Agrifoodtech innovators in Africa are under constant pressure to build business models and operations that will attract venture capitalists.
But though the ecosystem has witnessed an exponential increase in funding over the past decade — from a paltry $5 million in 2013 to a staggering $636 million in 2022, according AgFunder’s Africa AgriFoodTech Investment Report 2023 — many startups on the continent lack knowledge about investment readiness. Many more operate on radar-less business models.
“There is a large knowledge gap in the African agritech industry on how to become investment ready,” Peter Kraus, program lead at Endeavor South Africa, a global community of high-impact entrepreneurs, tells AgFunderNews.
The drive to help agritechs in Africa become attractive to VCs and build sustainable business models is what drives the African Agritech Scale-Up Program between Endeavor and Dutch entrepreneurial development bank FMO. The two recently extended their partnership for a second African Agritech Accelerator program, which kicks off in January 2024.
AfricaGrow, a fund of funds domiciled in Germany which aims to support small- and medium-sized enterprises (SMEs) and start-ups on the African continent, has also join the partnership.
The partnership will host a cohort of 10 early-stage African agritechs, providing them access to global thought leaders, mentorship and investor networking opportunities.
A first year success story
The continuation of the partnership was a no-brainer for FMO and Endeavor after the initial deal returned impressive results. Six businesses out of 10 in the first cohort completed capital raises amounting to $16 million cutting across pre-angel, angel, pre-seed and seed rounds.
Apart from fundraising, the group posted 60% growth in annual revenues. Meanwhile, five startups expanded into eight new markets across Africa and a total of 55 direct jobs were created. Two startups also joined the Endeavor SA Local Scale Up program designed to walk with them in their long-term growth journey.
“Providing more investment readiness services for scaling businesses is critical in growing the agritech sector across Africa, so we are eager to collaborate with Endeavor and AfricaGrow to provide tailored support to another cohort of promising ventures in one of our key sectors,” said Marieke Roestenberg, FMO ventures program manager.
This next cohort is co-funded through the Entrepreneurial Ecosystem Building component of the FMO Ventures Program Technical Assistance Facility, co-funded by the Dutch government and European Union.
Nigeria’s Winich Farms was among agritechs that managed to secure financing and join the Endeavor SA program during the first cohort. The startup, which leverages technology to connect smallholder farmers to markets and provides financial services, closed a seed round with Founders Factory Africa, Expert Dojo and Angel Syndicate Dubai.
“We had great support in the line of developing a robust marketing strategy, with warm introductions made on the front of digitizing payment to our customers,” stated Riches Attai, Winich Farms’ cofounder and CEO.
Going by the successes and lessons of the first cohort consisting of 10 agritechs businesses operating across 14 African markets, empowering agritechs in terms of funding and business strategy remains at the core of transforming and modernizing the agricultural sector in Africa.
Modernizing Africa’s agriculture: an urgent task
Modernizing Africa’s agriculture is urgent, considering that smallholder farmers in the continent, who produce 70% of the food supply, are quite slow in adopting new technologies even when they are available. This is despite facing emerging challenges like declining productive land and climate change.
For Endeavor and FMO, the first cohort was an eye opener on many fronts. To start with, a total of 74 startups expressed interest in participating in the year-long program designed to address challenges and opportunities facing agritechs, yet the program was open to just 10.
The large number underscored the fact that agritechs in the continent are wrestling with deep systemic challenges that go beyond fundraising, making it difficult to scale and expand into new markets. These challenges cut across leadership and human resource management, marketing and growth strategies, and how to deal with policymakers and regulators, among others.
“The greatest learning of the program is that we had the wrong business model,” said Betrand Foffe, cofounder and CEO of Cameroonian agritech Jangolo.
Being part of the program enabled the startup, which provides quality data to the agro-industrial value chains and facilitates market access through information access, to rebuild its foundation and realign its team. The impacts have been immediate, tripling month-on-month revenues in the first quarter of this year.
A notable trend from the selection process of the first cohort was the dominance of marketplace solutions — an indication that the majority of innovators are concentrating on solving midstream challenges.
However, “Africa needs more scalable innovations that solve a broad range of agricultural challenges beyond the marketplace solution to enhance food security and inclusion,” observes Kraus.
A greater focus on farmtech
The need to broaden the scope of innovations is among the criteria that Endeavor intends to deploy in the selection of the second cohort. Greater emphasis will be on startups offering solutions in areas like precision farming, novel farming systems, farm mechanization and equipment, value add services for farmers including insurance and access to finance, farm management software and sensing among others. Further to this, agri-adjacent solutions are also being considered.
Apart from expanding the scope, Endeavor seek to attract founder-led startups that are scalable, are already well established in terms of operations and from a broader set of African countries.
Targeting more African countries is essential. Over the past decade, four countries namely Kenya, Nigeria, South Africa and Egypt have dominated funding, attracting 95% of the $1.76 billion that VCs have pumped into agrifoodtechs across the continent.
For Africa’s agritechs, the continuation of this partnership promises to be a game changer in terms of offering year-long insights on business strategy and growth, helping them become investment ready through Endeavor’s mentorship model.
Alison Collier, Endeavor South Africa’s managing director, shared her enthusiasm, “It’s wonderful for Endeavor to be joining forces with FMO and AfricaGrow and work together to drive growth in the Agritech sector of Africa – enhancing food security and driving local revenue and job growth across the continent. We are excited to continue our work with promising African agritechs – connecting them to founders, investors and mentors in Endeavor’s global network and accelerating their growth.”
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