Releaf, a Nigerian agritech firm, received $3.3 million in an oversubscribed pre-Series A financing. Releaf provides ingredients (beginning with the oil palm) to consumer goods makers and their food factories.
Samurai Incubate Africa, which had previously led Releaf’s seed round, led the pre-Series A round of fundraising along with Consonance Investment Managers. Additionally investing were Jeff Ubben, founder of Inclusive Capital Partners and board member of the World Wildlife Fund, and Stephen Pagliuca, chairman of Bain Capital.
The agritech, whose valuation has risen since its seed round, will use this money to broaden the geographic areas where it processes palm and the types of crops it can handle.
The Kraken II and SITE launches will also be supported by the funding, according to the Jack Ma Foundation-backed business, which in September 2021 announced a $4.2 million (including a $1.5 million grant) seed raise.
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“Our seed round was focused on essentially getting the first evolution of Kraken and proving that we can be the first company to take multiple species of very poor quality smallholder palm nut and turn them into high-quality palm kernel oil,” Uzoma Ayogu, co-founder and CTO, said in a statement. “After proving that, we needed to figure out how to best place this technology dynamically and, over the last couple of months, made progress on Kraken’s evolution from being static to being portable and reducing the cost significantly [Kraken II] while adding new products [SITE] to complement the suite of tech that we have already.”
Why The Investors Invested
Since its founding, the company has experienced significant growth. Since the introduction of Kraken in 2021, the business has processed more than 10 million kilogrammes of palm nuts using its supply chain technologies. Releaf has increased its monthly income 7 times year over year as a result, and this year’s growth is anticipated as a result of the signing of over $100 million in supply contracts with Nigerian producers of consumer goods.
Rena Yoneyama, managing partner at Samurai Incubate Africa, speaking on the investment, said:
“Releaf’s success with its pilot Kraken validates its thesis, and we are excited to continue supporting their ambitious vision to create efficient supply chains within Africa’s agricultural market.”
A Look At What The Startup Does
In order to provide smallholder farmers with greater processing yields and lower transport costs, Releaf focuses on value chains wherein smaller manufacturers are positioned close to them. Releaf’s first and only crop at the moment is the oil palm, which has a $3 billion market with more than 4 million smallholder farmers. These farmers use pebbles or ineffective equipment to drive roughly 80% of the crop’s production, which results in the creation of low-quality vegetable oil. For this reason, the agritech company unveiled Kraken, a static palm nut desheller designed to process this crop and give farmers access to “high-quality” vegetable oil.
The palm nut de-sheller is available in a mobile, less priced variant called Kraken II that costs half as much and eliminates over 80% of margin-eroding expenses. In contrast, SITE is a geographic mapping programme that lists the assets used in food preparation. A MacArthur Fellow and Director of the Center on Food Security and the Environment at Stanford University, Professor David Lobell’s team improved the age identification method for oil palm trees in Nigeria, and his team’s work informed the development of SITE.
According to Ayogu, the YC-backed Releaf realised that placing technology in the appropriate locations at the right time throughout various parts of Nigeria was more important than simply constructing technology to get the best margins for farmers and businesses. Thus, the portability of Kraken and the placement and route-planning capabilities of SITE. Instead of being constrained to procuring crops within 100 kilometres of a set processing plant like other food processors, the Uyo-based Releaf can target the finest prospects across Nigeria’s oil palm belt thanks to the mix of both.
“The biggest benefit to them [farmers] with this new evolution of Kraken and SITE is that many offer farmers poor prices because they have to pay a lot for logistics. But now that we can eliminate 80% of the logistics costs and process much closer to the farmers, we can pass a lot of that profit back to them while also keeping more of it for ourselves while improving even the quality of the end product,” said Ayogu, who co-founded Releaf with CEO Ikenna Nzewi on why this new technologies matters for farmers.
In Nigeria’s food processing sector, there is more competition downstream. This competition is primarily controlled by middlemen and merchants, who are typically one- or two-person operations that are well positioned to benefit from stronger pricing power and proximity to consumers. Releaf, which works upstream and has less rivalry, experiences something different, at least when the use of technology is taken into account. Releaf competes in this market area by giving farmers higher prices and working capital, according to Ayogu.
“Our insights have shown that downstream is capped by supply, which is upstream,” the CTO said. “And so our focus is via the first mover advantage with differentiated technology, we can capture a significant amount of supply in a fragmented market and then over time verticalized to increase margins and market position.”
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard