Image source: Hope Mukami
This article was submitted to TechCabal by Conrad Onyango, bird story agency*
Venture capital in Africa is being boosted by investments in companies connecting farmers and food producers to retailers (known as “midstream technologies”) according to an investment report that shows African agrifood tech startups raised US$ 1.1 billion in five years.
Last year, investments into agrifood tech – startups seeking to disrupt the global food and agriculture industry – in Africa hit US$ 482.3 million. Of this, 61 percent went to midstream technologies . In 2020 startups in this sector raised US$185 million.
Venture capital firm, AgFunder, in its first Africa Agrifoodtech Investment Report, 2022 shows startups using software to fill in critical infrastructure gaps, including agribusiness marketplaces, raised US$293.7 million last year- highlighting the rising attractiveness of these ventures to investors.
“Many new promising innovations to secure and improve the world’s food supply are starting to gain traction globally, as well as in African markets,” said Dutch lender, FMO ventures, in the report.
The lender said that technology offers more cost-and-resource-efficient ways of addressing Africa’s persistent dependence on food imports and food insecurity.
“We believe emerging agtech solutions have the potential to address challenges in current food production and distribution, and target end users ranging from the smallholder farmer to agri enterprises to the final consumer,” said the firm.
In 2021, some of the largest fundraising by midstream startups included a Series A funding raise of US$ 55 million, by Egyptian e-commerce startup MaxAB and US$ 50 million in Series C funding by Kenya’s Twiga Foods. Twiga is a business-to-business (B2B) platform that helps rural farmers supply fresh produce to small and medium-sized vendors and retailers.
Nigeria’s TradeDepot raised US$ 42million in Series B funding, plus US$ 68 million in a debt round.
This year, the largest funding value in midstream startups more than doubled after Wasoko raised US$ 125 million in series B funding, before relocating from Kenya to Zanzibar.
Wasoko’s fundraise represents about 30 percent of approximately US$ 400 million mobilised by agrifood tech startups in the first half of the year — more than 80 percent of all 2021 sector funding.
Among Africa’s ‘Big Four’ startup markets, Egypt leads with US$ 186.1 million, followed by Nigeria (US$ 147.8 million) and Kenya (US$88.5 million). South Africa had the smallest share of the four, with US$ 22.1 million.
Over the last five years, Agrifood tech deals have almost tripled from just 51 in 2017 to 150 in 2021.
Agrifood Fintech startups that are facilitating financial inclusion for farmers, agribusinesses, food vendors and retailers are also rising as the next biggest category to watch after midstream tech startups, having raised US$ 23.6 million last year.
More funds are still heading to agrifood tech startups following the launch of a nine-month investment readiness program by Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) earlier in the year.
The program – dubbed Scaling Digital Agriculture Innovations through Startups (SAIS) – targets five startups every year whose solutions enable users of the agricultural or agrifood sector (mainly women and young people) to increase their income.
“The GIZ-SAIS investment Readiness Program is aimed at entrepreneurs who have developed and brought to market a digital product that solves a specific problem in the agricultural and agrifood value chain,” according to their website.
It will consider startups from 25 countries, including the Democratic Republic of Congo, Morocco, Cameroon, Rwanda, Benin and Algeria (and excluding the “big four”), showing that investors are interested in Agritech ecosystems across the continent.