releasea Nigerian agritech startup that supplies ingredients (starting with the oil palm) to consumer goods manufacturers and their food factories has received $3.3 million in an oversubscribed pre-Series A round.
The Jack Ma Foundation-backed startup, which announced a $4.2 million seed raise (including a $1.5 million grant) in September 2021, said the funding will support the launch of two new technologies: Kraken II and WEBSITE.
Releaf focuses on value chains where smaller factories are set up near small farmers, enabling them to get better processing yields and less expensive logistics costs. The oil palm is the first and for now the only crop that Releaf is working on; the oil palm market is a $3 billion market made up of over 4 million small farmers. These farmers are driving around 80% of crop production the use of bricks or inefficient hardware, responsible for producing low quality vegetable oil. So the agritech launched Kraken, its static palm nut shelling machine, built to process this crop and efficiently extract “high-quality” vegetable oil for farmers.
“Our seed round was aimed at getting the first evolution of Kraken and proving that we can be the first company to take multiple varieties of very poor quality palm nuts from small farmers and convert them into high quality palm kernel oil,” Uzoma Ayoguco-founder and CTO, businessroundups.org told businessroundups.org in an interview.
“Once we proved that, we had to figure out how best to dynamically place this technology, and over the past few months we’ve made progress with Kraken’s evolution from static to portable and significantly reduced costs. [Kraken II] as new products are added [SITE] to complement the suite of technology we already have.”
Kraken II is a mobile and less expensive version of the palm nut sheller, costing half as much and eliminating more than 80% of margin-eroding costs. On the other hand, SITE is a geospatial mapping application that exposes food processing resources. SITE was developed in collaboration with Stanford University Professor David Lobell, a MacArthur Fellow, and Director of the Center on Food Security and the Environment, whose team refined the age identification process for oil palm trees in Nigeria.
According to Ayogu, YC-backed Releaf found that just building technology was not enough to get the best margins for farmers and manufacturers, but that the technology had to be in the right places and in the right season in different regions of Nigeria. Hence the reason for Kraken’s portability and SITE’s placement and route planning capabilities. The combination of the two enables Uyo-based Releaf to target the best opportunities in Nigeria’s oil palm belt rather than limiting itself to sourcing crops within 100 kilometers of a fixed processing location, such as existing food processors.
“The biggest benefit for them [farmers] with this new evolution of Kraken and SITE is that many farmers offer bad 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 large part of that profit on to them, while also keeping more for ourselves and even improving the quality of the final product. said Ayogu, who co-founded Releaf with CEO Ikena Nzewi about why these new technologies are important for farmers.
In Nigeria’s food processing industry, there is more competition downstream, which is mainly dominated by middlemen and traders, mostly single or few person outfits who are typically closer to the consumer and have better pricing power. It’s different for Releaf, which operates upstream and has less competition, at least when technology adoption is considered. Offering farmers better prices and providing working capital are two ways Releaf is gaining market share in this segment, Ayogu noted.
The startup has used its supply chain technology to process more than 10 million kilograms of palm nuts since launching Kraken in 2021. As a result, Releaf has grown its monthly sales 7x year-over-year, which is expected to increase this year following the confirmation of more than $100 million in supply contracts from consumer goods manufacturers in Nigeria. With this funding, the agritech, whose valuation has tripled since the seed round, aims to expand the regions where it processes palm and expand the crop types it works with.
“Our insights have shown that downstream is constrained by supply, which is upstream,” said the CTO. “And so our focus is through the first mover advantage with differentiated technology, we can capture a significant portion of the supply in a fragmented market and then verticalize it over time to increase margins and market position.”
The pre-Series A funding was led by Samurai Incubate Africa, who reinvested after leading Releaf’s seed round, with participation from Consonance Investment Managers. Stephen Pagliuca (chairman of Bain Capital) and Jeff Ubben (board member of World Wildlife Fund and founder of Inclusive Capital Partners) also invested. Speaking about the investment, Rena Yoneyama, managing partner at Samurai Incubate Africa said: “Releaf’s success with its Kraken pilot confirms its thesis, and we are excited to continue to support their ambitious vision to create efficient supply chains within the African agricultural market .”