Varaha is attracting investor interest as an end-to-end developer of carbon credits it generates in partnership with thousands of smallholder farmers who produce crops on over 700,000 acres of land in India, Bangladesh, Nepal and Kenya. are collecting.
The voluntary carbon offset market is expected to reach $250 billion by 2050, up from $2 billion in 2020, according to estimates from Morgan Stanley. However, awareness of the financial and environmental benefits associated with carbon credits is low.
In general, carbon offsetting occurs when an organization or business engages in activities that reduce its CO2 emissions, such as replacing fossil fuel-based energy sources with renewable energy sources, or (rarely) through technologies such as carbon capture. Awarded for removing CO2 from the atmosphere. . The polluter then buys these offsets to counteract the CO2 he is emitting, claiming that he is reducing his emissions or that his carbon emissions are heading towards “net zero” can. This will become increasingly important as awareness of the role of CO2 in global warming grows among the public and investors in listed companies, and as governments begin to face political pressure to reduce their CO2 emissions. It has become.
But not all carbon offsets are created equal, and the market is largely unregulated. There have also been widely reported cases in which carbon credits have been granted to projects that have made little contribution to reducing emissions, leading to increased market uncertainty and downward pressure on prices.
Large organizations in the universe find it difficult to operate at the grassroots level. Some large carbon credit companies are offering renewable energy projects, such as moving to EVs or installing solar panels to generate electricity, because measuring and monitoring carbon emissions requires fewer resources and less effort. I like to work on it. Similarly, industry giants in sectors as diverse as automotive, chemicals, and pharmaceuticals are generating their own naturally derived carbon credits, leading to disputes and criticism over their offsets.
Enter Varaha.
Agricultural engineer Madhur Jain co-founded Varaha with Ankita Garg (COO) and Vishal Kuchanur (CTO) in 2022 after spending 17 years academically and professionally working with Indian farmers. . Years before starting Varaha, Jain was working with Nobel laureate Michael Kramer as country director for India at the social enterprise Precision Agriculture for Development, when he was inspired to limit the burning of crop residues. Recognized the need to encourage farmers. winter. This was premature, as at the time there was no methodology to generate carbon credits from agriculture. But the 34-year-old entrepreneur decided to start his venture after the methodology started appearing in developed markets, including the US and Europe.
Varaha is currently working with over 100 partners across all regions to support the participation of smallholder farmers in following sustainable and regenerative farming practices that lead to reduced emissions and quantification of soil organic carbon sequestration. I am supporting. This will lead to the creation of nature-based carbon credits, which the startup will sell to mainly European companies.
The startup combines remote sensing, machine learning, and scientific research to quantify sequestration (the safe separation and storage of harmful substances, including carbon dioxide), measurements that limit greenhouse gases from regenerative agriculture, and We have developed a reporting, verification (MRV) platform. Afforestation and biochar project. As a result, these projects help farmers increase productivity, increase crop yields, save water, increase biodiversity, and improve climate adaptation.
Typically, farmers follow certain practices that ultimately lead to carbon emissions. For example, when farmers flood their fields to grow rice, the layer of water breaks the contact between the soil and the environment, creating bacteria that release methane, Jain explained. This is so powerful that rice methane emissions account for 2% of total global emissions today, he said. Farmers can reduce their impact by limiting water use.
In such cases, nature-based carbon credit approaches can help generate more revenue and limit their contribution to atmospheric impacts.
Unlike nature-based credits, carbon credits from renewable energy projects are easy to measure and record and do not involve co-benefits to nature. Therefore, Jain said their price is between $0.5 and $4, which is one-fifth to one-seventh of the price of natural credits. However, selling carbon credits generated from nature, including agriculture, requires additional checks and balances and third-party audits.
Varaha co-founders Vishal Kuchanur, Ankita Garg, Madhur Jain (left to right) Image credits: Varaha
“This is basically like coming full circle in that we identified a problem a long time ago and now we're finding a solution and building towards it,” Jain said in an interview with TechCrunch.
The company has now raised $8.7 million in an investment round led by RTP Global, and the two-year-old startup aims to expand access to carbon credits for smallholder farmers and enter new markets in the coming years. We are striving to
The new funding comes amid an ongoing market downturn that has had a major impact on emerging markets, including India, and has restricted investors from taking different bets.
Varaha works with NGO Verra, which runs a significant carbon credit program, to undergo an audit of its data and measurement practices before generating credits. Jain told TechCrunch that the startup went through an audit process last year, which took seven and a half months.
For agricultural projects, this process also requires bringing in specialized scientists to examine and validate available data models and determine whether they are suitable for local conditions.
That said, rigorous monitoring will result in high-quality carbon credits that can be sold around the world.
Farmers receive 60-65% of the carbon credit sales, while Varaha receives a 20-25% share depending on the carbon credit category, and 10-15% is distributed to partners.
Varach said it has already signed and sold more than 230,000 carbon credits across a diverse project portfolio, with key customers including Denmark's Climate, Germany's Good Carbon and Switzerland's Carbon Future. . It has also attracted interest from financial institutions and technology companies in the US and UK.
Asked why there were no Indian customers for Varaha's credits, given that India is one of the largest carbon emitters, Jain said consumer behavior is changing from European and US companies. The company told TechCrunch that it is encouraging people to voluntarily reduce their carbon emissions. “There are no similarities between India and developed markets… There is a huge fragmentation going on on the ground. Farmers have much less land and farmers have much less income. So that's part of the underlying infrastructure challenge. you need to understand,” she said.
Despite this, the startup sees some interest from India as well.
“I look forward to a lively dialogue within the next six to nine months,” he said. “The willingness to pay premiums exists primarily in Western countries today. So that is our main focus. But in the next four to five years, that trend will change and it will impact India as well. That's what I think.”
Varaha plans to use the new funding to enter five to six countries in the next 12 to 18 months, and has already developed 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 also plans to hire more people with a team of 51 full-time employees and build a sales team across the U.S. and U.K. to strengthen the technology and science focus of half of its employees. We are also aiming for
“We are also looking at other innovative carbon capture solutions at the farm level,” Jain said. “So piloting and building out these solutions is another key area of focus for this fundraiser.”
Jayne's experience in the field and down-to-earth approach gave RTP Global the confidence to lead the Series A round after securing a small angel ticket for the 2022 seed round.
“We watched what he was able to accomplish throughout the year and were very impressed with the results,” RTP Global Partner Galina Chifina told TechCrunch. “The team has made quite a few calls with farmers to see what is happening on the ground, not just in the boardroom.”
Varaha's Series A round also saw participation from the startup's existing investors Omnivore and Orios Venture Partners, as well as Japanese institutional investor The Norinchukin Bank's first investment in an Indian startup. This also includes investments from AgFunder and Octave Wellbeing Economy Fund, a division 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 starting in late 2022.