How Crowdfunding in Agrotech is boosting food supply

The global human population currently stands at 7.9 billion people. The UN estimates that the number could grow to 9.7 billion by 2050. To feed that number the world bank estimates that the food supply has to increase by 70% from 2005 levels. The agricultural sector would also require $80B in private sector investments to be able to hit that target. 

In Africa, the case is even direr. The continent is home to the fastest-growing population on earth. Half of the projected growth between now and 2050 is expected to happen in Africa. The continent also has 61% of the world’s unused arable land. Many farmers own land, which they are currently unable to use due to a lack of investment. Financial institutions are reluctant to invest in the agriculture sector, as they judge the risks to be too high. Less than 5% of loans granted are destined for agriculture. 

Enter crowdfunding. The last decade saw an explosion of start-ups dedicated to raising capital for farmers across Africa. From Senegal to Nigeria and Kenya, crowdfunding startups are changing the narrative. If the world and Africa are going to close the food shortage gap, these startups may just have the answer. Here’s how.

Reward-Based Crowdfunding for Donors

This was created to reward donors with necessary perks that differ from each other. Related benefits that will be influential to them. Here, they are rewarded with product samples in some cases, t-shirts and other ideal benefits as a thank you message for donating. Or it might be a “mention” on the donated site, depending on how the donor wants it. 

It has always been very common for startup founders to use reward-based crowdfunding to check marketplace traction. A successful example can be cited to be The Cheeky Panda. They have been able to disrupt the paper tissue market with a plant-based alternative. They began this in 2016. It started with a reward-based crowdfunding project that began aiming to generate €10,000 of an order of tissue made from sustainable bamboo. 

Developing and Strengthening Crowdfunding platforms dedicated to agri-food innovators

Agri-food is a very important sector of the economy if not the most important. It’s very important because of society’s needs. A lot of people in society, especially young ones, are willing to pay a lot for sustainable food. Through crowdfunding, smaller agri-food innovators can get financing and also connect consumers to small agri-food businesses and this is going to be a change and build a network in the world of technology for food supply. The agri-food sector can be an appropriate place for easy crowdfunding. It can be an avenue for connection between the investor and the company. It bridges the gap and helps smaller agri-food businesses to make ends meet.

Equity Crowdfunding

Also, employing equity offerings on crowdfunding platforms will help the public to invest in small businesses. This makes sure that capital is made in return for agri-food innovators. It’s ideal for a lot of startups to try and explore the potential equity crowdfunding platforms have to offer. This is to help agri-food innovation and assist in enhancing the role of public financial institutions ranging from national promotional banks to the EIB Group. 

Equity crowdfunding isn’t the same as rewards-based crowdfunding. This is in the sense that it has no debt component. Here, investors get ownership. It’s a method of raising capital online from investors so that they can fund a private business. Crowdfunding platforms may charge a percentage of funds raised for their services. This kind of crowdfunding is legal. The U.S. Securities and Exchange Commission allows private companies to be able to legally raise $5 million in twelve months using equity crowdfunding.

A Senegalese agricultural crowdfunding platform

There is a Senegalese crowdfunding company BaySeddo. They use digital channels to encourage inclusive and social investment in agriculture. Whenever a potential specific agricultural project has been highlighted, the financial needs in total are divided into agricultural shares. This share is fixed at 100,000 CFA francs which is roughly €150. BaySeddo used some part of its winnings from CTA organized AgricHack 2017 competition to finish the development of its mobile app and they were able to incorporate electronic payment services to function in their platforms and made payment easy. 

Other African initiatives models are existing in many other African countries. Like in Nigeria, a startup Farmcrowdy has been at the forefront of leading roles in Africa. At the end of 2017, the company had been able to raise $1m from the international market that invested in them. Through its digital platform the future “sponsors” – a term used by them to describe buyers of their agricultural shares, – can access what they had earned, also able to visualize farming projects and converse with the management of the company. There have been other Nigerian startups in this sector like efarms and farmnignite. They were both winners of the Pitch AgriHack competition that was organized by CTA in 2018. In the end, these processes can boost the food supply.

Efosa Obasuyi
Cofounder/CEO of Adancly (Adancly is a Lending Tech Start-up for SME’s in Africa)
Senior Product Manager GRICD integrated Services Limited