The distance between their fields and the nearest processor is critical for smallholder farmers who need to process their crops. And although Nigeria has a deep similarity with the West in regards to its food processing systems In cities with high demand, large factories and economies of scale, farmers still suffer from poor logistics networks.
With distance and logistics problems, farmers can lose crops and when factories When buy them, it affects their processing yields and price. Farmers who face post-harvest losses also get paid less and miss the opportunity to invest in their crop production.
Nigerian agritech startup Relief is solving this by creating proprietary hardware and software solutions to make these farmers and food factories more efficient and profitable.. Today, the company is announcing that it has raised $2.7 million in seeds and funding for this effort.
Pan-African focused venture capital firms Samurai Incubate Africa, Future Africa and ConsenSys Investment Managers led the round. Individual investors such as Bain Capital chairman Stephen Pagluka and Twitch’s Justin Kahn also participated..
with this In the seed round, the agritech startup received a $1.5 million grant from The Challenge Fund for Youth Employment (CFYE) and USAID.
Founded by Ikenna Nzewi and Uzoma Ayogu, Releaf focuses on value chains where small factories are set up near small farmers. This allows them to achieve better processing yields and lower logistics costs; In the end, the farmer has more money to work with.
When the pair started the company in 2017, the idea behind Reeled was not yet concrete as the US-based team hadn’t figured out a product-market fit.
Firstly, it planned to increase productivity in Nigeria’s agricultural sector using software. even After graduating from Y Combinator’s summer batch that year, Relief toyed with ideas around trade finance and a marketplace for buyers and sellers of agricultural products..
When the founders moved back to Nigeria the team would get a clearer picture of what it wanted to build. Nigerian-Americans visit 20 states and study different value chains for crops that detect inefficiencies to be solved by Technology.
“We took a more comprehensive approach to what the solution would be, but we Really Wanted to decide on a specific crop to work on. And we found that opportunity in the oil palm sector,” Nejevi told in an interview.
The palm oil market in Nigeria is worth $3 billion, with more than 4 million smallholder farmers cultivating the fields where they are crops. have been installed.
These farmers produce 80% of the palm oil. But since the industry is quite fragmented, they face many challenges in processing oil palm as it is a crop that requires serious processing power. To extract vegetable oil from it.
farmers In general Go through this process using rocks or unsuitable hardware – Ineffective processes that lead to low-quality oil palm To a large extent Unsuitable as input for manufacturing high quality vegetable oil.
Nazevi says the team saw an opportunity and set out to create a technology to help farmers crack oil palm nuts. The result was the Kraken, a proprietary patent-pending machine.
So here’s how the company’s business model works. Relief buys nuts from farmers, then uses Kraken to crack the nuts and crush the kernels in vegetable oil. Relief then sells the vegetable oil to FMCG processors and local manufacturers, mainly In the south-south region of Nigeria.
“There is about 60% more demand for vegetable oil in Nigeria than supply. And this cannot be met due to shortfall in supply with imports as the government has banned the import of vegetable oil. So there is a need to take these smaller holders that are driving 80% of the production and make them more efficient so that we can have a better balance of supply and demand for vegetable oil,” Nejevi said of the pain point Releaf is addressing. Used to be.
But still, why does the company think it can break into the competitive Nigerian vegetable oil market with barely differentiated products?
Nzewi explains that the answer lies in the quality of the products. In general Vegetable oil is driven by A free fatty acid (FFA) metric that measures the impurity of vegetable oil. The CEO claims that while the industry standard is around 5% FFA, Releaf produces at 3.5%.
Despite the increase in production quality, Relief Products are sold to an industry standard. Nzewi says that may not happen in the future as the company ultimately wants to take advantage of its product quality and increase prices to improve its profit margin..
According to the company, Kraken has already processed 500 tonnes of palm nuts. Its software connects to over 2,000 small farmers who have supplied more than 10 million kilograms of quality palm kernel nuts to food factories.
Regarding expansion, Nezvi said that Relief has more appetite to move to new geographies rather than offer crop. They argue that the processing of the oil palm and farming style is a straightforward method due to its similarities throughout West Africa..
But for crop expansion, the company may have to find crops that can be imposed Practice further intercropping with palm oil or work with crops such as soybeans or peanuts used in the vegetable oil industry.
Relief will use seed investment To develop the technology and deploy it to smallholder farmers, Nazevi tells me. Then $1.5 million in grants will focus On providing working capital financing to these farmers. He says Relief has already run financing trials this year where it has increased the income of smallholders three to five times.
“we think there is Really Great opportunity to bring both physical technology and financial services to make these communities more productive. And that is central to our thesis,” the CEO said. “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 give them access to working capital, payment for education and access to insurance services As valuable as can be found. So we look at food processing as the first step that strengthens us in the value chain“
Earlier this year, agritech startups like Grow Intelligence and Aerobotics raised huge amounts of venture capital and showed the promise of the sector in Africa. However, venture capital has waned over the past few months and Relief’s investment brings that spotlight back to the sector, albeit for a while.
Rena Yoneyama, Managing Partner, Samurai Incubate Africa, said Reelif’s innovative approach sets it apart from other agritech startups the venture capital firm is associated with.
“we believe The firm’s thesis on the decentralization of food processing will have a strong reconciliation with Africa’s economic development scenario for the next few decades. Ikena and Uzo are the perfect founders to disrupt this market in Nigeria and beyond. we are thrilled To support them as innovation in providing both agro-processing and financial services to rural communities and farmers,” she added.
Also speaking on the investment, Iin Aboyezi, General Partner, Co-Principal Investor Future Africa, said, “… Relief’s team is building the agro-allied industry of the future, starting with palm oil, for which they have developed a new technology. grossDeshell and process in key ingredients like vegetable oil and glycerin. Future Africa is pleased to support Relief to build the future of modern agriculture.