Fundraising through Adversity: Speaking to Complete Farmer About How COVID-19 is Impacting Their Startup.
MEST’s Head of Marketing, Veronica Mulhall, interviewed Complete Farmer’s Founder and CEO, Desmond Koney, about how they are working through COVID-19. They discuss strategies that entrepreneurs can implement to keep all stakeholders, including investors engaged, and ensure that the company’s goals are met.
My first question, the COVID-19 pandemic has brought a lot of uncertainties to entrepreneurs. What are some of the harder decisions Complete Farmer has had to make amidst the pandemic?
Just as everyone is trying to figure out like the virus and its behavior, we’ve been very proactive in also figuring out the effects of the lockdown on the business. What we are seeing is there’s a huge rise in demand for food due to the fact that the only thing people are spending on during this period is food and keeping their family safe. The biggest thing we’ve had to do is figure out ways of securing our supply chain to keep production going.
Most of all, we are focused on making sure our employees are protected from COVID-19. We’ve made provisions for the farm managers and the farmworkers to stay safe on the farm and keep all the protocols on the farm. It’s a tricky protocol for farm work, but the farm managers are really bold to take up the challenge. We are making disinfecting soaps, washing stations, and sanitizers available on the farm for the laborers and stuff. So those are some of the hard changes that we’ve had to look at. Just ways of keeping our supply chain open and keeping operations going to take advantage of the increasing food demand.
That ties into my second question — What proactive steps are you doing to keep control of the business?
Fortunately for our business model, we have the working capital to provide credit to our vendors for (agricultural) inputs. Many inputs providers are also having trouble importing fertilizers and agrochemicals into the country. There’s a queue, getting these raw materials. We’ve had to pre-finance, or sometimes rely on goodwill capital to acquire these materials just to make sure that we are first in line. We didn’t have to provide a hundred percent pre-financing, but we gave vendors an incentive to prioritize Complete Farmer when these inputs came.
We have spoken to the logistics service providers to see if our logistics chain has been disrupted and we have spoken to our buyers to discuss their liquidity in these times, asking if they have bankruptcy protection and other forms of protection. Our strategy has been around stakeholder engagement with all the people on our supply chain and making sure that inputs and services are in place when needed. Our goal is to make sure that all the other players and stakeholders are engaged and we know their operational position at every time, because the agriculture value chain is very interdependent on each stakeholder. This has pushed us to build deeper relationships, with our farm staff, vendors, and buyers in different countries, making sure the lockdown in their country doesn’t affect their business.
As you mentioned, the agricultural sector, in general, is so interdependent. What advice do you have for other startups in the agricultural sector?
Especially when it comes to the security of supply chains, this is the best time to have contingencies or redundancies because most of the stakeholders on your supply chain would have huge hits and they themselves may not anticipate this. I’m cognizant of the fact that a lot of these stakeholders also, like me, do not know what will be happening in the next three to four months. The best advice is to have different contingency plans; if you have one supplier or distributor in your supply chain, make sure you are working on increasing that number so that you’d have more people to rely on.
COVID-19 is making entrepreneurs and business owners look at how much resilience has been built into work processes. In the past, we’ve been comfortable with having one stakeholder perform a certain function, but I think the redundancies that we build would also help the businesses post-COVID-19. Post-COVID-19 there will be efficiency and improvement of business processes if these contingencies and redundancies are built now. We’ve been able to create a visual map of how our supply chain moves, and we’ve made sure that each part, each step of the supply chain, has more than one stakeholder to preserve the interdependent relationship of stakeholders.
For instance, we currently have three mechanization partners and all of these are formal businesses but we’ve also gone down to the community levels to talk to tractor operators so that if these businesses are impacted or for some other reason, can’t deliver a service, we have people on the ground to provide mechanization services. The contingency we have for our input supply is to buy from retail shops. That may be difficult and expensive, but it’s what we have to do.
In a nutshell, my advice is that mapping out your supply chain and figuring out which parts you need to double up with contingencies and build redundancies would be great solutions to ensure businesses keep running.
I know you are currently raising a funding round. Can you tell me how that round looked pre-COVID-19, and what it is looking like now?
It’s been an interesting experience for me. Pre-COVID-19 we had lots of investors’ interests. I think the funding round started last November and gained momentum in January. We had a lot of investors’ attention and they had also started due diligence processes with us. When the COVID-19 news kicked in, most of these investors had to get back to the LPs and figure out what strategy they are using.
We’ve been able to close some of these investors, but I think the entire round should have been closed by now, if not for the COVID-19 situation. So, we are currently still in the market looking for investment.
Not knowing the outcome of the current situation is the same for the investors as well. They’re trying to figure it out if a recession is on the horizon, and which industries it’s going to affect, and, how do they invest or hedge. It’s quite a difficult time in the markets.
For the seed round, how was your investor pool looking pre-COVID-19?
Pre-COVID-19, we had a lot of interest from different investors from different places. We are looking to have investors from different geographies. We had investors all the way from the US, UK, China, Japan, and also from investors based in African markets.
We had a few angels who wanted to be part of the round. These were commodity traders in the US who wanted to invest in us, but most of the round the interest was dominated by private VC companies.
Is there a trend of which types the investors dropped or stayed?
The investors who have committed are mainly VC companies. We had two investors from Japan and one from the UK who committed to the round.
The rest haven’t really dropped off, but there’s a lot of uncertainty. Some of them have to come down to do the due diligence and the borders are currently closed. I’m still trying to keep that engagement going and I keep sending them investor updates. I want to keep them updated on what’s going on here in Ghana. Most VCs have postponed when the deal can actually happen till there is more certainty in the market.
They haven’t dropped off, but a number of them have asked for like two to three months to see how the situation goes. The interesting thing about this COVID-19 situation is that; it is also making VCs very selective of companies they invested in. Right now as a startup you really have to prove not just the sustainability of your business, but sustainability in a time of recession and uncertainty. How would your business fare? And I think for most startups this will require a lot of business to pivot.
What we did was create a document for all the investors we have been engaging with, highlighting the strategies that we’re going to adapt for various scenarios. We were able to provide them a lot of proactive foresight by basically anticipating various scenarios and stating the measures Complete Farmer would take in the event of such. We didn’t want the investors to assume what would happen to us and how we would react, we wanted to be proactive in telling them what we thought would happen and how we could react.
To summarize, it’s not that they’ve all gone away, but many need to do the on-the-ground due diligence that’s out of their control. So they’re waiting, because of that waiting period, you still have an open round.
It’s an interesting market and we are beginning to see investors returning to reengage. It’s still an open round.
You really were proactive by creating a risk management document, talking about how the company would look in all these different scenarios. Would you suggest other entrepreneurs create that type of document to send to their stakeholders?
Yes, I would; it’s really important. Right now entrepreneurs need to rub the back of investors, investors need to rub the back of entrepreneurs. They need to encourage each other because there’s a lot of uncertainty. Once you acknowledge the risk levels and what this also means from an investor perspective, you will know how to communicate best to that investor’s concerns.
It’s always very good to be proactive and add that layer if there are possible pivots that a business model can make to survive the recession period or the COVID-19 period. All those things have to be highlighted to investors and it opens that conversation.
Initially, some leads were going cold because of the COVID-19 situation, but after I sent that document, we had phone calls to talk about these new strategies. Having that risk management document has been quite helpful for us, and I’d recommend it to other startups. You can just blast it off to different stakeholders. I sent some to MEST as well. It’s not just for investors, but also to get your mentors, your program managers, or any stakeholder in your business to be able to contribute to that strategy. It gives you a plan or a blueprint on how to navigate this situation as well.
That’s great advice. What else would you like to communicate to investors at this time?
The uncertainties are real. Many businesses are hanging on a lifeline right now. A lot of businesses that have a high-value impact across their value chain, and should investments into those companies cease, it will affect the stakeholders across the value chain. For instance, with Complete Farmer, we are working with farmers on the ground, we work with input delivery services, we have an entire economy connected to us. We deliver food to people to eat.
Our vision is to feed the world through sustainable agriculture, so during this COVID-19 period, it is a very ethical decision to hold on. We want to reserve whatever capital we have to increase our runway to keep this vision alive. It’s our mission to ensure food security in the future. So we are also taking a risk in investing in our operations to make sure that our operations go on. This requires the support of investors to keep that process going.
We don’t know how long this situation will take, but we still have to keep eating food, and Complete Farmer still has to keep producing. We see that as contributing to the relief efforts of this whole COVID-19 pandemic. It’s really important that we ensure food security during COVID and post COVID. That’s why we need investments to keep going.
If you would like to learn more about Complete Farmer or the status of their seed round, please reach out to Desmond Koney at firstname.lastname@example.org.