Releaf, a Nigerian agritech startup that supplies ingredients (starting with oil palm) to consumer goods manufacturers and their food factories, has received $3.3 million in an oversubscribed pre-Series A round.
The Jack Ma Foundation-backed startup, which announced an initial raising of $4.2 million (including a $1.5 million grant) in September 2021, said the funding will support the launch of two new technologies: Kraken II and SITE.
Releaf focuses on value chains where smaller factories are established close to small farmers, enabling them to achieve better processing yields and lower logistics costs. Oil palm is the first, and for now, the only crop Releaf works on; The oil palm market is a $3 billion market consisting of more than 4 million smallholder farmers. These farmers drive around 80% of crop production using rocks or inefficient tools, responsible for producing low-quality vegetable oil. That’s why agritech launched Kraken, its static palm nut husking machine built to process this crop and efficiently extract “high quality” vegetable oil for farmers.
“Our seed round was essentially focused on getting the first evolution of Kraken and showing that we can be the first company to take multiple species of very poor quality palm nuts and turn them into high quality palm kernel oil,” Uzoma Ayogu, co . -founder and CTO, told TechCrunch in an interview.
“After testing that, we needed to find the best way to place this technology dynamically, and over the past few months, we’ve advanced Kraken’s evolution from static to portable while significantly reducing the cost. [Kraken II] while new products are added [SITE] to complement the suite of technology we already have.”
Kraken II is a less expensive mobile version of the palm nut sheller, costing half as much and eliminating more than 80% of margin-eroding costs. On the other hand, SITE is a geospatial mapping application that reveals food processing assets. SITE was developed in collaboration with Stanford University Professor David Lobell, MacArthur Fellow and Director of the Center for Food Safety and the Environment, whose team refined the age identification process for oil palms in Nigeria.
According to Ayogu, YC-backed Releaf found that just building technology was not enough to get the best margins for farmers and manufacturers, rather the technology needed to be in the right places and at the right season in different regions of Nigeria. Hence the reason for Kraken’s portability and SITE’s location and route planning capabilities. Combining the two allows Uyo-based Releaf to target the best opportunities in Nigeria’s oil palm belt rather than just sourcing crops within 100 kilometers of a fixed processing site like existing food processors .
“The greatest benefit for them [farmers] With this new evolution of Kraken and SITE, many offer farmers low 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 return much of that profit to them while keeping more for ourselves while even improving the quality of the final product.” said Ayogu, who co-founded Releaf with CEO Ikenna Nzewi about why this new technology is important to farmers.
In the Nigerian food processing industry, there is more competition downstream, dominated mainly by middlemen and traders, usually teams of one or few people who tend to be closer to consumers and have better fixing power. prices. It’s different for Releaf, which operates upstream and has less competition, at least when you consider the application of technology. Offering farmers better prices and providing working capital are two ways Releaf is using to gain market share in this segment, Ayogu said.
The startup has used its supply chain technology to process more than 10 million kilograms of palm nuts since the launch of Kraken in 2021. As a result, Releaf has increased its monthly revenue 7 times year-over-year, which will increase this year. . after winning over $100 million in supply contracts from consumer goods manufacturers in Nigeria. With this funding, the agritech, whose valuation has tripled since its seed round, will seek to expand the regions where it processes the palm and broaden the types of crops it works with.
“Our insights have shown that the downstream is limited by the supply, which is upstream,” the CTO said. “So our approach is through first-mover advantage with differentiated technology, we can capture a significant amount of supply in a fragmented market and then, over time, verticalize to increase margins and market position.”
Pre-Series A funding was provided by Samurai Incubate Africa, who reinvested after leading Releaf’s seed round, with participation from Consonance Investment Managers. Stephen Pagliuca (President of Bain Capital) and Jeff Ubben (World Wildlife Fund board member and founder of Inclusive Capital Partners) also invested. Rena Yoneyama, Managing Partner of Samurai Incubate Africa, speaking on the investment, said: “Releaf’s success with their Kraken pilot validates their thesis, and we are excited to continue supporting their ambitious vision to create efficient supply chains within the agriculture market of Africa”.