Desmond Koney knew the fundraising journey for his startup was going to be tough. His company, Complete Farmer, operates an agribusiness marketplace for Ghana’s under-financed and under-resourced farmers. Financing for agrifoodtech ventures like his is also scarce in Ghana.
“Many agrifoodtech solutions do not get the necessary funding, compared to fintech,” Koney tells AFN.
Fintech ventures on the continent raised $2.3 billion—more than half of all venture capital committed to African startups in 2021. Of the roughly $160 million in agrifoodtech investment that went to African startups last year, ventures in Ghana inked just $3 million in funding.
Complete Farmer was one of the lucky ones. The startup secured $400,000 in a seed round backed by Africa-focused venture fund Ingressive Capital last March.
For venture investors wanting to see economic and social returns in Africa, no sector compares to agriculture. More than 70% of Africans earn a living somewhere in the agrifood value chain; the sector is responsible for about 20% of the continent’s GDP.
Koney blames the scarcity of capital on the infrastructure-heavy nature of the agriculture sector. Unlike financial services, he explains, agriculture requires the production, processing and movement of physical goods, which makes agriculture more asset and capital intensive.
Young market woes
Fundraising is harder in a market like Ghana, where the entrepreneurial ecosystem is younger than in its larger-market peers like Nigeria, Kenya, South Africa and Egypt. Investors find fewer opportunities, or few large-ticket opportunities. Lack of familiarity with the West African market also keeps them away.
Overcoming Ghana’s agrifoodtech investment requires better investor education around the opportunities—even those that seem very early-stage, says Dennis Matangira, managing director of Zebu Investment Partners, a private equity firm focused on Africa’s agrifood sector.
“We have developed a platform that assists with the dissemination of information to help investors and private funds understand the opportunity, as well as positioning that will most likely give them a return on their investment while making an impact,” Matangira explains.
There are exceptions. Early-stage funds like Ingressive Capital, Diaspora Ventures and AV Ventures have cut early checks to Ghana’s agrifootech startups. For the most part, founders are forced to bootstrap or search or alternative forms of capital, like startup grants, for years at a time.
Nana Opoku considered the odd of raising venture funding for his startup, Grow For Me, and decided to get creative instead. The commodity trading and crowdfunding platform for Ghana’s under-capitalized farmers tapped commodity traders on the Ghana Commodity Exchange as a financing stream. The company has also secured a small infusion of angel funding as well as a $100,000 grant from Google’s Black Founders Fund.
With these resources, Grow For Me has been able to raise $150,000 for farmers on its platform and transact about $250,000 in commodities through its platform, Opoku says.
The lack of venture funding for Ghana’s agrifoodtech ventures isn’t just a supply-side problem. Startup founders themselves are unfamiliar with how venture capital works, and whether it’s the right option for growing an early-stage business.
Moses Mallaghan founded Agro Innova to design basic digital tools to help crop and livestock farmers monitor and manage their fields and animals. The company started in 2017 and had sold its tools to several hundred farmers. But Mallaghan says the company is not yet ready to seek venture capital.
“Investors have shown interest but we have no intention to raise any funds for the next two years,” he says. “We have some targets that we would like to reach as a company before we go into any equity funding rounds.”
Instead, the five-year-old company is getting by on early-stage grants and resources from incubator programs like the Meltwater Entrepreneurial School of Technology, or MEST Africa, through which Agro Innova received $80,000.
Complete Farmer used a $50,000 cash prize that it won in a pitch competition to help it scale to the point that venture funding became an option. Talmond, a producer of tropical almond milk, received a small grant from Well-Fed World before going on to raise venture funding from Sustainable Food Ventures.
Says founder Ashiaki Tei, “We intend to continue building and looking for grants to supplement our revenue.”