Why We Invested: Harvesting

Today, we’re excited to announce the Social Venture Fund’s sixth agriculture investment (and 13th overall): Harvesting.

Harvesting is enabling financial inclusion for farmers by providing actionable insights to financial institutions via its software-as-a service (SaaS) solution. Harvesting processes massive amount of global data sets, such as weather, satellite, agronomic data, and applies machine learning algorithms to help reduce risks for crop insurance and lending companies. In doing so, it hopes to unlock more appropriate financial products and other services for hundreds of millions of smallholders.

The world’s 500 million smallholder farmers grow 70% of our food, yet most live on less than $2 a day without access to the knowledge, services and tools they need to increase their incomes.

At Mercy Corps Social Ventures, we envision a future where smallholder farmers, including women and youth, have agency over their livelihoods and are fully integrated into food systems with access to the myriad of tools they need feed their families and generate profit for them to thrive. They are resilient in the face of inevitable shocks and empowered to take control over their livelihoods and break the cycle of poverty.

Our food systems are ripe for (positive) disruption, but we approach agriculture humbly. From afar on a whiteboard, a particular market system might look extractive and Model X could help farmers break the cycle of poverty. On the ground, though, understanding value chains from the perspective of a smallholder is like peeling a onion: layer after layer of interconnected challenges, relationships and risks that collectively lead to that farmer’s position in the market.

At Social Ventures, we leverage the experts, market intelligence and network of our parent organization, Mercy Corps. Mercy Corps’ $200M+ annual agriculture programming portfolio spans large flagship initiatives like AgriFin Accelerate, which reaches over 1 million (and growing) East African farmers, to a series of productivity and land formalization programs in Colombia that have deeply impacted 80,000 coffee farmers.

The influx of capital and interest into AgTech and AgFin are exciting developments in the impact investing sector. We have been proud investors in a variety of startups that endeavor to dramatically redesign value chains, ag finance and market access. Across every region we invest in, we see more, smarter startups leveraging innovative tech and models. This is a positive trend. However, the hype still outpaces the reality. Innovations in big data, remote sensing, productive assets, digital identity / traceability and mobile money have the potential to create impact at scale, but are still comparatively new applications within the agriculture space.

We believe that the initial hysteria around big data and remote sensing for agriculture is now, finally, coming back to reality (the “Slope of Enlightenment”, if you will). AgTech startups made audacious promises for dramatic results in a limited timeframe. Some failed, while others are recalibrating, iterating and slowing building up the data, partnerships and analytics to truly bring disruptive models to smallholder value chains. As with all innovations, we are still probably overestimating the impact in the short-run, while simultaneously underestimating the long-run applications and potential.

There is an estimated $450 billion capital demand in financial services to smallholder farmers, but current models only reach only about 7–10% of this figure. Due to a lack of valid and holistic data, lenders struggle to serve smallholders. Moreover, other actors in agriculture (input manufacturers / suppliers, productive asset manufacturers, offtakers / buyers) that are attempting to work more directly upstream with smallholders are unable to do so at scale.

Led by Ruchit Garg, Harvesting endeavors to solve the massive data asymmetry between farmers and other food system stakeholders. Working alongside financial service providers (FSPs) with existing ag lending portfolios, Harvesting helps the world better understand farmers. FSPs using the venture’s agri-lending suite can leverage the power of AI and alternative datasets (climate data, remote sensing) to manage the entire lending life-cycle from lead generation to portfolio management and monitoring. In doing so, Harvesting hopes to make agri-lending more efficient, scalable and responsive to farmer needs / demands.

Long-term, as Harvesting amasses a rich dataset, it is positioned to originate and channel a plethora of other value-add services to smallholders, including insurance, market access, inputs, mechanization, and precision agriculture.

While other startups, including a few of our investees, are bypassing FSPs and leveraging similar technology to lend directly to smallholders, Harvesting is (perhaps heroically) attempting to work within and reshape the current ag finance system. We believe that both approaches are valid and have their relative risks / opportunities. The market opportunity is massive, and our fund is excited to invest across a spectrum of models to maximize learning and success.

Though early in its journey, Harvesting has forged major partnerships and contracts, including FMO — Dutch Development Bank and Maha Agriculture Finance to rollout their agri-lending suite in Myanmar and a CGAP partnership to support Pride MicroFinance in Uganda to build a credit risk scoring system for farmers. As an investor, we aim to help Harvesting leverage our extensive network of microfinance institution partners, agricultural programming, and general ag finance expertise. As with any early stage company (and particularly in AgTech), we’ll be mobilizing our post-investment support, Mercy Corps partnerships and advisory to help the company achieve stronger product-market fit.

We are super excited about this opportunity as Mercy Corp brings in their extensive network and understanding of regions and communities we want to serve. They get smallholder agriculture and agtech. We believe that this partnership will help us further fuel our growth in both micro-lending as well as micro-insurance in agriculture. We have built some great partnerships in last few months and we have a growing pipeline of potential customers. With Mercy Corps, we believe we are well-positioned to further learn about the market opportunities, serve customers and grow the company. — Ruchit Garg, CEO and Founder of Harvesting

We believe the most exciting advances in leveraging big data for smallholders are just over the horizon. We are excited to work with Harvesting in driving this revolution.

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You can catch Ruchit Garg at SOCAP 2018 on Wednesday, October 24 at 1PM at the Gallery Tent on a panel about Impact Investing in Africa. Ruchit and Julie Cheng (Director of Financial Inclusion) will be present throughout SOCAP. Reach out to Ruchit and Julie at info@harvesting.co

Harvesting is also hosting an upcoming webinar with United Nations FAO on October 25, 2018.

For more information on Harvesting, please visit Harvesting.co.