A lot of people wonder why African financial technology (fintech) startups have been almost exclusively the recipients of big-name venture capital (VC) startup funding.
Well, I will tell you the simple answer. It is because African fintechs have revenue instantly, from day one.
Fintechs, unlike farmers, do not plant anything in the ground and then wait for 150 days or 6 months before getting any revenue.
Take Prosper on Farms for example.
Prosper on Farms gives African farmers irrigation systems without requiring any money from African farmers. The farmers only have to meet agreed production targets, delivering the crop to an offtaker, usually an industrial agroprocessor. The farmers earn their income when they sell their harvest, and Prosper on Farms makes its money when the offtaker has received the crop. That means Prosper on Farms may go for as long as 6 months, depending on the crop, without getting a dime in revenue from a farmer first. Compare that to a fintech or mobile payment system that charges users transaction fees.
Why does Prosper on Farms not require upfront payment from African farmers?
It’s because most farmers in Africa live on less than US$2 a day and do not even have the money to pay a deposit even for a US$250 water pump.
Secondly, it is a fraud prevention measure because it means farmers will not believe or entertain a fraudster or conman who claims to be collecting money or requiring money for Prosper on Farms. It keeps the farmers safe. By simply not requiring any money from farmers, Prosper on Farms does not have to tell farmers 1000 things to look out for to prevent fraud.
So, recently a fund said it will only support startups that already have revenue.
It is not like Prosper on Farms is not going to have revenues, they just take longer.
Now imagine a situation where you are an African in Africa and you actually needed capital to start a business like Prosper on Farms, those funds or investors will not even fund you.
But you will find some non-African tech startups getting funded without showing any revenues, raising millions of dollars after only just showing a pitchdeck, a PowerPoint presentation.
Agricool, a French startup that did not even have a business model, got US$35 million in funding from investors to grow food in containers.
When it comes to Africa, a lot of big-name venture capitalists want to invest in African payments systems (fintechs) so that they make money from the farmers’ payments and the farmers’ transfers of money on the African payment systems.
But how much money do you think will move on African payment platforms if almost all African farmers continue to live on less than US$2 a day?
Over 80% of jobs in Sub-Saharan Africa are in agriculture.
The irrigation systems that we provide to farmers allow farmers to more than double or quadruple their incomes, which means the farmers will have more money to spend, which also means that the fintech companies can make higher revenues from higher value transactions on their platforms, which ultimately means that investors in African fintechs will get way richer if African farmers are provided with irrigation.
In some cases, a client African farmer who Prosper on Farms supports will actually make enough money to qualify to be in the top 20% of income earners in the United States. Yet the big-name venture capital firms would rather not invest in the basic boosters of economic activity like ours.
So, somebody has to invest in the providers of basic agricultural infrastructure for African farmers’ success, irrigation, and that is us.
There is something wrong with the picture of big-name global venture capital funds funding African fintechs so that the global venture capital funds can profit from the money transfers of aid agencies, like those of World Food Programme, to poor African farmers who require food aid and financial aid because they do not have irrigation amid ever frequent droughts because of climate change.
How about lifting the farmer out of poverty with irrigation first? A lot of big-name venture capitalists will tell you that it is because that does not fit their “investment thesis”. LOL
So, what fits their investment thesis?
Fintech! It makes money right here and right now!
Whoever has the gold makes the rules.