INTERVIEW: Farm Capital Africa founder talks on how to scale up amidst challenges faced by start-ups
He was among the final 10 nominees for the 2015 annual Innovation Prize for Africa Awards. His start-up Farm Capital Africa was selected from 925 applications received from 41 African countries, surpassing the previous year’s entry record of 903.
He is also the brain behind Farm Capital Africa, a well-developed risk sharing agri-business funding model that draws in investors for a share of farming profits. The initiative identifies, screens and shortlists full-time farmers with small holdings and helps them devise farming plans to attract potential investors who earn profits over time.
This is a viable solution to address the inability of committed, small scale African “agripreneurs” — who lack collateral and credit history to access traditional financing—from expanding their operations. An attractive farming initiative and investment option for those with extra capital, benefitting both small scale farmers and investors.
After the finalists were announced we took time to have a word with Alex Mwaura Muriu, Founder of Farm Capital to get more insights on how Farm Capital operates? Challenges they have faced as a start up? And what societal challenges they have been able to address.
- What is Farm Africa Capital and what drove you to starting it
Farm Capital Africa (FCA) is a Social Impact Agri-investment company, formed to to channel Capital to profitable and sustainable Agriventures in Africa. We do this by Partnering with Small scale Farmers with great growth Potential, and through our Investor networks enable them to access the funds they need to scale up their Agriventures. This is all done through a Profit and Loss sharing arrangement between the Agripreneur, FCA and the Investor.
Our existence is inspired by the huge Financing Gaps currently experienced by the Small Scale Agriculture industry in Africa, which ironically forms the breadbasket of the Continent. Only 1% of the Continent’s Loan Portfolios currently go to Agriculture (Mastercard Foundation), leaving Billions of dollars in unserved and untapped Markets in this sector. The Social Impact of this gap is evident in the rampant food shortages across the Continent and the fact that majority of Africans living below the Poverty lines are in Small Scale Agriculture.
We seek to trigger an industry that will fix this problem once and for all.
- Take us through your journey in relation to how your started Farm Africa Capital
At the founding of my second Company (After 6 Labs), we were researching crowd funding as a solution to raising of capital for start-ups in Africa, inspired by our own difficulties in accessing start-up capital. We looked at many industries but opted to Pilot with Agriculture where the financing problem was more rampant. The more I dug deeper into Agriculture, the more I realized how much difference we were about to make. In 2014 I sold my shares in After 6 Labs and use the funds to pursue this solution further. The rest is history.
- What challenges have you faced in your journey?
The main challenge faced is access to Funding for the various stages of growing the business. The Angel and Venture Capital network in the continent is still nascent leaving a wide gap in start-up financing. This really limits growth and what could have been done in a short time can end up taking years to be achieved. The other challenge would have to be access to talent. It takes more than one person to turn an innovation into a company, and the best talent in the continent prefers more secure jobs in established companies. This presents a big problem as good people are the key to the success of any Company.
- What does the nomination for the Innovation Prize for Africa Award 2015 mean to you?
The nomination goes to show that our business model has been recognized as a potential solution to the financing problem in small scale agriculture in Africa. This recognition has already attracted a lot of attention to us and we expect a Win to take it to the next level.
- Through Farm Africa Capital what societal challenges have you been able to address?
We are the first Kenyan company using a Profit and Loss sharing Funding Model to provide expansion Capital to Small-scale Farmers. Without limitations such as Collateral, Monthly repayments and Investment Ceilings, we are able to provide Agripreneurs the investment they need to achieve their dreams, as opposed to what they can afford. Qualified Farmers do not receive any hard cash, but rather provide farm plans which upon review by our internal Agri-experts are used by our Field managers to ensure they get necessary inputs, infrastructure and farm support needed to achieve Success. This allows us to impact a segment that currently has few to no alternative options as far as expansion capital is concerned.
- Kindly share the worth of Farm Africa Capital and how do you generate capital to sustain Farm Africa Capital?
FCA makes its revenue through the Profit sharing arrangements we have with our Agripreneurs. Unlike Banks, MFIs and other traditional financiers we do not have the barriers such as Collateral, High Interest Rates or Monthly payments which are a big hindrance to this Market segment accessing expansion Capital. We protect our downside through thorough vetting of Farmers, applying Good Agribusiness Practices and Insuring all our Project. We have been in existence for about 8 months, and in that time have processes about 120 farmer applications, 6 of whom have already been brought into our funding Pipeline with a total investment value of $425,000. We have only just started getting revenue from our first project this April so too early to discuss numbers.So far the company is being sustained by the Founders’ own resources.
- Which other accolades/awards do you have as Farm Africa Capital?
In 2013, our Founder Alex Muriu represented Kenya at the Global Entrepreneurship Summit in Kuala Lumpur, Malaysia, and won an Honorable Mention award for the Farm Capital Africa concept. In 2014, he was one of 12 International Entrepreneurs selected to attend the GIST Transformation Journey in the cities of Chicago and Washington DC, hosted by the US State Department.
- Any expansion strategies and what’s next for Farm Africa Capital?
Farm Capital Africa is currently seeking Kshs 10 Million (USD 111,111.11) as seed capital to support working capital requirements, to develop our Investor Portal for future fundraising and Project Management software to help better monitor funded projects, establish our offices (we are currently operating from the Kenya Climate Innovation Centre incubator space at Strathmore Business School) and run payroll for an expanded workforce to manage our increasing number of projects, and finally run marketing campaigns to attract investors. Our three year strategy is to work with at least 100 Agripreneurs to cultivate up to 1,000 acres of Land.
- What does the future hold for Farm Africa Capital?
Farm Capital Africa’s pioneering model will see 20,000 small scale Agripreneurs become large scale food producers over the next 10 years. By sharing our Success Model with Entrepreneurs in other African countries who share our vision, and helping them implement it in their Countries, we see this number going up to 1 Million Small scale Agripreneurs across the continent.
Here is a short documentary about Farm Capital
#TechTrendsKE wishes Alex Mwaura and the other Kenya nominee Kyai Mulleia of M-Changa ll the best in the awards.
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