Nigerian agritech startup Releaf secures $4.2M to scale its food processing technology – TechCrunch

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The space between their farms and the closest processor is essential for smallholder farmers who have to course of their crops. And although Nigeria’s meals processing programs have a eager resemblance to the West with respect to massive factories and large economies of scale in high-demand cities, farmers nonetheless undergo from poor logistics networks.

With distance and logistics issues, farmers’ crops can go dangerous and when factories purchase them, it impacts their processing yields and value. Farmers, witnessing post-harvest loss, additionally receives a commission much less and miss the chance to spend money on their crops manufacturing.

Nigerian agritech startup Releaf is fixing this by constructing proprietary {hardware} and software program options to make these farmers and meals factories extra environment friendly and worthwhile. In the present day, the corporate is saying that it has raised $2.7 million in seed and grants in direction of this effort.

Pan-African targeted enterprise capital companies Samurai Incubate Africa, Future Africa and Consonance Funding Managers led the spherical. Particular person traders like Stephen Pagliuca, the chairman of Bain Capital and Justin Kan of Twitch additionally participated.

As well as to the seed spherical, the agritech startup secured  $1.5 million in grants from The Problem Fund for Youth Employment (CFYE) and USAID.

Based by Ikenna Nzewi and Uzoma Ayogu, Releaf focuses on worth chains the place smaller factories are arrange close to smallholder farmers. This enables them to get higher processing yields and fewer logistics prices; ultimately, the farmer has more cash to work with.

When the pair began the corporate in 2017, the concept behind Relead was not concrete but because the staff, based mostly within the U.S., had not found out product-market match.

First, it deliberate to extend productiveness in Nigeria’s agricultural sector utilizing software program. Even after graduating from Y Combinator’s summer time batch that yr, Releaf toyed round with concepts round commerce finance and a market for patrons and sellers of agricultural merchandise.

The staff would get a clearer image of what it wished to construct when the founders moved again to Nigeria. The Individuals of Nigerian descent toured throughout 20 states and studied totally different worth chains for crops recognizing inefficiencies that would be solved by expertise.

“We took a way more broad strategy to what the answer can be, however we actually wished to determine on a particular crop to work in. And we discovered that chance within the oil palm sector,” Nzewi stated to TechCrunch in an interview.

The oil palm market in Nigeria is a $Three billion one with over Four million smallholder farmers cultivating farms the place these crops are planted.

These farmers drive 80% of the manufacturing of oil palm. However because the trade is kind of fragmented, they’ve many challenges processing the oil palm as a result of it’s a crop that requires severe processing energy to extract vegetable oil from it.

Releaf

Picture Credit: Releaf

Farmers sometimes undergo this course of through the use of rocks or inappropriate {hardware} — ineffective processes that result in low-quality oil palm largely unfit as enter for high-quality vegetable oil manufacturing.

Nzewi says the staff noticed a chance and got down to construct a expertise to assist farmers crack oil palm nuts. The consequence was Kraken, a proprietary patent-pending machine.

So right here’s how the corporate’s enterprise mannequin works. Releaf buys nuts from the farmers, then makes use of the Kraken to crack the nuts and crush the kernels into vegetable oil. Releaf then sells the vegetable oil to FMCG processors and native producers, primarily in Nigeria’s south-southern area.

“Nigeria has about 60% extra demand for vegetable oil than it does provide. And it cannot be met as a result of provide shortfall with imports as a result of the federal government banned the importation of vegetable oil. So there’s a have to take these smallholders who’re driving 80% of manufacturing and make them extra environment friendly in order that we are able to have a greater stability of provide and demand for vegetable oil,” Nzewi stated concerning the ache level Releaf is addressing.

However nonetheless, why does the corporate suppose it could actually break right into a aggressive Nigerian vegetable oil market with hardly differentiable merchandise?

Nzewi explains that the reply lies within the high quality of merchandise. Sometimes vegetable oil is pushed by a free fatty acid (FFA) metric that measures vegetable oil’s impurity. The CEO claims that whereas the trade commonplace is about 5% FFA, Releaf produces at 3.5%.

Regardless of having an edge in high quality of manufacturing, Releaf merchandise are offered on an trade commonplace. Nzewi says that may not be the case sooner or later as the corporate is trying to lastly reap the benefits of its product high quality and enhance costs to enhance its revenue margins.

In response to the corporate, Kraken already processes 500 tonnes of palm nuts. Its software program connects to over 2,000 smallholder farmers who’ve equipped over 10 million kilograms of high quality palm kernel nuts to meals factories.

Concerning growth, Nzewi famous that Releaf has extra urge for food for transferring into new geographies as a substitute of crop choices. His argument is that processing oil palm and cultivation model is an easy technique as a result of its similarities throughout West Africa.

However for crop growth, the corporate might have to seek out crops that may be planted alongside oil palm and follow intercropping or work with crops like soybeans or groundnuts used within the vegetable oil trade.

Releaf

L-R: Uzoma Ayogu (CTO) and Ikenna Nzewi (CEO)

Releaf will use the seed funding to develop expertise and deploy it to smallholder farmers, Nzewi tells me. Then the $1.5 million in grants will focus on offering working capital financing to those farmers. He provides that Releaf has run financing trials already this yr the place it has elevated smallholder incomes by three to 5 instances.

We predict there’s a actually nice alternative to deliver each bodily expertise and monetary providers to those communities to make them extra productive. And it’s sort of central to our thesis,” the CEO stated. “We consider that our good factories can function an financial pillar in these rural communities and make it simpler for us to provide these communities with different providers that they’ll discover precious like entry to working capital, fee for training, and entry to insurance coverage providers. So we see the meals processing as like step one it cements us within the worth chain.”

Earlier this yr, agritech startups like Gro Intelligence and Aerobotics raised big sums of enterprise capital and confirmed the sector’s promise in Africa. Nevertheless, enterprise capital has slowed down over the previous few months and Releaf’s funding brings that highlight again to the sector, albeit briefly.

Rena Yoneyama, the managing associate at Samurai Incubate Africa, stated Releaf’s novel strategy units it except for different agritech startups the enterprise capital agency has engaged with.

We consider the agency’s thesis on decentralizing meals processing would have a powerful match with Africa’s financial growth panorama for the following few a long time. Ikenna and Uzo are the proper founders to disrupt this market in Nigeria and past. We are thrilled to again them as they innovate in offering each agro-processing and monetary providers to rural communities and farmers,” she added. 

Talking on the funding as nicely, Iyin Aboyeji, normal associate at co-lead investor Future Africa stated, “…The staff at Releaf is constructing the agro-allied trade of the long run from the bottom up, beginning with palm oil which they’ve developed a novel expertise to mixture, deshell and course of into crucial elements like vegetable oil and glycerine. Future Africa is delighted to again Releaf to construct the way forward for fashionable agriculture.”

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