Funding for agricultural startups saw a significant downward shift, with African agritech startups raising $429 million in the first half of 2022 (H1 2022), compared to just $99 million in H1 2023.
Despite the abundance of funding opportunities, particularly in South Africa, many farmers and startups in the region express the challenges they face in raising funding for their businesses, especially regarding access to funding.
How can agricultural startups secure funding?
This article will provide details on funding opportunities available to South African agricultural startups and tips on how they can secure them.
Let’s get started!
Funding makes it possible for startups to invest and gain access to resources like people, equipment, and technology, opening up opportunities for greater creativity and productivity.
Funding enables businesses to grow, penetrate new markets, and withstand volatile markets.
The International Fund for Agricultural Development (IFAD) field report indicates that agriculture in Sub-Saharan Africa has 11 times more impact in reducing extreme poverty through economic growth than other sectors.
By seeking funding opportunities, startups can efficiently manage challenges, take advantage of business opportunities, and substantially contribute to the economic development of South Africa's agriculture sector.
As much as funding for agricultural startups is important, they also need to be aware of the available opportunities and take advantage of them.
The National Development Agency (NDA) aims to contribute to poverty eradication and its causes by offering funding to civil society organisations, including agricultural businesses. They implement expansion projects for poor communities and strengthen these organisations that serve economically disadvantaged communities.
Funding focus – Startups in the agricultural sector can access funding for various projects like farm infrastructure development, capacity building, and community empowerment.
Application steps – Submit a detailed project proposal outlining objectives, budget, and impact.
Eligibility status – Civil society organisations including agribusinesses
Funding type – Non-repayable grant for project development.
The AGRIBEE Fund is focused on helping black-owned agriculture businesses become proficient in technology, economically viable through market access, and significantly contribute to general agricultural growth.
Funding focus – Invests in aspiring African agribusiness startups in rural and peri-urban farms.
Application steps – Complete the AGRIBEE Fund application form with business details.
Funding type – Investment or loan with preferential terms for empowerment.
Land Bank is a South African development finance institution that provides funding for agricultural startups and facilitates the inclusion of new entrants and disadvantaged persons in the economy.
Funding focus – Financial products and services, including low monthly administration costs and development of suitable equity investment options and structures.
Funding type – Provides funding for land acquisition, equipment, asset development, and production credit tailored to the needs of agricultural startups.
Application steps – Submit a funding application with details about the agricultural project, business plan, and financial projections.
The South African government established the Umsobomvu Youth Fund (UYF), which has been running since January 2001.
UYF assists them with business and skill development.
Eligibility criteria – Men aged 18-35 and women of all ages starting new businesses or growing existing ones.
Funding type – Provides micro-capital loans ranging from 1500 South African Rands to 100,000 South African Rands (R1500 to R100,000).
Application steps – Apply for micro-capital loans by submitting a business plan and undergoing a credit check.
Agro-Processing Support scheme provides investment opportunities for agro-processing or beneficiation businesses.
Funding goal – To increase startup capacity, create employment, improve productivity and competitiveness, and introduce modernised machinery and equipment to the agricultural sector.
Funding type – Cost-sharing grant of 20% to 30%, up to a maximum of R20 million over a two-year investment period.
Application process – Submit a detailed business plan outlining investment activity and expected outcomes.
AGRA provides grants to governments, ministries, seed companies, not-for-profit organisations, agro-dealers, and others, especially those who can implement their transformative agenda.
Eligibility Criteria – Applicants must align with AGRA's agenda and demonstrate the potential for significant industry impact.
Funding type – Funding for initiatives that drive innovation, sustainability, and productivity in agriculture.
The SAB Foundation supports entrepreneurs and social innovators, including those in agriculture, in starting and growing sustainable businesses. The goal is to create jobs, address social issues, and contribute to community development.
These startups and small business owners gain funding, specialised mentorship, business development, skill development, and access to markets and finance from the foundation.
Eligibility criteria –
Funding type –
The IDC is a national development finance institution whose main goals are to empower South Africans economically and help create sustainable, balanced economic growth throughout the continent, which will benefit all of its citizens.
Funding range – Minimum of R1 million to a maximum of R1 billion.
Eligibility criteria –
Application process – Submit a detailed business proposal outlining the project's economic impact and growth potential.
Funding type – Loans or investments based on the project's scale and potential.
To sum up, South Africa provides agricultural entrepreneurs with a wide range of funding options, each with unique benefits and support systems. By investigating these agriculture funding options and making the most of the additional resources at their disposal, startups can promote innovation, expand quickly, and contribute to the long-term success of agricultural enterprises.
Agricultural startups require funding to succeed. Here's how you can secure funding for your business:
Before they seek funding, startups need extensive research to understand their target market and find appropriate funding alternatives. Examine market changes, the competitive environment, and investor preferences to determine the most suitable funding strategy to apply.
A business plan is a document that outlines your business's financial goals, mission and vision, business model, unique value proposition, customers, and business growth potential.
The business plan is important because it helps you attract investors and prove the viability of your business.
Know the wide range of funding opportunities available to you, especially in your region. Each funding option has pros and cons, eligibility criteria, funding amounts, and repayment terms. To know the right funding option for you, you must first identify your funding needs and long-term goals.
To increase your network, you can take part in pitch competitions, attend networking events, join business associations, and engage in online communities. Developing solid relationships and good communication with stakeholders can lead to funding opportunities and valuable resources.
Investors typically seek out agricultural startups with a well-defined exit strategy that outlines their intended revenue generation. Consider exit strategies like buybacks, mergers, IPOs, and acquisitions, and properly communicate them to investors.
A pitch is a clear presentation of a business idea to attract potential investors. A well-organised pitch deck or presentation should clearly and succinctly communicate the startup's story, value proposition, market potential, competitive environment, financial projections, and funding needs.
Once your pitch is ready, it’s time to pitch your business to potential investors. Communicate with assurance, clarity, and transparency while demonstrating your enthusiasm, knowledge, and funding readiness.
Agricultural startups can improve their likelihood of raising capital, attracting investors, and growing their businesses by implementing these practical strategies and steps.
FFA has assisted several agricultural startups in securing funding for their businesses. We connect startups with agriculture funding opportunities, resources, mentorship, and strategic partnerships.
Founders Factory Africa invests up to $250,000 in ventures at the pre-seed and seed stages. We look for ventures that solve real problems and have the potential for scale.
The South African market provides many funding opportunities. Agricultural startups can succeed by utilising grants, specialised financing, and other strategic ways to secure funding. The key is to understand these options and take proactive steps to ensure stability in your business.
With the right support, startups can create successful businesses that benefit the agricultural sector and South Africa’s overall growth and sustainability.
FFA invests in transformative early-stage ventures like yours. We are more than just a funding source for agricultural startups; we are a true partner with experience in helping agricultural startups achieve success. Learn more about how we can assist you.
