The rise and pivot of agritech crowdfunding platforms
The financial debacle of agritech startups should have been resolved last year. But Agropartnership, Crowdyvest, Farmnow, Farmpower and other agritech crowdfunding platforms still owe investors millions of naira.
Agritech startups that allow people to invest in agriculture through crowdfunding are still explaining their inability to payout with "COVID-19 affected us". This is almost two years into the global pandemic.
The coronavirus pandemic is indeed a black swan and a litmus test. While agile teams have used the attendant opportunity to adjust their business models, some agritech crowdfunding platforms are set in their ways; hence, their continuous indebtedness.
"There's a fine line between heroic persistence and foolish stubbornness", organisational psychologist Adam Grant writes in his book Think Again. "Sometimes the best kind of grit is gritting our teeth and turning around".
Some months after the World Health Organisation declared COVID-19 a global pandemic on March 11, 2020, news broke that some agritech startups were owing their customers-investors. These startups include Thrive Agric, Menorah Farms, Grow Crops Online, Eatrich Farms, Winich Farms, HO Corn, Agro-Park, and PayFarmer.
Of that set of defaulting startups, only Thrive Agric has completely paid investors and it has discontinued its crowdfunding service. Meanwhile, Grow Crops Online has declared force majeure. Eatrich Farms and HO Corn have abandoned and gone as far as arresting protesting investors. Winich Farms reached out to investors yet to receive their capital in July 2020; however, it's unclear if they’ve completed their payout.
The financial debacle of agritech startups should have been resolved last year or at least a staggered payment plan be made known to investors. Instead, more people are coming forward to say they are yet to receive their payout from these agritech startups: Agropartnership, Crowdyvest, Farmnow, and Farmpower.
The Crowdyvest case is particularly interesting. Farmcrowdy — the foremost agritech crowdfunding startup in Nigeria — eluded being among the 2020 set of defaulting agritech startups by divesting its crowdfunding service to Crowdyvest in September 2019. And last year, Crowdyvest exited Emfato Holdings — the parent company of Farmcrowdy and Treepz (formerly Plentywaka).
An investor tale of woe with Crowdyvest
David (not real name) invested ₦1.3 million on Crowdyvest last year January. The investment matured in November 2021 with a 15% return on investment. But David is yet to receive his money, both the profit and capital. Crowdyvest has been taciturn.
On December 10, 2021, David initiated a withdrawal on the Crowdyvest platform. But his request was not processed; his account was not credited. So he sent an email to Crowdyvest's customer support on December 13. The next day, he received a reply from the CRM Assistant Team Lead Sophie Ekama, who explained that "we experienced some delay with receiving funds from one of our project partners and this resulted in the delay of the remittance of your payout. However, this is being resolved as we seek other means to make the payment".
"In light of this, we plead your approval to allow us till the 30th of December (2021) as the timeframe within which your payout will be completed", the email shared with Benjamindada reads.
More than two weeks later, David is yet to receive his money — ₦1,502,000.
Rather than credit his account and respond to his email — in which he copied the CEO Temitope Omotolani, a customer representative called him on December 29. According to David, Segun — the customer rep who called him — said they won’t be able to pay as planned on December 30 and asked if he’d roll over his investment for another 60 or 90 days and get some more returns. David refused the offer. "I just need them to pay me", he said.
Crowdyvest did not respond to multiple requests for comment.
In a confidential notice to investors on January 13, however, Crowdyvest said: "We have recently encountered some business challenges occasioned by delays in payment from our partners. This has in turn affected our ability to pay you at the stipulated time... While we continue to work with our partners to fulfil their obligations to us, we are currently working with a team of consultants as we explore alternative avenues to resolve the payment delays in the shortest possible time".
"We are requesting that you extend us a maximum 30-day period during which firm commitments can be secured so we can communicate in more details a planned payout period".
This is similar to what Thrive Agric did to resolve its payout issue. Co-founder and CEO Uka Eje stepped down for Adia Sowho, the former Managing Director of Migo – Nigeria, to steer Thrive Agric through the tumultuous time. So Crowdyvest users can remain hopeful.
Farmnow also sent an apology email to investors on January 7, 2022. The email obtained by Benjamindada reads: "We apologise for not fulfilling our words regarding the payment schedule which ought to have come to fruition on the 28th of December 2021... Farmnow Nigeria in no way intends to demean your understanding and patience with us. Our priority is solidly centered on making all outstanding payouts to you, our esteem investor... Again, bear with us and be assured that Farmnow Nigeria is still committed to making payment. We will keep our correspondence open for further updates".
Meanwhile, people who invested with Agropartnership are threatening to take legal action against the platform. "These investors appear to have run out of patience upon the lapse of the 3-7 days ultimatum which Agropartnerships said would be used to pay investors with one to five units of the cashew 04 cycle which matured on the 15th of December as those with over five units have refused to wait until April next year to access their funds", Nairametrics reported.
Why agritech crowdfunding startups are unable to payout
People familiar with agritech crowdfunding startups operations said the tapered interest in agro-investment is one of the reasons these startups are unable to payout.
Before the global pandemic that gave rise to the first set of defaulters and the Securities and Exchange Commission’s crowdfunding regulations, investing with crowdfunding platforms was lucrative. Even savings and investment platforms like Piggyvest launched products that enabled their users to make agro-investment.> **Related:** [Why Piggyvest launched Investify](/piggyvest-launches-investify/)
Some crowdfunding platforms were using new investors’ money to settle those whose investments had matured. They were using JJC’s fresh investment for OG’s payout; paying Peter with Paul's investment. The continuous cash flow ensured their smooth operation, people familiar with the matter explained.
In a separate interview with Benjamindada, the co-founder and CEO of Agricorp International Kenneth Obiajulu said: "Some people think agritech is synonymous with crowdfunding. But that’s not the case. You’d never be able to replace the hard activities of being on the ground and producing with sitting at home and pressing your phone".
Indeed, two of the leading crowdfunding platforms — Farmcrowdy and Thrive Agric — have pivoted to focus on providing tech-enabled solutions for smallholder farmers. Crowdyvest and other agritech crowdfunding platforms should complete payout to investors like David. And then, perhaps, reconsider their business model.
As senior development analyst Gbemisola Alonge noted in her analysis of how the pandemic turned agricultural investment opportunities sour, crowdfunding platforms attempted to control most of the aspects of the value chain and have enjoyed the benefits of the agriculture sector. But beyond putting seeds in the ground and waiting for it to sprout, agriculture in Nigeria is no small feat.
Issues of transportation, storage and climate change were all challenges that existed before the coronavirus pandemic but were challenging to manage when it finally broke. And no matter how hard you attempt to hide something wrong, it will always reveal its true self, she concluded.