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Lessons for other investment tech businesses, as ThriveAgric raises $56.4 million debt funding

Lessons for investment tech platforms as ThriveAgric raises $56.4 million in debt funding - Startup Lagos

ThriveAgric raises $56.4 million in debt funding

The agricultural sector in Nigeria stands as one of the key sectors crucial for economic growth in the country. This is what has heralded the proliferation of the market with agrictech startups and agrovest platforms, like ThriveAgric, etc. With a broad division into four sectors, namely crop production, fishing, livestock, and forestry, the sector remains the largest sector in the country contributing an average of 24% to the nation’s GDP over the past seven years (2013 – 2019). Smallscale farmers also constitute over 80% of the industry, with access to finance, advisory, logistics, and inadequate market offtakes as significant hindrances for farmers to grow their businesses. Coupled with a host of other challenges in insecurity, transportation inefficiencies, etc., many startups are developing solutions to these weighty issues.

ThriveAgric is one of Africa’s fast-growing agrictech companies, with a broad reach across Nigeria. The company has just raised $56.4 million in debt funding from the joint support of local commercial banks and institutional investors. This raise is also together with a co-investment grant of $1.75M from the USAID-funded West Africa Trade & Investment. The company hopes to grow its 200,000+ farmer base, through these new funds, to expand into new African geographical markets, including Ghana, Zambia, and Kenya.

The agrictech company was founded in 2017 and aims at empowering farmers across the country to market and sell their products to FMCGs and food processors, through the use of its proprietary technology to have access to finance, improve productivity as well as boost sales to enhance food security. The technology that the company uses, an Agricultural Operating System (AOS), runs offline while dispatching USSD to its farmer network, and powering Android apps used by its field agents to capture creditworthy farmers and other relevant data.

The company had last raised over $9m in 2020 and has over the past year, increased by over five times, its revenues, with a year-on-year of over 277%. This success is attributable in part to the boost by farmers using the company’s AOS proprietary product.

The company assists smallholder farmers in overcoming their production challenges of high-quality grains. Through its wide network of over 450+ warehouses, the company helps farmers to store their harvests, including maize, rice, and soybeans across places in Nigeria like, Bauchi, Jigawa, Kaduna, Kano, and Katsina states in Nigeria, before commoditizing these products and offering them to local and global trade markets at premium prices.

Remarking on the development, the Chief Executive Officer of ThriveAgric, Uka Eje, said,

The new investment takes us one step closer to fulfilling our mission of building the largest network of profitable African farmers using technology, to ensure food security. We look ahead with renewed confidence knowing that our smallholder farmers will benefit financially even more from this new investment.

Speaking further, he elaborated on the way through which the market has responded favorably to the growth of ThriveAgric, especially as it has broadened its impact across more states in the country,

It is great to see that the market has overwhelmingly backed our farmers and they are confident in the strategic decisions we have taken. ThriveAgric has increased its footprint to 20 states in Nigeria, and we look forward to a lengthy period of growth as we continue to link African farmers to capital, data-driven best practices and access to local and global markets for their commodities.

The dark pandemic crises for ThriveAgric

Through ThriveAgric’s platform, farmers are able to charge premium rates for their products offering them control over their incomes up to 25 percent upward raise. However, during the global pandemic, as businesses were hit heavily by the disruptions to movement and logistic challenges, ThriveAgric was in danger of falling apart. The company had become unable to fulfill its obligations to its investors. As Adia Sowho, who came in as CEO of the then-struggling agrictech, to guide it through a turnaround recounts with Techcrunch, one serious challenge it faced was one of timing.

ThriveAgric is making impact across the country by helping farmers to enhance the quality of their produce and sell at premium prices - Startup Lagos
Source: ThriveAgric Farm Stories, 2019.

As the implications of the COVID lockdown had prevented farmers from accessing their farms, the company was also prevented from accessing the markets to offtake the commodities. This put a compromise to the company’s ability to make revenue and made key decision-makers ill at ease in disseminating these challenges to subscribers. However, swift actions by members of the management team, in ensuring risk compliance and proper documentation, helped the startup to get its acts together and head back on track. With a consolidated structure in place, the company was able to settle all outstanding disputes with its subscribers. Speaking on the success of bouncing back, the CEO continues,

Despite a volatile backdrop over the past few years, brought about by the global pandemic, ThriveAgric witnessed temporary payment disruptions to our retail crowdfunders. However, we were able to overcome those challenges within a year and maintained company profitability. Our solid financial performance underscores investors’ faith in ThriveAgric.

Failing investments: The continuous debacle

With the harsh economic environment of Nigeria, many investments often go south. This is aside from the regular share of ponzi schemes that litter the length and breadth of Nigeria’s market space. In recent days, social media has been abuzz with the news of the collapse of the Chinmark Group investment platform. Over 4,500 aggrieved investors have been screaming foul in outrage at the pain of losing their hard-earned investments to what is now turning out to have been a ponzi scheme.

In spite of these terrible instances of the Nigerian investment climate, there are other legitimate investment platforms that have been forced to battle with hideous forces of hindrance in getting their models to remain sustainable. Earlier in the year, Crowdyvest had faced huge scrutiny from its inability to pay its investors as at when due. Through 2021, the company had said that its user base had grown from 50,000 to over 140,000 customers in the space of 8 months with a cumulative transaction value of well over $35 million. The company has since reiterated its commitment to paying its investors while spotlighting challenges in its ill-advised debt acquisition model, and the failed projections to onboard equity investors and long-term financing. The company shared these challenges in an email to all its investors, while also mentioning the defaults by its impact partners as what had led to its inability to meet up with its commitments. The company has recently emphasized its commitment to keeping to its promises and has outlined a payment plan via batches for investors on its platform.

A number of other investment vehicles like Payvest Global which had as of last year, broken down on its promises to pay its investors, are also facing the throes of the harsh investment climate. The company which had ridden on the back of many Twitter influencers to grow its credibility within the Nigerian market has communicated to its investors to pay back a meager 6.25% spread over several months of the capital of its investors. The company had cited devastating challenges with the rigid investment policies, especially in crypto investment, that had occurred last year. Even in spite of all these shortfalls, it is yet the case that more investment platforms would spring up. It is important for these platforms that they not only live up to their billing, but are operating sustainable business models.

The challenges that many investment tech startups face in managing the many faces of Nigeria’s harsh economic environment are generally proving as strong limitations for these startups looking to scale. An important thing for agrovest platforms as well is to look at ways of not just collecting money from investors, but ensuring that these funds are used to finance the work of its partner farmers. It is also key, for platforms that are already under the heat of significant setbacks, that their teams are resolute in turning around the bedeviling challenges. These are important mindsets and restructuring models that would help present investment platforms struggling with setbacks to bounce back appropriately like ThriveAgric. With such dogged resolve, when they finally overcome their challenges, they consolidate their integrity in the eyes of the market and investors, who only find these businesses much more sustainable to invest in for growth.

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