Founded by Ikenna Nzewi and Uzoma Ayogu, Releaf focuses on value chains where smaller factories are set up near smallholder farmers. This allows them to get better processing yields and fewer logistics costs; in the end, the farmer has more money to work with.
The Nigerian agricultural system though might be one of the biggest in Africa still has a lot of significant issues, distance and logistics are some of the major problems. Farmers’ crops can go bad and when factories buy them, it affects their processing yields and price. Farmers, witnessing post-harvest loss, also get paid less and miss the opportunity to invest in their crops production, that’s where Releaf comes in.
The company started out with vegetable oil. They buy the nuts from farmers, break them with a proprietary machine, the Kraken, and then press them into vegetable oil which they then sell to food factories. Releaf says the Kraken processes 500 tonnes of palm nuts a year, per Techcrunch. Through its software, it has enabled 1,000 farmers with the means to provide 7.5 million KGs of quality crops as of 2020. Now it has onboarded over 2,000 farmers who have provided 10 million kg of quality palm kernel nuts.
“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.
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,”Releaf CEO, Ikenna Nzewi said.
According to Techcrunch, when the pair started the company in 2017, the idea behind Releaf was not concrete yet as the team, based in the U.S., had not figured out product-market fit. First, it planned to increase productivity in Nigeria’s agricultural sector using the software. Even after graduating from Y Combinator’s summer batch that year, Releaf toyed around with ideas around trade finance and a marketplace for buyers and sellers of agricultural products.
Releaf has announced it recently raised $2.7 million in seed toward this effort. Pan-African focused venture capital firms Samurai Incubate Africa, Future Africa, and Consonance Investment Managers led the round. Individual investors like Stephen Pagliuca, the chairman of Bain Capital, and Justin Kan of Twitch also participated. In addition to the seed round, the Agritech startup secured $1.5 million in grants from The Challenge Fund for Youth Employment (CFYE) and USAID. It later raised $1.3m in funding from angel investors like Eudaimonia Capital. This brings its total funding to date to $5.68 million.
Regarding expansion, Nzewi noted that Releaf has more appetite for moving into new geographies instead of crop offerings. For its crop expansion, Releaf will need to find crops that can be planted alongside oil palm and practice intercropping or work with crops like soybeans or groundnuts used in the vegetable oil industry.
Releaf will use the seed investment to develop technology and deploy it to smallholder farmers. Then the $1.5 million in grants will focus on providing working capital financing to these farmers. Releaf has run financing trials already this year where it has increased smallholder incomes by three to five times.