Editor’s Note: I re-posted this with a full transcription of the podcast as my guest Samir Ibrahim was recently named on the Forbes 30 Under 30 list for energy. Congratulations Samir!
Samir Ibrahim is CEO and cofounder of SunCulture, a solar-powered irrigation technology company operating in Kenya. The startup sells drip irrigation kits that use solar energy to pump water from any source.
I’ve been talking to Samir since SunCulture won a grant from USAID’s Powering Agriculture challenge last December, and our conversations have often centered around the challenges that startups face in getting their technologies adopted in the developing markets of Africa.
Smallholder farmers have limited cash flow to be able to purchase new agtech, so SunCulture, and other agtech startups operating in the region, have had to get creative in how they sell their wares. Namely, some startups are seeing the need to provide farmers with some sort of financing to enable them to buy their tech. They are filling a gap left by local African banks, which typically lend just a few percent of their total loans to agriculture, despite it employing the majority of the African workforce.
In this week’s podcast, I speak to Samir about the evolution of SunCulture from a pure technology play to one offering farmers asset financing to help them purchase new technologies that would otherwise be out of reach. Samir also talks about the diverse and innovative advertising strategies the startup has employed to get in front of as many farmers as possible. He also speaks about the different investors he’s approached and gained investment from and gives funding advice to other agtech startups that are building technologies for Africa’s agriculture sectors.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
Is providing asset finance and a sort of one-stop-shop for farmers a pivot for SunCulture? Samir says definitely not. Improving the lives of smallholder farmers was always his mission.
Find out more about SunCulture’s journey and its approach to gaining investment by listening to our podcast below. As ever, feedback is welcome and hope you enjoy it!
Here’s an abridged transcript of our conversation:
Louisa: Today I’m going to be speaking to Samir Ibrahim who is the co-founder and CEO of Sun Culture, which is a solar powered irrigation kit technology company operating in Kenya. I’ve been speaking to Samir since last December after Sun Culture won a grant from US AID’s Powering Agriculture Grand challenge. Through various of our different conversations we’ve talked about the challenges that agritech start-ups face in getting their technologies adopted by smallholder farmers. Obviously, there are limitations to the amount of investment that small older farmers can make in new technologies, so from my conversations with Samir and other agritech startups operating across the African continent, it seems to me that they need to be a little bit more than a pure technology play if they’re to ensure that their technologies are deployed and adopted at scale.
Recently, when I was at the Social Capital Markets conference in San Francisco someone who is familiar with Sun Culture told me that the startup is going through a bit of a pivot in that they’re offering farmers some asset finance for them to be able to purchase their technologies. Today, I’m going to catch up with Samir to find out what’s going on.
Hi, Samir. Is it true that you’re going through a bit of a pivot at the moment?
Samir: No. I don’t like the word pivot because pivot means there’s change in direction for the actions and missions of the company. We started a company with the sole intention of figuring out how to ensure farmers weren’t poor anymore. It bothered us to know that three fourths of the world’s poorest and hungriest people are smallholder farmers. Ironically, they actually grow the very thing they need to escape from both hunger and poverty, which is food. Then we started realizing that a better answer is now combining product services and financing because a lot of products exist, but farmers don’t have the access to finance. The narrative has just been going deeper and deeper and trying to solve this big problem of farmers being poor and not being able to access products and services and capital.
I wouldn’t call it a pivot. I would call it an addition to the business model. We’re just building on what we started and we’re very excited at where we figure this out at a time when people started to see it as well. We have a lot of people who are supporting us and a lot of people who think that we can really pull this off because when you come to financing, you can’t just take an approach that banks do and just sort of give money or lend money. You have to do the product and services, which is our original “business model”. I think it will work out very well.
Louisa: Well, let’s back up then and talk about SunCulture as it was in the beginning. How did you guys get to where you are today?
Samir: Charlie and I actually started this company through an NYU business plan competition. They had an NYU Stern Social Venture Competition. We got second place and that pissed us off a little bit. So to prove to everyone else and to ourselves that this would work, we decided to launch a pilot. We went to Kenya and we said, “Let’s try to answer a few questions and if we get a yes for all three questions, we’re going to do this.” The three questions were, does this make economic sense for a for-profit company? Does this make economic sense for a farmer? Does the technology work? All three were yes, so we packed our bags and five weeks later, we moved to Nairobi.
Louisa: How did you know each other and how did you come to do this competition together?
Samir: Charlie’s best friend growing up’s girlfriend, was a good friend of mine from university. Charlie approached me with this technology idea, combining solar-powered water pumping with drip irrigation, just the tech side of it when we were at a bar in New York and he said, “Hey, I have this idea. It’s a tech play. I want to put it through this business science competition. You went to Stern. Could you sign this piece of paper for me?” I wasn’t even involved in the company at the beginning but I signed the piece of paper to allow him to enter the competition and when he made the semi-finals, they required an NYU student to pitch with him so then he dragged me in to pitch with him. When I started pitching with him, I realized: “This could actually work” and it all went from there. So, it was actually by fluke that I got involved.
Louisa: What was your personal career direction before that then?
Samir: Interestingly enough, and Charlie didn’t know this at the time, my direction was trying to figure out the private sector’s role in economics development in East Africa. I wanted to do that because my family is from the region so I’ve always been drawn to the economic challenges that people in East Africa have. The direction I was going was through real estate finance. I was working at PwC in the real estate finance group. Then my plan was to go learn about infrastructure investing and then use that to impact the development of East Africa. This was very much in line with what I wanted to do directionally for the rest of my life. How do you use the private sector to solve the big problem for people who need it the most? I was drawn to this because my family worked really hard to make sure that I had a life that they didn’t have.
But it was very serendipitous because Charlie didn’t know this at all. Charlie had spent some time in West Africa. He’d been to Senegal twice around 2007. His family had been doing a lot of work in terms of literacy in the region. He was also drawn to the region, the problems the region faced as well. We didn’t know this about each other when we met. We didn’t know that we had a very complementary skill set. He comes from a mathematics and engineering background. I come from a development economics and finance background. He went to engineering school. I went to business school.
Louisa: So it was a marriage made in heaven?!
Samir: Yeah, it really was and we didn’t know this at all. When we started figuring this out, we both looked at each and we said, “We have to do this.” We didn’t know each other very well. We had maybe spent 40 hours total with each other before we decided to work on this full time together in Nairobi. There’s been no looking back at all since then.
Louisa: Had you ever thought about agriculture as being an important sector within your mission? I wrote an article the other day about how agritech is an impact investment and I think there’s a lot of people starting to realize the ways that technology can massively revolutionize farming industries across the world, and with that, empower local people and bring employment up and so on. Did you think in those terms about agriculture at all, or not really?
Samir: Oh, absolutely. It’s really funny sometimes you never know how big of an impact a sector can have on the development of the larger population until you’re sitting in it. It’s easy to see the problems and how massive an impact agritech can have in agriculture because every day, people interact with agriculture. Every day people are eating food. Once you start digging deeper and really understanding how disconnected the value chain is and how unstable policies can affect large numbers of people, then you start digging into the bigger problems of agriculture. You see how technology can be a platform to raise a massive population out of poverty while solving a lot of other problems. I particularly like the combination of renewable energy and agriculture because it works on a lot of things.
Sometimes it’s hard to stay focused, but we try to stay focused on the end user, the smallholder farmer. If we can make sure that the small holder farmer makes more money, that means that she’s growing more high value fresh fruits and vegetables and selling them. Which means there’s more nutrition. That means she’s using proper irrigation methods, which means she’s reducing water usage. There are so many things that trickle out from there, but the way we keep our focus is by focusing just on the end user, just how can we improve the livelihood of that smallholder farmer?
Louisa: So how do agritech businesses like SunCulture go about getting these technologies into the hands of these farmers? I know that one of the main challenges for agritech entrepreneurs across the world, in the developed and developing markets, is adoption. People have been using the same practices for centuries in some instances. Obviously, it’s a particular challenge in developing nations where farmers do not have the cash flow to invest in new technology so I suppose this is where your new model comes in? Perhaps you can talk about some of the ways that you’ve seen other entrepreneurs get technologies into the hands of smallholders?
Samir: Yes. That’s a big question. When we entered the market, we were the first company to commercialize solar power drip irrigation in Africa. When you’re the first company to bring a new technology, plus a new business model into a nation, agritech market, it’s very difficult to convince people to buy things from you, especially when they’re expensive. We spent a lot of time educating farmers and what we realized is that farmers need to see it to believe it. We pushed really hard to get our first 10 – 20 systems out. After that, uptake started snowballing when people started trusting in our product and seeing it in more places. How do you make sure people hear about you through different channels? How do you disseminate the right information at the right time to the right people?
Once we started to convince people that this is a great technology and that it works, the next biggest thing that we had to figure out was the problem of access. We look at access in three different ways. Access to product: how do people physically get the product? Access to information: how do they hear about the product and learn about the ways to use the product? Then access to finance. Physically getting a product in rural Africa is not easy. Infrastructure is not as nice as it is in Boston, where I’m sitting right now. When it rains, you can’t get to farms. Drip irrigation used to be very bulky as well. You would need a pickup truck to move one acre of irrigation anywhere in the country. We decided to attack the access to product problem by redesigning the product. Now we have an irrigation kit that fits in the back of a motorcycle. It’s sort of an Ikea-like irrigation kit that can fit on the back of a motorcycle and get delivered to a farm in one day. Instead of going to pick it up themselves, let’s do next day delivery. Let’s do delivery faster than Amazon Prime.
Louisa: Were you building a bulkier version before and then changed it?
Samir: Yeah, so the standard drip irrigation kit uses a lot of materials that are not easy to collapse or fold or roll up. That’s one of the problems. Another thing is that drip irrigation design used to be very complicated. No one had really created a way to design irrigation very quickly. Charlie went to the drawing board and just thought fundamentally, how do you move water? How do you move water in this region? What are the challenges that people have? Why do people use materials that are very stiff and hard like PVC pipe? How can we switch this material into something that’s a little bit more easy to transport, maybe lay flat material? Why don’t people do that?
When you have PVC pipe, it’s sturdy. It doesn’t break when you drill it down. How do we take those principles and change the actual design while making sure we keep in mind all the problems and the challenges farmers have when installing the system?
Samir: The second is access to information. How do you figure out how to get a lot of people to learn about you when you don’t have a lot of money because you’re a start up? How do you make sure they trust you? Coincidentally, we started working in Kenya at a time when Facebook was doing a lot work. A lot of times the only access to the internet that farmers had was through Facebook because it was free for them. We actually started advertising on Facebook and doing promotions on Facebook. People would see that on the internet because that’s all they’re looking at. That was the first thing.
The second thing that we spent a lot of time on was marketing language. How to get information to people at the right time through the right channels? We have tried everything. SMS, radio, TV, newspaper, magazine, demo days, house demos, ads on the back of buses. We’ve tried everything.
Louisa: What was the most effective?
Samir: A combination of them all. We figured that there are different things that need to get promoted through different channels, at different times. Drip irrigation work is better through one channel and our solar-powered water systems work better through another channel. Not only that, but they work in different regions differently. Drip irrigation in the central region should be marketed through one channel, whereas drip irrigation in the west region should be marketed through a different channel. Now we have a really good idea of how to message what we want to message through different channels, which took a long time.
Then thirdly we think about access to agronomy information. Less than 2% of all Kenyan farmers ever irrigate. Less than 6% do across the continent. How do we make sure we’re training the farmers in the right way so they get access to information about the crop type, crop stage and location that they’re planting it in? How do we set up an SMS protocol that gives a farmer the right information at the right time? Combining that with a call center, an in-field agronomist. We have to take a really big, holistic bulky approach to making sure farmers get the right information. But when they get the right information, they do much better. Our farmers right now are making about $14,000 an acre of year, which is a lot of money for a smallholder farmer. We haven’t seen a smallholder irrigator tech give that number to anybody. It’s not just because we have good technology, but we also give the right information that helps farmers use our technology well.
Louisa: Are you giving them that information after they’ve purchased your kit?
Samir: Yeah. The last thing and this is the topic that we started talking about was actually the financing, which we have found is the biggest problem smallholder farmers face on the continent of Africa. Despite 65% of Africa’s workforce being involved in agriculture, less than 1% of all outstanding bank loans go to the ag sector. What’s worse, is when you look at this 1% of loans that farmers get, they’re very small, short term, unbundled and require high payments up front. You have farmers that are getting a few hundred bucks as a loan that they have to pay a high application fee for and then repay back very quickly and they don’t get any services with it or any products; they just get the money. Now, we learned from before in our early days of SunCulture, that farmers need a bundled solution in order to do well because they’ve never irrigated before.
We decided to take that 1% number and change it. We are actually partnering with Shell Foundation and Syngenta on a pay as you grow pilot. We are bundling high quality inputs, seeds, fertilizer, crop protection, crop insurance with our high quality, solar powered irrigation technology plus installation training, agronomy support and after sales support in one bundle. Financing it over two years, and allowing farmers to make variable payments. During the growing season, when they’re not making so much money from agriculture, they don’t have to pay very much money, and when they harvest, they pay more money. We’re trying to make a smallholder financing solution keeping the smallholder farmer in mind for the first time.
There was a report that came out a few months ago that said that the agriculture finance shortfall in Africa is $150 billion. We’re trying to address that and then take this model and apply it to the rest of the world. We think the trick’s going to be creating a payment process and an operating model that works for farmers and then figuring out what our escalation process needs to be to make sure farmers do really well.
For us, farmers are taking a bet with us. They’re saying, “Okay, you’re not replacing any of my costs.” Unless they use a fuel pump and not many do. “I’m going to put a bet that I’m going to do well and then I’m going to pay you back from my proceeds.” That’s a huge step to take for a farmer, especially a farmer who has never taken a loan out before, who’s never had a bundled approach. Who’s saying, “Hey, I’m going to take this bundled loan, $6,000 and I’m going to trust you to make sure I do well.” That’s a trust we’re very grateful to get from farmers and it’s our job to make sure that they do extremely well.
Louisa: Fantastic, but as a startup, yourselves, there’s a big upfront cost for you in essentially deploying a bunch of these irrigation kits and then hoping the money comes in over a two year period. How are you de-risking that for yourselves?
Samir: We pay really close attention to our relationship with the farmers. We’re starting to look at technology that we can use to be more proactive as opposed to reactive in making sure that crop health is high. Looking at a lot of technology that you write about and how do we take that and apply it to the context of Africa? That’s one way we’re doing it.
Another way is just by having really good partners teach us about assessment process. How do we figure out the ability and intent for someone to pay? How do we make sure that we keep a really close eye on that to make sure we work with the farmer to do well? That’s how we de-risk it. But at the end of the day, we’re lending and when you lend, there’s a risk. But I think we’re best suited out of anybody in the world to make sure that it works out.
Louisa: Tell us a bit about your investor base and how you’ve come to find them and how that may have progressed over the years. Do you have any particular plans to go back for more funding soon after this pilot phase?
Samir: When we first started the company, Charlie and I took loans from our families. We went to a lot of different members of the family. We took out loans. It started with a very, very little amount of money, relative to how much we’ve actually needed to run the company. We made a very little amount of money last for a couple of years. It was quite difficult for us to receive financing in the early days because no one believed this would work. This was something that was very new. This was something that was very risky to a lot of people. For the first two years, we survived on that loan and then we actually started drawing out on grant capital. We found that grant and donors started believing in the model that we were employing and started looking at not only agriculture energy, but the combination of the two. We started drawing on grant capital at the beginning of 2015, which essentially helped us unlock inventory.
Then we started attracting money from individual investors and VCs. I think that the model that works in our space is to start with donors because they de-risk an investment for a private investor. I think the private investment space in Africa is not very mature. I think that the investing space needs to be a little bit more quicker, a little bit more robust, a little bit more willing to take risks. But until that happens, donors catalyze private investments. I think starting with donors and then finding a few angel investors who are well-learned in the space. Then using them to parlay your VC and higher quality international investors. That’s the model we’ve used and I think that’s a really good model. I think that model works well for companies who are trying to address challenges that no one has addressed before. Because individual investors and VCs think that when they see risks, they take a long time to conduct diligence. When you take a long time to conduct diligence, it’s tough for the company. We started with that.
Louisa: Have you got any VC investors yet, or is that your next step?
Samir: Yeah, we’re actually very close to closing a round that we’ll be announcing soon. That does have a couple VCs on the cap table. We are seeing venture capital interest, which is really nice. We’re seeing interest from investors with more experience, which is really great. This space is really interesting right now because you’re seeing a lot of private equity plays in the social impact space. That’s really good news for the space. I hope that continues and we see an uptick in the types of investors and the quality investors that are coming into the market right now. It’s a lot different than when we last spoke [6 months ago].
Find out more about the investor landscape by listening to the full podcast.
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Image credit: A Kenyan farmer using SunCulture’s drip irrigator.