Start-up of the week: in Nigeria, Farmcrowdy sponsors farms
In just two years, Farmcrowdy, a company founded by Onyeka Akumah, raised $ 7 million, which helped finance nearly 8,000 farmers in Nigeria. A model that has convinced the American accelerator Techstars with which the start-up raised $ 1 million, and will soon be extended to Mali and Ghana.
Onyeka Akumah is not his first start-up when he launched Farmcrowdy in 2016: in the space of ten years, he participated in the creation of many renowned companies in Nigeria, including the African giant of the -commerce Jumia and Travelbeta, a Nigerian flight booking service.
Trained as an IT engineer in India, he decided to put his skills to the service of agriculture at a time when the administration Buhari, just elected, promises a strong support to the sector.
He and his co-founders, Ifeanyi Anazodo (vice president of data and intelligence), Jimoh Maiyegun (technical director), Akindele Phillips (chief financial officer) and Tope Omotolani (director of operations) note that nearly 38 million small farms in Nigeria have There is a huge need for funding, training and structuring, but the entrepreneurs who offer these services encounter too much information bias with farmers, and lack the time to carry out field monitoring. The team then decides to position itself as an interface and starts up what will soon become a “crowd of farmers” – Farmcrowdy.
The start-up offers everyone – usually urban assets between the ages of 25 and 40 – to finance a farm on a harvest cycle, with an annual return on investment of between 22 and 35%. The farms selected are small (1 to 3 hectares) and have untapped production capacity due to lack of capital and outlets. The sponsor thus bears the full cost of operating the additional agricultural units, whether they be maize, rice, cassava or poultry farms.
Throughout the harvest cycle, the farmer is accompanied by the start-up who trains him in modern farming techniques, while the sponsor receives twice a week photos, videos and reports on the progress of crops. Farm tours are also offered to investors who would like to visit the field.
Once the harvest is sold, the initial investment returns to the sponsor while the profit is divided between the farmer (40%), the investor (40%) and the start-up (20%). The average investment per unit is 95,000 naira (235 euros), the two main parties earn on average 9,000 naira per unit, which is half the minimum wage in Nigeria.
And if it works so well, it is because the young push has managed to remove the trust bias while bringing a great added value to farmers. The general manager smiles when asked about the methods that lead to success. “It works because we are giving our farmers a yield of 0.5 to 6 tonnes per hectare,” he says.
Its teams in the field work primarily on training and the fight against bad practices (seed often erratic, lack of care – weeding and fertilizer – during the shoot …). Farmcrowdy also brings mechanical equipment and tractors.
In a second step, the program ensures market access and assists farmers in negotiating a fair price for their crops. “Many middlemen in Nigeria have become rich on the backs of farmers, buying at ridiculous prices to sell at a high price! We bring them to the negotiating table, “says Onyeka Akumah.
7 minutes to find a sponsor
The co-founder of the start-up also explains that the funding is adjusted to the harvest cycle: farmers are no longer forced to sell their production before term or barely harvested to ensure the welding: a margin that allows them to sell at the moment timely by maximizing their profits.
Field work that pays off: the return on investment for sponsors is between 22 and 35%, when farmers tripled – at least – their average income. A win-win partnership that is confirmed by the increasing attractiveness of the model: if it took six weeks to raise the $ 2,000 required to finance the first farm, the last lot proposed to $ 100,000 has gone in 7 minutes!
71% of sponsors choose to finance a second harvest, quintuplanting their stake, while those who invest for a third season multiply their investment by 10. The interest is similar on the side of farmers, who have gradually converted to the model. Seeing the success of the first demonstration farms: “Our results are our best educational tool: farmers see that beyond inputs and market access, we train them in modern farming practices. They want to be part of it, “says Onyeka Akumah.
In 2019, focus on Mali, Ghana and A-Series
With 45 employees, Farmcrowdy received support from Nigerian investment fund Niche Capital in its second month of operation for $ 60,000, before being selected by the iconic American Techstars accelerator for a three-month program in Atlanta. Nigerians raised their first million dollars during the Demo Day, with US investment funds Techstars Ventures, Cox Enterprises and Social Capital.
With more than $ 7 million invested over two years, Farmcrowdy has supported 8,000 farmers on 8,500 cultivated acres across 10 states in Nigeria. Named Nigerian tech-start-up of the year in 2017, it has grown by 188% in fiscal 2018, with an income of $ 110,000. The serial entrepreneur targets $ 7 million in sponsorship in 2019 and $ 12 million in 2020 to support nearly 15,000 farmers.
Farmcrowdy’s goals for 2019 are not only financial: the team plans to launch in other West African countries in the first half, with planned expansion in Mali and Ghana, and why not in Africa? for the end of 2019. For this, a fundraising Series A will be launched later this year, while the start-up loop at the time it is a new round of table to 3 million of dollars.
Agriculture, a sector valued at 110 million dollars in Nigeria
Onyeka and his teams are also thinking of ways to scale up the model, through small farmer cooperatives to help finance an ever-increasing number of farms. The company also intends to open up to corporate investors who would like to have a social impact.
Because that’s what motivates the serial entrepreneur: “The level of emotional connection is very strong. In the beginning, sponsors often come from simple economic interest, but when they receive our reports and see that they earn money while changing someone’s life, it becomes very attractive. ”
Through the Farmcrowdy app, nearly 70,000 Nigerians learn a little more about farming every day. “We make agriculture attractive for people, who find a way to invest without getting their hands dirty,” enthuses the founder of the company. The agricultural sector is the second largest contributor to Nigeria’s GDP, with a market valued at $ 110 billion, according to Onyeka Akumah, who believes his country can go much further: “Countries like Indonesia have yields of 12 tonnes per year. hectare. Production costs are too expensive in Nigeria. We need to train our farmers better and create policies to increase their incomes: then we will be able to compete on prices. ”