Nigerian agritech startup Releaf has secured $3.3 million in an oversubscribed pre-Series A round. The funding round saw the participation of Consonance Investment Managers, Stephen Pagliuca (Chairman of Bain Capital) and Jeff Ubben (Board member at World Wildlife Fund and Founder of Inclusive Capital Partners), and was led by Samurai Incubate Africa. The Nigerian startup also counts The Jack Ma Foundation as part of its backers.
Releaf supplies ingredients to consumer goods manufacturers and their food factories. The startup places its focus on value chains where smaller factories are set up close to small-scale farmers. This produces benefits such as cheaper logistics costs and better processing yields. For now, oil palm is the only crop that the startup works on. The oil palm market is estimated to be worth $3 billion and consists of at least 4 million small-scale farmers, and this is what Releaf has been tapping into. Releaf wants to help these farmers attain better results via efficient methods and adequate tools, as an estimated 80 percent of oil palm production is done using primitive methods and inefficient hardware; this leads to the production of low-quality products. To mitigate this, Releaf launched Kraken; its palm nut de-sheller machine that can not only process crops but also extract high-quality vegetable oil for farmers efficiently.
Releaf will be using the newly-acquired funding to support the launch of two new technologies; Kraken II and SITE. Releaf’s co-founder and CTO Uzoma Ayogu explained that “Our seed round was focused on essentially getting the first evolution of Kraken and proving that we can be the first company to take multiple species of very poor quality smallholder palm nut and turn them into high-quality palm kernel oil. After proving that, we needed to figure out how to best place this technology dynamically and, over the last couple of months, made progress on Kraken’s evolution from being static to being portable and reducing the cost significantly [Kraken II] while adding new products [SITE] to complement the suite of tech that we have already.” Releaf was founded by CTO Uzoma Ayogu and CEO Ikenna Nzewi in 2021.
Kraken II which can be referred to as an upgrade to Kraken is a mobile and cheaper version of Releaf’s palm nut de-sheller. While this mobile version costs about half the price of Kraken, it eliminates more than 80 percent of margin-eroding costs. The second technology, SITE, that the startup plans to launch is a geospatial mapping app that discloses food processing assets. The technology was developed in partnership with Stanford University’s Professor David Lobell.
Professor David Lobell is a MacArthur Fellow and the Director of the Center on Food Security and the Environment. His team was responsible for refining the age identification process for oil palm trees in Nigeria.
Tech alone wasn’t enough to help farmers and manufacturers attain the best margins, according to Releaf’s co-founder and CTO Uzoma Ayogu who went on to add that tech needed to be in the right places and operate at the right seasons across the different regions that exist in Nigeria. These were the factors Releaf had in mind while building Kraken II and SITE, Kraken II for its portability, and SITE for its placement and route planning capabilities. Backed by these technologies, Releaf can target the best opportunities and suffer no limitations.
“The biggest benefit to them [farmers] with this new evolution of Kraken and SITE is that many offer farmers poor 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 pass a lot of that profit back to them while also keeping more of it for ourselves while improving even the quality of the end product,” Releaf’s CTO added.
Releaf, with its model of operating upstream, faces little or no competition thanks to technology. The startup not only offers farmers better prices but also grants them access to working capital.
Releaf claims to have processed over 10 million kilograms of palm nuts since its launch and has grown its monthly revenue 7 times year-on-year. This is set to increase in 2023 thanks to supply contracts from consumer goods manufacturers worth over $100 million. The startup is also considering expansion plans to more regions.
“Our insights have shown that downstream is capped by supply, which is upstream. And so our focus is via the first mover advantage with differentiated technology, we can capture a significant amount of supply in a fragmented market and then over time verticalized to increase margins and market position,” Releaf’s CTO said.
“Releaf’s success with its pilot Kraken validates its thesis, and we are excited to continue supporting their ambitious vision to create efficient supply chains within Africa’s agricultural market,” Rena Yoneyama, managing partner at Samurai Incubate Africa, commented on the investment.