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Ways of fundraising for young e-agriculture entrepreneurs

Kiringai Kamau

Many start-ups rely on fundraising in their own networks. However, new platforms have unlocked new ways to raise money for start-ups. 

Like all enterprises, e-agriculture businesses need finance to evolve products, to grow, and to make a valuable presence in the marketplace. Understanding the needs in the market, documenting potential marketable solutions and sectoral challenges, and developing a business plan to address them, must be the first step. Furthermore, you have to ward of any possibility of failure by distinguishing between money for you and business money. Once convinced that the business can pay you and itself; then you are ready to start the journey to drive your business.

Most e-agripreneurs do not have enough own capital to invest in the start-up. The decision to borrow money is paramount. Where must the money come from? When I started my own business, my bank closed the day I left my job. My money was stuck in there. I had to start offering services even with no resources or peace of mind. Fortunately, I had my first contract to set up a computer network in a friend’s company. It made sense linking up with someone who had trained me on entrepreneurship so that he could fund the purchase of the network resources and the other equipment needed.

No doubt, fundraising starts with your own skillset and your networks. Dhairya Pujara the founder of Ycenter and my business partner in Ycenter Africa, an enterprise that trains value chain ICT4Ag design thinkers, says rightly that knowledge is the first tool that is needed to create impactful and scalable solutions. He indicates that on-the-field learning experiences that provide cultural awareness, learning languages and empathy with the market is necessary. My own experience when I started the precursor of my ICT4Ag business, Octagon Data Systems in 1995, is that networks and own knowledge are more important than cash given or borrowed.

Advance payments

In the end your start-up needs capital to survive. So speak to successful and trusted entrepreneurs or family members who have experience in the field. Identify people who can either put money in your business with a promise on shared ownership or deferred investment in which you can define their returns in the future. Another option is to use clients’ advance payment. This, however, assumes that you have some record to trade for trust. If you do, this is a good source of investment cash since they pay you in advance and pay you your worth once you are done.

New opportunities of fundraising have occurred recently. An angel investor, for example, is a wealthy individual who invests his or her personal capital in a company in exchange for equity in that company. Angels typically fund a start-up at the seed stage of a company. If investing with a group, they can do it as part of an angel fund or as part of an angel syndicate. When you bring an angel on board, you want to make sure you have the right one. They become your business partner whether you like it or not. You would hope that the angel, in addition to capital, brings in new knowledge and networks to the start-up. While there are angels that have tremendous insight into building a company, there are also young founders who might not have the knowledge that can help your company. Try contacting other start-ups in that angel’s portfolio to see if he or she would be a good fit for you.

The advent and relative growth of crowdfunding platforms have proven a great advancement for start-ups to sell their idea direct to the consuming public. One of the benefits of crowdfunding is that none of your “investors” are shareholders in your company, so you get to maintain equity while raising capital to get your company off the ground. The difference is that you have to deliver something to get that money; whereas angel investing and venture capitalists provide investments up front so that you can build out a company and deliver a product to customers down the road. 

Copyright © 2016, CTA. Technical Centre for Rural and Agricultural Cooperation

CTA is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.