Feeding a nation

By Kunle Falayi

Guests started to arrive at The Tabernacle around 3.30pm on October 10, 2017. The mid-size concert hall straddling Nassau and Luckie streets, just a few meters across the road from CNN’s headquarters in Downtown Atlanta, was playing host to a crowd different from the kind usually seen in the 111-year-old, 2600 capacity hall. In the ornately designed galleries overlooking a spot-lit stage, strangers and friends from the investment world mingled, a mix of chit-chat and jazz providing a soundtrack. It was a gathering where a chance connection or small talk with a stranger might lead to a multimillion-dollar investment that can make the difference between a failed venture and a unicorn.

It was Techstars Atlanta Demo Day. Investors were there to decide which startup founders were worth a gamble, and soon, on the same stage where Bob Dylan, James Brown, Adele and numerous other stars have thrilled crowds of music lovers, Onyeka Akumah would pitch his young company, Farmcrowdy for the first time. In a way, his task that day was not so different from that of the music stars; they offered their talents in exchange for the admiration of their audience, who paid money to be thrilled, Onyeka sought to pique audience interests and open funders’ pockets.

32-year-old Onyeka, who likes to tell interviewers he is a “serial entrepreneur”, was one of 10 startup founders pitching that evening. The event was a culmination of Techstars’ 13-week accelerator program where seasoned entrepreneurs mentor, teach and guide founders on how to take their companies to the next level. This demo day was an “opportunity for angel, seed, and Series A investors to evaluate startups at varying stages across a variety of industries,” Techstars promised on its event website.

For any startup aiming to attract international investors and scale up, taking part in an accelerator program like Techstars can be game-changing. 19 of Techstars' graduates have become unicorns or have reached a valuation above $1 billion.

“[Accelerators] help ventures define and build their initial products, identify promising customer segments, and secure resources, including capital and employees,” Susan Cohen, a Professor of Management at the University of Georgia explains in a 2013 paper published in MIT’s Innovations: Technology, Governance, Globalization journal.

A year earlier, Onyeka, a First-Class graduate of Applied Information Technology from India’s Sikkim Manipal University, had sat down in a small office in an area of Lagos, Nigeria called Yaba along with 4 of his friends. They were all from the dense investment and tech jungle of Lagos, and the venue was a fitting place. Although Yaba looks much like any place else in Lagos, it is known as Nigeria’s Silicon Valley and attracts the country’s most daring and best entrepreneurial young minds. Yaba is the birthplace of many of the country's best startups as well as the graveyard of many others.

Startups lucky enough to cite their headquarters at Yaba position themselves to be seen by curious foreign investors looking to cash in on the next best thing in the developing-world’s tech ecosystem. When Mark Zuckerberg, Meta’s CEO, visited Nigeria in September 2016, Yaba was his first port of call. Accompanied by the company’s current Head of New Product Experimentation, Ime Archibong, a ring of security men ushered him into the premises of a young tech company called Andela, which trains software developers. CNN called it “the startup that is harder to get into than Harvard”. Zuckerberg invested $24 million.

Many startups with Yaba origins also flopped, like GoMyWay, a rideshare company which launched in Nigeria after Uber arrived there in 2014; GoMyWay hoped to pry some of the market share out of Uber’s hands, but flamed out in less than two years.

Onyeka and his friends were all in their early 30s: Tope Omotolani, an economist and the only woman among them; Akindele Philips, a former senior accountant with global accounting giant, KPMG; Ifeanyi Anazodo, a branding expert and Christopher Abiodun, an IT expert. They hashed out the operational arrangement of the company they were founding. There they decided to call it Farmcrowdy, a name that gives an idea of their business model — crowd-funded farming.

The startup was Onyeka’s idea. A veteran of the startup world, he was burnt out from going solo on previous ventures, such as a startup called QuikGist which aggregated social news that readers could download. As he told the YouTube channel, NdaniTV, he was determined to work with cofounders on his next.

“I was the sole founder for years,” he said, a structure that meant “I didn’t have a team to rub minds with. I didn’t have people to complement my skill set. It was the reason it (QuikGist) didn’t thrive. I didn’t want to take that same risk with other people’s money.”

▫️Onyeka, Tope, Akindele, Christopher, Ifeanyi. Source: Farmcrowdy

The meeting of the co-founders produced Onyeka as the CEO of Farmcrowdy and Akindele as the Chief Financial Officer. Ifeanyi became the Chief Marketing Officer; Tope, Chief Operating Officer and Christopher, the Chief Technology Officer. They told themselves they were creating the most innovative agriculture startup to ever come out of West Africa. They opened their first office in Lekki an upscale neighborhood on the Lagos Island, funded with Onyeka’s life savings. Thus began the journey to prove they were a serious player in Nigeria’s fast growing tech ecosystem.

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At 4pm, the demo day officially opened at The Tabernacle as Michael Cohn, the Managing Director of Techstars Atlanta, took the stage. The recording of the event on Youtube shows Mr. Cohn dressed down for the event with his shirt untucked and no tie, but excitement to make up for the informality. He introduced the program, explaining that Techstars Atlanta was one in a network of 30 other similar accelerators all over the world.

Next, Cohn’s business partner, Tyler Scriven, took the stage to introduce Onyeka as an up-and-comer whom he had met during a visit to Nigeria in search of “the best entrepreneurs committed to solving the most difficult challenge that the country faces.” Scriven said he was thrilled to have crossed paths with Onyeka, “one of the most ambitious and inspiring entrepreneurs I have ever met.”

Then, Onyeka bounded up the stage to Michael Jackson’sHeal the World.The black backdrop screen transformed into the picture of two smiling young black men in a field, wearing black T-shirts emblazoned with Farmcrowdy’s logo and holding a sheaf of rice.

▫️ Screenshot from Techstars' Youtube channel

Onyeka wore the same t-shirt as in the photo. Then with an affectation straight out of the startup pitching playbook of Y-Combinator, one of the world’s most popular startup accelerators, he began: “What if I told you about a retail investment opportunity that has proven to return an average of 15 to 30 percent [profit] and changes the lives of small-scale farmers in Africa?”

In public relations photos and media interviews, Onyeka is rarely seen without his glasses. That day, his face was bare, as if he needed the audience to look him in the eye. He punctuated each word with his right index finger and thumb pressed together.

He paused for a pre-recorded video which demonstrated the simplicity of Farmcrowdy’s platform.

The narration explained that an individual signed up to Farmcrowdy’s app and selected one of five farms: maize, cassava, soybeans and chicken. They could decide to ‘sponsor’ one chicken farm — made up of 40 birds — at about $290 (2017 Dollar to Naira exchange rate) or as many farm plots as their pocket could afford. It said Farmcrowdy used the funds to purchase farm inputs and supplied them to farmers for the entire farming cycle. After harvest, the profits were shared three-way with the farmer, Farmcrowdy and farm sponsor who also got their initial capital back.

After the narration ended, Onyeka highlighted some challenges with the Nigerian agriculture sector which he said might prove to be opportunities for the company: lack of capital, modern farming techniques and capability to cultivate available land and lack of market knowledge.

To solve these problems, Onyeka said Farmcrowdy gave farmers quality seeds and fertilizers, mentored them on smart farming and ensured access to markets to sell their farm produce. The ultimate goal of the venture, he said, was to give farmers 40 percent of profits. Farm sponsors got the same amount along with their initial capital while Farmcrowdy kept the remaining 20 percent.

The startup was planning to replicate the model in Ghana, Kenya and Rwanda with hopes of targeting 38 million small-scale farmers. It was an ambitious plan riding on Onyeka’s ability to charm these investors into seeing the huge profit yet to come.

Despite increased foreign investment in Africa’s tech ecosystem, only a small fraction of funding is going into startups producing food in a continent facing high food insecurity and a fast rising population. Experts and agritech founders say a combination of infrastructure deficit, climate uncertainty, and an archaic land tenure system are making investors wary of putting their money where huge returns are not guaranteed. Some say many startups may just be running unsustainable business models.

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Red bubbles are African startups. Use dropdown to filter on country, solution-focus, and continent.

Bubble size = funding size

Six years ago, less than $600m was raised in funding by African startups. By 2021, it has increased to $5bn, according to the latest Africa Investment Report. Of every $100 investment in technology startups in Africa, less than $5 go to agritech startups, the report shows. “You will notice that most of the startups raising big money are those who are not in core production like we were,” Farmcrowdy’s current CEO, Akindele tells this writer in an interview.

That evening, Onyeka took a dramatic pause as he delivered his punch line: “This is a win, win, win scenario for everyone.”

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Fatai Zenat was supposed to buy a new batch of chicks for his poultry farm in May 2016 but he sent his employees home. There was no work for them until further notice. No savings to replenish the 35,000-capacity farm located in Ewekoro town, about 60 kilometers north of Lagos.

He bought a few chicks to breed as food for his family. He sold off his last poultry breed at the beginning of the year. Prices of chicks and feeds and everything else had spiked. He resolved there was nothing he could do but to wait out the hard times.

By the second half of 2016, Nigeria had slipped into a recession, worsening the economic situation of a country where 70 million people or more than a third of the population,classified as poor.

At 49, with no education beyond high school and no other skills, he was desperate.

“All I have ever done in my life and all I know how to do is breed chicken,” he tells this writer. “I knew everything about the poultry business until the recession came.”

Fatai survived that way till February 2017 when a relative told him about a company that was looking for poultry farmers to register on its platform.

“He told me the company would me everything including the chicks. ‘Just breed them, deliver them back when they mature and get your money.’”

Fatai jumped at the opportunity.

After a meeting with Farmcrowdy officials, he agreed to breed a batch of 5,200 birds. He wanted more, but the company had to test him with the batch first. Every week, he was required to send photos and videos of the poultry’s progress. A Farmcrowdy ‘consultant’ was tasked with being the go-between for farmer and company. It supplied all inputs to the farmers through the middlemen.

Seven weeks later, Fatai delivered 5,080 mature birds to Farmcrowdy. The startup had set a ceiling of 5 percent mortality during breeding. The mortality rate of the birds at his poultry farm was less than 3 percent. Farmcrowdy sold the chicken to wholesalers. Fatai got over $1,600 as his share of the profit. At the time, Nigeria’s minimum wage was $70.

“I was so happy that I could keep my poultry open,” he says. “I immediately accepted another batch of 10,000 birds.”

Around the same time, 51-year-old Olumide Dada who had been a poultry farmer for 23 years with over 23 years of experience was producing thousands of chickens for Farmcrowdy in his Lagos farm. He too said Farmcrowdy “saved” his poultry farm.

All the farmers interviewed for this story say Farmcrowdy paid them what was agreed but they had challenges with the middlemen.

“There was a time when I was supposed to get 1,000kg of chicken feed,” Fatai says, “the middlemen supplied 800 kilograms. When you short chicken feed, it reflects on chicken weight. Olumide confirms the same problem.

Farmcrowdy sold chicken to wholesalers by weight rather than by number of chickens.

The middlemen, who were not Farmcrowdy employees, helped to get farmers on to the platform. If farmers had complaints, they channeled them through these middlemen to Farmcrowdy. However, apart from the middlemen problem, farmers said they had no complaints.

It is unclear what impact the indiscretion of the middlemen with supplies might have had on Farmcrowdy’s business. Onyeka, the CEO at the time, declines multiple requests to be interviewed for this piece. Farmcrowdy’s current CEO, Philips Akindele, who was the former CFO, declines to address the issue in a series of interviews with this writer, describing it as “a private corporate information.”

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By the time Onyeka stood in the Tabernacle pitching his company to a crowd of potential investors, Fatai had produced over 30,000 chickens under the company’s crowd farming system. Others including Olumide had produced thousands more.

Shortly afterward, however, the company stopped its partnership with local farmer, despite the urgent need in the country’s agriculture sector at the time. In fact, it was a critical time. Nigeria like the rest of Africa was dealing with a rising food insecurity problem.

Agriculture plays a central role in the economic survival of Nigerians, contributing over 22 percent to the country’s GDP. The FAO also estimates that 70 per cent of Nigerians depend on it for sustenance, despite the face of low mechanization and capacity.

Farmcrowdy had tested its business model, it was working. Apart from this, it was a time when the Nigerian government had just banned the import of frozen or live chicken in order to cut down the country’s high food import bill and encourage higher agriculture production. There was high demand for locally produced chicken. So, the farmers wondered why the company could not continue a model they felt was working.

“If they ran into challenges that made them stop, they didn’t tell us what it was,” Fatai says. “My partnership with them was rewarding while it lasted.”

It wasn’t just the farmers who signed up on Farmcrowdy’s platform who were pleased with the business. Farm “sponsors” too found a system with a quick turn-around time for their investment.

Tope Adesemoye was a member of an investment club made up of young professional women who describe themselves as “millennial investors” in Lagos, Nigeria. She worked with one of Nigeria's largest oil companies, Oando. With some considerable disposable income, she was looking to invest some of her savings in 2016, when her club members brought Farmcrowdy to her attention.

“I had never heard of crowd farming in Nigeria before then,” she says. “The model got me interested immediately. But I was cautious, so I decided to sponsor one poultry plot to test the waters.

Seven months later, as the company promised, she got back her $333 — her $290 capital plus 15 percent interest.

“I invested a lot more four different times after that,” she says. “Everything was seamless. The returns came quickly and without any hassle.”

Immediately after harvest, the company’s off-takers like restaurant chains and frozen poultry companies readily took in the supply. Sponsors got their money promptly, Farmcrowdys’ CEO Akindele explains.

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“We have a goal of empowering small-scale farming across Africa,” Onyeka said in the close of 2016 pitch as seen on Techstar’s Youtube channel. He stretched his arms out to his audience, “I want to welcome you today to join us as we continue to grow our impact across the developing world.”

Back home, the company’s lofty plans would attract the attention of high-profile executives in the government, prompting a visit to its offices by Nigeria’s Vice President, Yemi Osinbajo, Minister of Digital Economy, Isa Pantami and Minister of Science and Technology, Ogbonnaya Onu.

▫️Source: Farmcrowdy's Youtube channel

However, six years after Techstars Demo Day in Atlanta, Farmcrowdy has raised only $3 million in investor funding, according to data from CB Insights, a market intelligence company which curates data on all agriculture tech startups globally.

In March 2021, Farmcrowdy effectively announced its exit from crowd-farming. It had stopped core production much earlier. It decided to metamorphose into a platform for the supply of food commodities instead.

Akindele explains to this writer that the startup’s operation in upstream agriculture became unsustainable.

Despite the early momentum, press spotlights and government endorsement, Farmcrowdy didn’t attract enough funding to scale up. The funding would have helped it to achieve its food production dreams within and outside Nigeria. One investment expert, Kalu Aja, said he saw the startup’s troubled future coming.

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Why did Farmcrowdy’s lights go out so unceremoniously in a country and a continent that desperately need its service? The clue to starting to understand the challenges that doomed the startup might be in the movement of investment dollars in the agritech world.

Analysis of agritech funding shows that of the 80 such startups in Africa, only 12 have raised funding over $3million. The highest amount — $122 million — was raised by AgriProtein, a British company headquartered in South Africa, which uses insects to ‘recycle’ food wastes to produce livestock feed. The second highest was raised by Apollo, a startup based in Kenya, which was founded by American Eli Pollak, a former manager in a Silicon Valley agritech company. Apollo helps farmers access high-quality farm inputs, financing and markets.

Only one percent of global funding for agritech startups has gone into African startups. Meanwhile, investors are favoring biotech agritech startups as the need for innovative and sustainable food production increases worldwide. But Africa is missing out of this opportunity. Almost half of all investment dollars are going to food biotechnology while North America, primarily the U.S., takes the lion share of all fundings.

In one of his interviews on YouTube, Onyeka said he pitched Farmcrowdy to over 80 investors and more than 60 of those said no. “I thought getting into the Techstars accelerator program would help us to do that [raise funding] better.”

Records show the startup’s $3m million funding came from 13 individual and institutional investors. Techstars is one of them. Accelerators often “provide a small amount of seed capital” apart from “a plethora of networking opportunities” as benefits of being cohorts, according to Prof. Susan Cohen of the Terry College of Business, University of Georgia.

Akindele Philips, Onyeka’s successor, insists that Techstars was not a dud. In fact, he says it led to over $1m in funding and the incorporation of Farmcrowdy in Delaware, the number one choice location where African startups incorporate as a doorway to accessing international investment opportunities.

When Farmcrowdy was desperately looking for funding in 2016, one of the investors it approached was Kalu Aja.

“There was no way I was going to invest,” the investment expert says. “I don’t have any agritech startup in my portfolio because it is hard to make profit in agriculture when it is easier to import food from some European countries to Africa than it is to import food from one African country to another due to infrastructure problems, multiple taxation and other costs.”

Road access is still low in Africa, making farm to market extremely difficult for some producers. The Africa Development Bank estimates road access in the continent at only 34 percent — 16 percent less than the global average. Only 30 percent of the continent also have access to electricity.

The current pinch Africa is feeling due to the ongoing Russo_Ukrainian war illustrates Kalu’s point. A UN report released in March 2022 shows that 25 African countries rely on the two countries for their wheat needs. 18 of them get more than 50 percent of their wheat from the two enemies.

Many of the investors to whom Onyeka pitched doubted the potential of Farmcrowdy to turn huge profit in the face of the infrastructure challenges in the continent.

“You can’t invest in something that is broken,” Kalu says.

Akindele, Farmcrowdy’s CEO himself confirms it was a major problem.

“If we were in another part of the world, we wouldn't bother about accessibility to our farms,”

But there were many problems that also made it impossible for the startup to sustain its production business, according to Akindele.

Some of the startup’s farms were destroyed by floods. In other cases, the company did not make profit because some farmers they engaged sold off harvests in side deals.

Then there is security, the current monster facing everyday life and businesses in Nigeria.

“We started farms in Jos (a city in Nigeria’s middle belt region) and shortly after, Boko Haram started killing farmers,” Akindele says. They could no longer go to their farms.”

Farmers have been a target of Boko Haram, an extremist group in Nigeria for over a decade, a major threat to the country’s food security. In 2020, the Washington Post reports how over 110 rice farmers were massacred on their farms in one single incident by militants.

How did Farmcrowdy not factor these security challenges in during its research prior to launching? Akindele says it was not something anyone could have expected.

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Whenever Tomie Balogun comes across any investment opportunity that looks genuine, she brings it before The Green Investment Club, a group she founded in Lagos in the wake of Nigeria’s 2016 recession.

With an MBA and 15 years of experience as a certified financial educator, she wanted to create a community of “millennial investors” who would “never be as broke as our parents when we reach their age.” It was the same group Tope Adesemoye belonged to.

The club’s website boasts of having over 2,000 members who are core investors spread over 38 countries and have collectively raised and invested over $25 million.

One of the first investment opportunities Tomie would bring before her group was Farmcrowdy.

“Everyone knows agriculture is important,” she tells this writer. “I had been very interested in investing in that area and Farmcrowdy came at a perfect time with a model that made sense.”

She invited Onyeka to her club’s meeting to explain how the model worked and the potential to generate great returns. His explanation and answers to their questions satisfied the club members. Many of them, including Tomie, would eventually invest as farm sponsors. She declined to say how much the club invested.

“I knew there were many risks like bad harvest, crops going bad.” she says. “The company was innovative to have taken insurance against those risks.”

At the time the startup launched, Akindele says no insurance company in Nigeria wanted any part of it.

“All the private underwriters thought it was too risky. It took a lot of effort to eventually convince one of them, Leadway Assurance, to provide cover.”

Now, six years later, Tomie believes the startup lost a chance to grow because “they were trying to be more of a tech startup than an agriculture startup.”

Her explanation was that once the company established itself, it should have pivoted to producing commodities with longer turnaround and higher revenue.

She cites the example of sesame seeds, Nigeria’s biggest non-oil export, which earned the country $269 million in 2021 according to the government’s quarterly foreign trade data.

It would seem that the startup tried to focus on cassava farming to increase its earnings at a point. A 2018 video on its Youtube channel shows a couple of people in Farmcrowdy shirts waving to the camera as a drone shot pans over an expansive cassava plantation in the deep southern state of Akwa Ibom. Onyeka confirmed to journalists two years later that the company was cultivating 1,250 acres of cassava in the state.

However, one former employee who prefers not to be named in this piece because they were not authorized to speak for the company says the cassava project in the state became a scandal as the company “did not get a penny back in revenue from it.”

When this writer asks Akindele about this project, he says, “There were many challenges with agriculture production no amount of research could have mitigated.” He declined offering further details as he insisted it was a private company matter.

None of Farmcrowdy’s co-founders has an expertise in an agriculture-related field.

“Many of my colleagues are more concerned about being a tech startup than being an agriculture startup,” one agritech startup founder, Kojo Boateng says.

His company, NewAge Agriculture is a Ghanaian crowd-farming startup, which has been operating for two years, a time he says the company produced over 30,000 metric tons of grains.

Like Farmcrowdy, NewAge also focuses on smallholder farmers to produce its crops. It says on its website over 9,000 farmers have earned revenue through its platform.

Many African countries like Ghana and Nigeria still operate a family inheritance land tenure system.

Kojo says that the company used to buy lands for farming but soon realized it was problematic. Different families would lay claim to the same land forcing the company to sometimes pay multiple times for the same land, he says.

The startup found a solution.

“We approach landlords who have more land than they can use and lease part of the land for our farms,” he tells this writer.

The startup also has a plan to expand to the rest of West Africa but unlike Farmcrowdy, it has no intention of doing funding rounds, at least for now.

“Our impact on food production, creating income for farmers are what matter to us,” he says. “Crowd-farming is helping to do that. The moment we start raising funds from venture capitalists and investors, we start worrying too much about turning a profit for them. This may not result in creating the impact we want.”

Kojo says that it is the pressure to turn profit for investors that forces many startup founders in Africa to often travel around the global north where most investors are “giving speeches and polishing the image of their startups” instead of consolidating real value on the ground.

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Professor Idris Ayinde of the University of Agriculture Abeokuta, Nigeria, says he often questioned the impact many current agritech startups in Nigeria are having.

“I see reports and rarely the products of these startups,” the Agriculture Economist tells this writer.

According to him, the only way agritech startups can solve Africa’s food insecurity is to focus on small-holder farmers who make up the majority of the agriculture production chain. He adds that startups must limit the export of food out of Africa and operate within communities where small-holder farmers work.

“Agritech startups operate out of the cities with small units in the rural areas where the small-holder farmers are concentrated,” Prof. Ayinde says. “It is hard to create impact that way.”

Prof Udaya Nagothu of the Norwegian Institute of Bioeconomy Research, who has been working with farmers across sub-Saharan Africa through an EU-funded project, shares some of Ayinde’s opinion.

He says small-holder farmers are the solution to Africa’s agriculture problem but climate challenges and lack of access to input make them risky to invest in.

“Access to seeds is a major constraint in Africa,” he says. “There is need for climate-resistant crops.” He cites East Africa where the climate has devastated maize farms in the last three years.

He identified skills training for farmers, logistics and marketing support as well as positive government policies as the most pressing issues needed to engender Africa’s agriculture.

Professor Nagothu suggests that agritech companies must work with the scientific communities to grow better crop varieties and find climate resistant seeds.

For now, Farmcrowdy’s founders have learned their lesson.

“Even if we raised 10 times the funding we raised, we would not have been able to continue operating in upstream agriculture due to the risks,” Akindele says. “But we are proud that we got young people to see agriculture as a viable investment.”