Varaha helps Indian farmers reduce climate-damaging practices like burning crop residue and flooding rice fields

Varaha It has attracted investor interest as an end-to-end developer of carbon credits, working with thousands of smallholder farmers growing crops on a total of more than 700,000 acres of land in India, Bangladesh, Nepal and Kenya. Produces by doing.

voluntary carbon offset market Will reach 250 billion dollars by 2050 From $2 billion in 2020, according to estimates made by Morgan Stanley. However, awareness of the monetary and environmental benefits associated with carbon credits is low.

Generally speaking, carbon offsets are awarded when an organization or company engages in practices that reduce CO₂ emissions, such as replacing fossil-fuel-based energy sources with renewable energy sources, or (rarely) removes CO₂ From the atmosphere through technologies like carbon capture. Polluters then buy these offsets to combat CO₂ They are emitting, which lets them claim to be reducing their emissions or moving toward “net zero” carbon emissions. This has become even more important due to awareness about CO₂Its role in global warming has increased among the public and public-company investors, and governments have begun to face political pressure to cut CO emissions.₂ emissions.

But not all carbon offsets are created equal, and the market is largely unregulated. There have also been highly publicized examples of carbon credits being awarded for projects that contributed little to reducing emissions, creating greater market uncertainty and downward pressure on prices.

Big institutions in the region find it difficult to work at the grassroots level. Some large-scale carbon credit companies prefer to work on renewable energy projects, including switching to EVs or installing solar panels to generate electricity, because they have fewer resources and less time to measure and monitor carbon emissions. Requires effort. Similarly, industry giants in various sectors such as automobiles, chemicals and pharmaceuticals are essentially generating nature-based carbon credits, leading to conflict and criticism against their offsets.

Enter Varaha.

After spending 17 years academically and professionally working with farmers in India, agricultural engineer Madhur Jain co-founded Varaha in 2022 with Ankita Garg (COO) and Vishal Kuchanur (CTO). Several years before starting Varaha, Jain – while working with Nobel laureate Michael Kramer as their country director for India at the social enterprise Precision Agriculture for Development – ​​started encouraging farmers to limit crop residue burning. The need was realized, which contributes. fog blanket during winter, This was early, as there was no methodology available at the time to create carbon credits from agriculture. However, the 34-year-old entrepreneur decided to start his own venture when these practices started appearing in developed markets including the US and Europe.

Varaha now works with over 100 partners across all geographies, helping smallholder farmers follow sustainable and regenerative farming practices, resulting in emissions reduction and organic carbon sequestration in the soil. This creates nature-based carbon credits, which the startup sells to companies – primarily in Europe.

The startup has developed its own measurement, reporting and verification (MRV) platform that uses remote sensing, machine learning and technology to limit greenhouse gases from sequestration (safely separating and storing harmful substances, including carbon dioxide) and regenerative agriculture. Uses a mix of scientific research. , afforestation and biochar projects. As a result, these projects help farmers increase their productivity, increase crop yields, save water, enhance biodiversity and improve climate adaptation.

Generally, farmers follow certain practices that ultimately lead to carbon emissions. For example, when farmers flood their fields to grow rice, Jain said, the layer of water causes a loss of contact between the soil and the environment and leads to methane-emitting bacteria. It is so powerful, he said, that today rice methane emissions account for 2% of total global emissions. Farmers can reduce that impact by limiting water use.

In such cases, a nature-based carbon credit approach helps generate more revenue and limits their contribution to the impact on the environment.

Unlike nature-based credits, carbon credits from renewable energy projects are easier to measure and record and do not include co-benefits to nature. Thus, Jain said their price was anywhere between $0.5 and $4 – one-fifth to one-seventh the price of nature-based credits. However, selling carbon credits generated from nature, including agriculture, requires additional checks and balances and third-party audits.

“It’s basically like coming full circle in terms of identifying a problem very early and then now finding a solution to it and building in that direction,” Jain told TechCrunch in an interview.

Now the company has raised $8.7 million in an investment round led by RTP Global, as the two-year-old startup seeks to expand access to carbon credits for smallholder farmers and enter new markets over the next few years.

The latest funding comes amid the ongoing market downturn, which has hit startups in emerging markets hard. including indiaand restricted investors from placing individual bets.

Varaha works with the NGO Vera, which runs an important carbon credit program, to have its data and measurement practices audited before credits are generated. Jain told TechCrunch that the startup went through an audit process last year, which took seven and a half months.

For agricultural projects, the process also requires deploying empaneled scientists to go through the available data models and validate them to determine whether they are suitable for regional conditions.

That said, rigorous oversight helps bring about high-quality carbon credits that can be sold globally.

Farmers receive 60% to 65% of the carbon credit sales price, while Varaha takes a cut of between 20% to 25% depending on the category of carbon credit, and 10% to 15% goes to his partners.

Varha said it has already contracted and sold more than 230,000 carbon credits across multiple project portfolios and counts Climate in Denmark, GoodCarbon in Germany and CarbonFuture in Switzerland among its key customers. It has also received interest from financial institutions and technology companies in the US and UK

When asked why Varaha has no Indian customers to its credit despite India being one of the largest carbon emitters, Jain told TechCrunch that consumer behavior is driving companies in Europe and the US to voluntarily reduce their carbon emissions. Inspiring to reduce. “You cannot draw any parallels between India and developed markets. , , There is massive fragmentation on the ground. The piece of land for farmers is very small, and the farmer’s income is very low. So, you have to understand the underlying part of the infrastructure challenge,” she said.

However, some interest is being seen in this startup from India also.

“We hope to have some active conversations over the next six to nine months,” he said. “The willingness to pay a premium exists in much of the Western world today; So, this has been our major focus. But we see this changing and coming towards India also in the next four to five years.

Varaha plans to use its new funding to enter five to six countries over the next 12 to 18 months and has already carved out eight to 10 markets in South Asia, Southeast Asia and East Africa. Some of these markets will be Vietnam, Thailand, Zambia and Tanzania, Jain said.

The startup is looking to hire more people to its team of 51 full-time employees to enhance its technology and science, where half of its workforce is concentrated, and build out a sales team across the US and UK.

“We are also looking at other innovative carbon capture solutions at the farm level,” Jain said. “So operationalizing and building these solutions is another important area of ​​focus for this fundraise.”

Jain’s experience in the sector and his grassroots approach convinced RTP Global to lead the Series A round in 2022 after putting in a small angel ticket in its seed round.

“We saw what he was able to deliver in a year and were very impressed with the results,” RTP Global Partner Galina Chifina told TechCrunch. “The team has talked to farmers a lot. , , Saw what happens not just in the boardroom but on the ground.”

Varaha’s Series A round also saw participation from the startup’s existing investors, Omnivore and Oreos Venture Partners, as well as an early investment in an Indian startup by Japan’s institutional investor Norinchukin Bank. It also includes investments from AgFunder and Octave Wellbeing Economy Fund, an arm of IMC Pan Asia Alliance Group. The new round brings the startup’s total funding to $12.7 million, including a $4 million seed investment from late 2022.