UPDATED: November 12, 2018 to remove Olam from the list of startup companies.
According to the United Nations, agriculture and other “rural activities” are the main source of income for three-quarters of the world’s “extreme poor”.
Every year for UN World Food Day (October 16) the UN Food and Agriculture Organization picks a theme within food and agriculture to bring awareness to on the day. For 2017 the organization is focusing on the challenges that forced migration brings to agriculture.
“A large share of migrants come from rural areas where more than 75% of the world’s poor and food insecure depend on agriculture and natural resource-based livelihoods,” says the UN, underlining the inherent linkage between migrants and smallholder farms all over the world.
According to the UN, migration forced either by conflict and political instability, or economic necessity can exacerbate existing problems in countries and cities that receive many migrants and stress local food systems and economies.
Under today's unique circumstances, AgFunder is re-opening Fund III for a limited time to enable investors to join our mission and invest alongside us as LPs in a second close. Learn more here.
“Creating conditions that allow rural people, especially youth, to stay at home when they feel it is safe to do so, and to have more resilient livelihoods, is a crucial component of any plan to tackle the migration challenge,” says the organization.
Farm technology startups, a subset of the broader AgriFood Tech market, raised $1.13 billion in early-stage funding in the first half of 2017, representing a 56% increase year-over-year, according to the recent AgFunder AgriFood Tech report.
For these startups, targeting developed countries and large farmers makes obvious business sense, but there is a growing contingent of startups looking to make the world’s 500 million smallholder farmers their market.
Here are six startups doing just that.
Stellapps – India
Stellapps is an Indian data collection and analysis stack for the dairy supply chain. Stellapps offers data collection and analytics to every piece of the dairy supply chain with the aim of improving the productivity, and quality of milk, and producing transparent data both for and about the dairy industry.
In 2014, India’s dairy industry grew to be larger than that of the rest of the world combined and the country has been the world’s largest dairy producer since 1997. Much of this production is made up of smallholder farmers. Since the majority of India’s dairy farmers are smallholders, Stellapps has created a system affordable for farms of any size, even those with only one or two cows.
The initial cost for sensors and the platform runs from $500-1500 — depending on which part of the supply chain the customer is — and the monthly fee for cloud services is $8-10. “Our strategy is to commoditize the hardware and reduce the [expense] so that it becomes affordable,” said CEO Ranjith Mukundan to AgFunderNews upon the announcement of the company’s Series A round in July. The company is also working with local banks to offer financing for the upfront cost of the system.
FarmDrive – Kenya
FarmDrive, a Kenyan data analytics startup is helping smallholder farmers in Africa access credit from local banks. FarmDrive was founded in 2014 by Rita Kimani and Peris Bosire who both grew up in smallholder farming communities and met at Nairobi University where they both did computer science degrees.
From a young age, they had witnessed the inability of smallholder farming families to make protective investments on their farms, such as purchasing certified seeds and fertilizers. Kimani and Bosire believed that the general lack of productivity on the farms in their communities stemmed from a lack of capital. But in speaking to farmers, they realized the main problem was that these smallholders didn’t qualify for loans because the banks were using criteria that didn’t work for smallholders.
When banks consider someone for a loan, they want to see a credit history and some collateral. Smallholders farmers have neither as they don’t have enough wealth to own assets and rarely have business records as they tend to mix their home incomes and expenses with those from the farm, Mary Joseph, director of partnerships at FarmDrive, told AgFunderNews in February. They may also be illiterate, she added.
FarmDrive is solving this issue by generating credit scores for farmers for banks to use to loan to them. It does so by using data input by farmers into its smartphone and SMS mobile app — an app that helps farmers to track their revenues and expenses — as well as satellite, agronomic and local economic data. By analyzing these datasets, FarmDrive’s algorithm is able to generate credit scores for farmers.
myAgro – Mali
myAgro is a mobile savings system enabling farmers to pay for crucial inputs like seed and fertilizer in pre-paid installments. The farmers purchase myAgro scratch cards at their local village store — much like prepaid minutes for a mobile phone — and they text a number on that card which turns this into a digital payment and deposits the cash into a mobile money account. myAgro then holds onto that layaway payment until it’s time for planting when it bags bulk purchases of seed and fertilizer and then delivers them to a distribution point within 5km of where the farmers live and work. myAgro earns commission on these sales.
“Being a farmer is risky enough regardless of how much money you have; taking a loan increases that risk and is a huge burden,” said CEO Anushka Ratnayake to AgFunderNews in 2016.
Dalberg Global Development Advisors reported in 2011 that farmers need $450 billion a year in financing but that only 3% of that is available to them through banks. In turn, that 3% is reaching only 7% of smallholder farmers globally.
SunCulture – Kenya
SunCulture is 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. SunCulture won a grant from USAID’s Powering Agriculture challenge last December and CEO Samir Ibrahim made the Forbes 30 Under 30 list for energy for 2017.
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.
SunCulture, initially a solar-powered irrigation kit company, is now offering asset finance to farmers to purchase new tech, said Ibrahim to AgFunderNews.
InspiraFarms – United Kingdom
InspiraFarms, is geared to help farmers in some of the world’s more demanding locations move up the global food supply chain by providing them with cold-chain processing facilities. These facilities enable them to reduce post-harvest crop deterioration and also satisfy the food safety and quality requirements of their final customers.
Post-harvest losses due to environmental exposure and pests are extremely high in many places, with McKinsey estimating that 30% of agricultural production in Africa and Asia is lost in post-harvest processes. The lack of cold storage in remote locations also places a limit on product management, seriously reducing shelf-life potential and therefore a farmer’s potential income from sales.
InspiraFarms hopes to address these challenges and increase annual farm income in these regions by 40% with its cold storage and food processing technology.