Plesion Capital, a venture capital firm that provides pre-seed and seed investments in high-potential startups, announced a $250,000 equity investment in the capital of the Nigerian start-up Releaf. This agritech, which is involved in the provision of agricultural inputs as well as the development of palm nut extraction technology, will utilise this resource to fund its expansion.
Plesion Capital’s founder and managing partner, Ben Finlay, has announced his intention to assist Releaf in expanding its activities beyond the cultivation and processing of palm nuts. Plesion’s investment comes on the heels of Releaf’s $3.3 million pre-Series A fundraising last January, which was used to fund the introduction of two novel palm nut growing methods.
Plesion Capital, which presently focuses on investment possibilities in food-related industries and infrastructure development in Africa, made its first commitment in a savings and investment fintech in Uganda last January. The venture capital business intends to expand its purchases in other parts of the world.
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
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.
“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.”
Releaf founders. Image credit: Releaf
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.”
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
Samurai Incubate Africa, a venture capital firm led by a team of Japanese investors, isn’t famous for investing in African agritech startups. Apart from investment in Ghana’s Complete Farmer, almost all of its previous investments had gone to fintechs. But not any more, at least in the meantime. The venture capital firm has led a $2.7 million seed round in Nigerian agritech startup Releaf, four years after the startup was founded. Also leading the investment are Future Africa and Consonance Investment Managers, with the participation of individual investors Stephen Pagliuca, the chairman of Bain Capital and Justin Kan of Twitch.
“We think there’s a really great opportunity to bring both physical technology and financial services to these communities to make them more productive. And it’s kind of central to our thesis. We believe that our smart factories can serve as an economic pillar in these rural communities and make it easier for us to supply these communities with other services that they can find valuable like access to working capital, payment for education, and access to insurance services. So we see the food processing as like the first step it cements us in the value chain,” said Ikenna Nzewi, CEO of the startup.
The agritech business has also received $1.5 million in grants from The Challenge Fund for Youth Employment (CFYE) and USAID in addition to the seed round.
According to Nzewi, Releaf will utilize the seed money to develop technologies and distribute it to smallholder farmers. The $1.5 million in grants will next be used to provide working capital to these farms. He goes on to say that Releaf has already conducted finance trials this year that have raised smallholder incomes by three to five times.
There are several reasons why investors seemed to finally buy into the startup’s seed funding round, four years after it was founded.
First is that Releaf may have finally found its product market fit, after years of experimenting, even after the startup graduated from Y Combinator’s summer batch in 2017.
The founders’ decision to move back to Nigeria from the United States was also instrumental for the sudden turnaround of the startup company.
“We took a much more broad approach to what the solution would be, but we really wanted to decide on a specific crop to work in. And we found that opportunity in the oil palm sector,” Nzewi said.
But perhaps the investors seemed to have gone for the startup largely because of its team.
“We believe the firm’s thesis on decentralizing food processing would have a strong match with Africa’s economic development landscape for the next few decades. Ikenna and Uzo are the perfect founders to disrupt this market in Nigeria and beyond. We are thrilled to back them as they innovate in providing both agro-processing and financial services to rural communities and farmers,” said Rena Yoneyama, the managing partner at Samurai Incubate Africa.
Iyin Aboyeji, general partner at co-lead investor Future Africa also gave a hint about the quality of the startup’s team.
“…The team at Releaf is building the agro-allied industry of the future from the ground up, starting with palm oil which they have developed a novel technology to aggregate, deshell and process into critical ingredients like vegetable oil and glycerine. Future Africa is delighted to back Releaf to build the future of modern agriculture,” he said.
In terms of traction, the startup has made some considerable progress. Kraken (Releaf’s proprietary technology) already processes 500 tonnes of palm nuts, according to the company. Releaf’s software also connects to over 2,000 smallholder farmers who have supplied food manufacturers with over 10 million kg of high-quality palm kernel nuts.
A Look At What The Startup Does
Founded in 2017 by the duo of Ikenna Nzewi and Uzoma Ayogu, Releaf focuses on value chains, which are comprised of smaller factories located near smallholder farmers. Releaf buys nuts from farmers, then cracks them and crushes the kernels into vegetable oil with Kraken. The vegetable oil is then sold to FMCG processors and local manufacturers, primarily in Nigeria’s south-southern region.
“Nigeria has about 60% more demand for vegetable oil than it does supply. And it can not be met due to supply shortfall with imports because the government banned the importation of vegetable oil. So there is a need to take these smallholders who are driving 80% of production and make them more efficient so that we can have a better balance of supply and demand for vegetable oil,” Nzewi said.
To distinguish itself from the highly competitive $3 billion vegetable oil market in Nigeria, Nzewi says that Releaf’s products quality standard is higher than that of the industry. Typically, a free fatty acid (FFA) meter is used to determine the purity of vegetable oil. While the industry standard is around 5% FFA, Releaf produces around 3.5 percent, according to the CEO.
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Farmers in Nigeria’s South-South region have received a boost to improve productivity and access finance through a new partnership between Releaf and OnePipe. This development is fundamental against the backdrop of the fact that it has provided well over 2,000 oil palm farmers in Cross River and Akwa Ibom states now have access to digitized financial services, thanks to a partnership between Releaf , a raw material procurement & logistics platform that is making it easy for crops to move from farm to factory, and OnePipe, a digital gateway enabling financial services.
OnePipe’s Founder and Chief Plumber, Ope Adeoye
The need to help farmers access finance stems from the fact that over 65 percent of Nigerians are outside the financial services envelope, with millions unbanked or under-banked. The combination of COVID-19 disruptions and the widening digital divide in the rural and underserved areas has threatened the attainment of financial inclusion targets in Nigeria. This partnership between Releaf and OnePipe is thus a welcome initiative to the National Financial Inclusion Strategy and provides opportunities for thousands of rural farmers across Nigeria’s South-South region.
Speaking on the collaboration, co-founder and Chief Technology Officer for Releaf, Uzoma Ayogu, said; “Since inception, Releaf has empowered over 1,000 farmers to supply over 10 million kilograms of quality crops to various food factories. While disbursements to our farmers have been largely cash-based, we now have access to digitized fund disbursement via embedded, customised accounts, provisioned by OnePipe, to drive financial inclusion of previously financially excluded farmers in the digital economy. As a result, we can provide increased funding to farmers in a more seamless, scalable, and safe manner. We are also exploring other products like insurance and other services leveraging OnePipe’s infrastructure and strategic partnerships with an array of Financial Institutions.
The embedded customised accounts for the farmers are provisioned leveraging OnePipe’s partner bank APIs. They are opened and operated via USSD and *PWA (Progressive Web App) channels and branded as Releaf Wallet for ease of adoption by the farmers. As full-utility accounts, farmers can receive inflow from any bank/channel and can transfer funds to any Nigerian bank account; they can also access readily available services such as airtime top-up (self and third party), savings/investments and various loan options. The loan options are configured such that consistent usage of the Releaf wallet by the farmers results in a correspondingly increasing credit line.
OnePipe’s Founder and Chief Plumber, Ope Adeoye described the partnership with Releaf as “an exciting opportunity to co-create value with Releaf. Releaf is reviving agricultural infrastructure and crafting a sustainable path to prosperity for farmers who previously did not have commensurate return for their labour”. According to him, “working with Releaf was inevitable as the company’s vision to transform Africa’s agricultural future by making decentralized food processing scaleable coincides with OnePipe’s social mandate to drive financial inclusion through technology for all – including the 700M+ smallholder farmers on the continent.”
OnePipe’s platform provides a single gateway that aggregates financial services from industry leaders and combines them in unique ways to create new brand propositions that help organisations reduce time to market by embedding financial services within their products. OnePipe is at the vanguard of the embedded finance movement in Sub-Saharan Africa and has assisted companies like Releaf to provide seamless digital financial services to their partners. In addition to the ongoing partnership with Releaf, OnePipe is also working with key players in the Retail, FMCG and Asset Management space to facilitate embedded finance within their existing offerings.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
