurch.
Venky Ramachandran: How did you navigate that crisis?
Lokesh Singh: First two months, no salary. We were putting money from our pockets for almost a year. Then through divine intervention, Manish Khera came on board. I thought he might invest 5-7 lakh rupees, but when I said the gap was 35 lakh, he sent a mail the next day saying he'd invest the entire amount.
But then we realized our core assumption was wrong. We thought after demonetization, digital money would be prevalent, farmers would pay us digitally through apps. It never happened. Most farmers are 50+, they're not using apps. The digital connection might exist in the family through a college-going son or daughter, but not with the actual farmer.
This robbed us of our USP of being completely digital. We had to set up physical centers, call centers, collection teams. Very similar to microfinance operations. After one and a half years, we did business of 80 lakh rupees, our commission was 8 lakh, but monthly expenses were 5 lakh. We'd burned 75 lakh and earned only 8 lakh.
Venky Ramachandran: That led to a pivot?
Lokesh Singh: We went back to investors honestly saying this model isn't working. They asked if we wanted to pivot. We asked farmers: "What's your main challenge?" They said they don't have money when they need it.
So we built a digital credit card. Farmers could use their phone number to go to any network partner (shops selling pesticide, seeds, or tractor owners), get work done without paying immediately, pay us after harvest. It was a beautiful closed-loop system with OTP verification.
It was going well but wasn't very scalable because it was still very physical. We tried raising equity but could only raise a small round from 500 Startups. We were almost breaking even when pandemic happened in 2020. First lockdown hit right when wheat harvest was supposed to start on March 24th in UP.
We had to innovate again, developed an app for retailers to broadcast messages about products and prices. Omidyar got interested but said they'd only invest if we did commodities. I wasn't interested in commodity business. That's just vanilla trading, no innovation. That's when I made my exit in May 2020.
Venky Ramachandran: What was your core disagreement?
Lokesh Singh: Commodities is a business everyone's been doing. You take a commodity and supply it to someone else. I went into this business looking for innovations. Our first innovation was the app for farmers, second was the digital credit card. But commodities isn't innovation, it's pure vanilla business that's already happening.
You're not doing anything new, just solving maybe a working capital problem for traders by giving them money to buy from farmers and pass to someone else. That was my disagreement point. It was a smooth exit though. I'm still good friends with Alok and Mehtab, meet them whenever I'm in Gurgaon. I'm proud that the name "Farmart" was given by me.
Venky Ramachandran: Your story reflects broader challenges in the Agritech sector. Do you see a way out of this cycle where innovations get forced into trading models?
Lokesh Singh: There's no risk capital in India. It's always whatever the trend is, you get capital for that. People who fund you aren't truly venture capitalists. Most have earned money in IT jobs in the US and call themselves VCs. They haven't created businesses, haven't seen failures. If they had, they'd be more tolerant of failures.
My theory is when you raise capital for innovation, either you hit break-even before capital gets over or you're bound to fail anyway. There's no point pivoting just for the sake of pivoting. You should cut your losses and get out rather than staying in ownership dilemma that "I created this business, it's bound to be successful."
All successful startups go through four-five near-death experiences. How you come out depends on the team. If the team doesn't believe in each other, you'll fail in the first or second experience. In Farmart, we had immense faith in each other. That's how it survived and is where it is today, even if doing something completely different from what it set out to do.
Venky Ramachandran: Looking at the macro picture, if someone like Vinod Khosla gave you unlimited capital (I know he won’t bet on Agriculture, given his investment genes) to transform Indian agriculture, what three areas would you invest?
Lokesh Singh: First is cold chain. Everyone knows this but I'm not sure what the solution is. I discuss this with my father-in-law monthly. He's a large farmer growing sugarcane because that's the staple crop in Western UP and he doesn't know anything else. What if he starts growing mushrooms? Who's going to sell those? Where?
We know Indian agriculture isn't profitable for small-scale farmers with staple crops. You can't grow staple crops on one acre and be profitable. There needs to be land consolidation, but that's a larger policy issue.
My background in MicroSave suggests doing away with all subsidies. MSP, fertilizer subsidy, agriculture electricity, everything. Just go for direct income support, not per acre but per individual or family basis. Make it universal, maybe 50,000 rupees per person.
What that would do: the person with only one acre gets 50,000 rupees, his livelihood is secured, he'd look for some other job. That takes him out of unproductive agriculture. Someone in the village might take that plot on rent. There's your land consolidation. Once there's consolidation, you can go for mechanization and staple crops.
Those left with smaller plots should go for fruits and vegetables. For that, you need cold chain.
Second area is building marketing cooperatives similar to Amul model for fruits and vegetables. Third is policy reform around direct income support replacing the current subsidy maze.
Venky Ramachandran: What advice would you give to a 20-year-old wanting to embark on a career in agriculture?
Lokesh Singh: I see scope in agriculture as a service. Right now labor is a big challenge across India. If something similar to what Farmart tried with tractors could happen with labor. People who can do pesticide spraying, hired on a service basis rather than permanently.
We need to make agriculture cool again for the next generation. Otherwise, agriculture is greying completely. Only 50+ people are doing it, and youngsters who do it are those who couldn't do anything else. My pet theory was that in India, people who can't do anything else go into teaching. But agriculture comes even below that.
This shouldn't be the case. We need to make it at least one of the life choices, not just the last resort. For that to happen, you have to take away the pain points. Labor shortage is a very big pain point. Farmers don't get people on time, while others in different villages might be unemployed. How do you bridge that gap?
But don't do it as a pure gig economy model like Urban Company. That takes away the dignity of labor. Don't treat them as resources you can move around. Maybe do it as subscription-based or treat them as business partners with dignity. They're doing important work.
Venky Ramachandran: Any final thoughts on the future of Indian agriculture?
Lokesh Singh: We need to document what's working and what isn't. We need to celebrate failures and normalize them.
Venky Ramachandran: The current ecosystem often creates more impact middlemen rather than actual impact organizations.
Lokesh Singh: The key is building sustainable businesses that can run without constant resource mobilization. Whether for-profit or innovative cooperative models, the focus should be on creating real value for farmers while treating all stakeholders, including labor, with dignity and respect.
So, what do you think?
How happy are you with today’s edition? I would love to get your candid feedback. Your feedback will be anonymous. Two questions. 1 Minute. Thanks.🙏
💗 If you like “Agribusiness Matters”, please click on Like at the bottom and share it with your friend.
Share this post