By the end of last year in Africa, the continent had received a total of USD 1.25 billion in funding across different sectors. Out of this, there were 280+ agritech ventures offering different solutions in agriculture with the sector ranking 6th in attracting funding, this is according to data collected by Briter Bridges.
Despite its rank, agriculture remains critical as the sector addresses a basic human need: food. In Kenya, for example, the sector contributes 26 percent of the Gross Domestic Product (GDP) and another 27 percent of GDP in a roundabout way through linkages with different parts, this is according to the Food and Agriculture Organization of the United Nations (FAO). However, due to the complexities of the sector, many countries within the continent are food insecure. In Kenya, approximately 1.3 million people are currently facing crisis or worse levels of food insecurity. With the impact of Covid-19 putting even more pressure on food systems, the need for innovative solutions in the sector to sustain the population and the economy have become even more clear. Thus, this is why FoodTech Africa organized its first webinar to get deeper insights on how agritech startups can fundraise and scale for a food secure continent.
The webinar had investors; David Maina,Director at Alpha Mundi Group, Maina Murage, an Investment Analyst at DOB Equity, Jonas Tesfu, CEO and Co-Founder of Pangea Accelerator and startup founder, Francis Nderitu of RainoTech4Impact. The panel was moderated by Linda Kwamboka, Entrepreneur-in-Residence and Manager of iBiz Africa, Strathmore University. Here are five lessons we learned on how to go about fundraising:
1.Investors look for good, agile entrepreneurs
Jonas Tesfu, set the ball rolling by pointing out one of the most important focus areas for investors is a strong team and further iterated by David. The general consensus was that a strong team guarantees that there is good governance in the startup, a deep grasp of the industry and thus builds investor confidence. David also added that like in most businesses, investors are keen on chemistry with the entrepreneurs, this is because having good chemistry provides a good runway when the going gets tough and founders can easily reach out to investors to help in brainstorming solutions, such relationships are not easy to be fostered if good chemistry does not exist. Lastly, investors are keen for agile teams i.e. founders who are willing to adapt, this is because a lot of startups will keep redefining the business until what works is identified, agile teams are able to adapt easily hence, core for investors.
2.Be realistic about your agritech startup
From investor experiences shared during the webinar, the panel all agreed about the importance of having self-awareness as a founder. Maina Murage shared his experience highlighting how startups need to find the balance in how they sell the big vision while still knowing where their current level is. Drawing from examples; founders were encouraged to know how much they can manage as they scale, that is, identify what you are good at and focus on that as you start. You can later add other business lines when you have capacity. This was noted to build investor confidence and also provides a realistic risk value for the investor.
3.Investors have certain sub-sector priorities
While the agriculture sector has several sub-sectors, it was apparent that investors have specific priority areas and objectives. Currently, many investors are focused on impact with some even indicating that they are targeting innovations linked to the Sustainable Development Goals (SDGs). Some of the sub-sectors in agriculture investors are interested in include: digital innovation and data, logistics and supply chain, fintech solutions particularly for smallholder farmers, marketplaces, insurance, crop protection, solar energy solutions, greenhouse technology, agriculture waste among other areas
4.Persistence and Commitment is Key
Francis drove the conversation by sharing his founder story and experiences when seeking investment for his startup. He encouraged founders to look at investment as sales and be comfortable with receiving feedback. He noted as this was what allowed him to improve and refine his business. He also reminded founders that there has to be commitment from you before external investors come in, adding that, you cannot sell what you don’t have. His parting shot was an encouragement to founders, urging them to keep applying for competitions, grants for visibility and show consistency of your startup.
4.Some tips and tricks in case an investor pulls out
During our Q & A session, one of the founders asked a curious question on what happens in the event an investor pulls up. While it was agreed this is not a situation any startup should ever hope to be in, the question provided some insights in case such an eventuality happens. Panelists all agreed the first step is to understand why they pulled out, Maina Murage offered perspective stating that, if an investor pulls out during the due diligence process it could be because they found something that did not fit with them. If however, they pull out after investing, perhaps it could be a fundamental problem they see coming up. David Maina, chimed in, urging founders to have a talk with the investors in order to get feedback on their reasons for pulling out. He also encouraged founders to maintain a good relationship with investors to mitigate their pulling out. Lastly, he cautioned founders to take the shareholder agreement seriously and ascertain that all documents are aligned to avoid disagreements with investors.
Linda summarized the webinar by reminding startups that raising investment is asking people to join the bandwagon in solving a problem and you have to position yourself in a way that builds trust and credibility.