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

The distance between their farms and the closest processor is essential for smallholder farmers who want to course of their crops. And although Nigeria’s food processing methods have a eager resemblance to the West with respect to huge factories and large economies of scale in high-demand cities, farmers nonetheless endure 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 worth. 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 food factories extra environment friendly and worthwhile. Today, the corporate is asserting that it has raised $2.7 million in seed and grants in the direction of this effort.

Pan-African centered enterprise capital corporations Samurai Incubate Africa, Future Africa and Consonance Investment Managers led the spherical. Individual buyers like Stephen Pagliuca, the chairman of Bain Capital and Justin Kan of Twitch additionally participated.

In addition to the seed spherical, the agritech startup secured  $1.5 million in grants from The Challenge Fund for Youth Employment (CFYE) and USAID.

Founded by Ikenna Nzewi and Uzoma Ayogu, Releaf focuses on worth chains the place smaller factories are arrange close to smallholder farmers. This permits them to get higher processing yields and fewer logistics prices; in the long run, the farmer has extra money to work with.

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

First, it deliberate to enhance productiveness in Nigeria’s agricultural sector utilizing software program. Even after graduating from Y Combinator’s summer season batch that yr, Releaf toyed round with concepts round commerce finance and a market for consumers 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 Americans of Nigerian descent toured throughout 20 states and studied completely different worth chains for crops recognizing inefficiencies that would be solved by technology.

“We took a much more broad approach to what the solution would be, but we really wanted to decide on a specific crop to work in. And we found that opportunity in the oil palm sector,” Nzewi mentioned to TechCrunch in an interview.

The oil palm market in Nigeria is a $3 billion one with over 4 million smallholder farmers cultivating farms the place these crops are planted.

These farmers drive 80% of the manufacturing of oil palm. But for the reason that business is sort of fragmented, they’ve many challenges processing the oil palm as a result of it’s a crop that requires critical processing energy to extract vegetable oil from it.

Releaf

Image Credits: Releaf

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

Nzewi says the staff noticed a chance and set out to construct a technology to assist farmers crack oil palm nuts. The outcome 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% more demand for vegetable oil than it does supply. And it can not be met due to supply shortfall with imports because the government banned the importation of vegetable oil. So there is a need to take these smallholders who are driving 80% of production and make them more efficient so that we can have a better balance of supply and demand for vegetable oil,” Nzewi mentioned concerning the ache level Releaf is addressing.

But nonetheless, why does the corporate assume it will probably 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. Typically vegetable oil is pushed by a free fatty acid (FFA) metric that measures vegetable oil’s impurity. The CEO claims that whereas the business normal is about 5% FFA, Releaf produces at 3.5%.

Despite having an edge in high quality of manufacturing, Releaf merchandise are offered on an business normal. Nzewi says that may not be the case sooner or later as the corporate is wanting to lastly benefit from its product high quality and enhance costs to enhance its revenue margins.

According 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 food factories.

Regarding 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 a simple technique due to its similarities throughout West Africa.

But for crop growth, the corporate may have to discover crops that may be planted alongside oil palm and apply intercropping or work with crops like soybeans or groundnuts used within the vegetable oil business.

Releaf

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

Releaf will use the seed funding to develop technology and deploy it to smallholder farmers, Nzewi tells me. Then the $1.5 million in grants will focus on offering working capital financing to these 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 think there’s a really great opportunity to bring both physical technology and financial services to these communities to make them more productive. And it’s kind of central to our thesis,” the CEO mentioned. “We believe that our smart factories can serve as an economic pillar in these rural communities and make it easier for us to supply these communities with other services that they can find valuable like access to working capital, payment for education, and access to insurance services. So we see the food processing as like the first step it cements us in the value chain.”

Earlier this yr, agritech startups like Gro Intelligence and Aerobotics raised enormous sums of enterprise capital and confirmed the sector’s promise in Africa. However, 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 companion at Samurai Incubate Africa, mentioned Releaf’s novel strategy units it apart from different agritech startups the enterprise capital agency has engaged with.

We believe the firm’s thesis on decentralizing food processing would have a strong match with Africa’s economic development landscape for the next few decades. Ikenna and Uzo are the perfect founders to disrupt this market in Nigeria and beyond. We are thrilled to back them as they innovate in providing both agro-processing and financial services to rural communities and farmers,” she added. 

Speaking on the funding as properly, Iyin Aboyeji, common companion at co-lead investor Future Africa mentioned, “…The team at Releaf is building the agro-allied industry of the future from the ground up, starting with palm oil which they have developed a novel technology to aggregate, deshell and process into critical ingredients like vegetable oil and glycerine. Future Africa is delighted to back Releaf to build the future of modern agriculture.”

#Note-Author Name – Tage Kene-Okafor

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