Food Systems Innovations Ep31: Youths in Agribusiness: What it Takes to be Investor-ready

In Sub-Saharan Africa, youth are increasingly becoming vital players in agribusiness, fueling innovation and driving economic growth, but you might be wondering why their contribution is still receiving low recognition.

You can acknowledge that several stumbling blocks are keeping young agripreneurs from contributing meaningfully to economic development and ensuring food and nutrition security while realizing their potential.

Therefore, tapping the youths' potential is critical, especially for climate-smart agriculture, a transformative approach to agricultural production. They are a potential driving force of climate-smart agriculture due to their innovativeness and zeal to make the world a better place now and in the future.

Facilitating the youth cohort’s participation in agriculture has the potential to drive the reduction of widespread rural poverty among youths and adults alike. Having gained empowerment and motivation to start venturing into different nodes of the agricultural chain, as a youth, you need your investment to grow into a more lucrative business and scale to attract more opportunities. 

You can start an agribusiness venture at the production level, value addition, or supply chain, and it generates income for you, but you will miss the bigger picture of achieving your vision should an opportunity present itself. This leads to a key question: “What could prevent your agricultural innovation or venture from becoming investor-ready?”

From understanding government regulations to establishing operational systems, the barriers can be daunting. This article will walk you through essential aspects of being “investor-ready”—a concept crucial for scaling up your agri-business in a way that attracts capital, builds sustainability, and fosters growth.

What Does It Mean to Be Investor-Ready?

Being “investor-ready” means that your agribusiness is prepared to attract and use external funding effectively to take it a level higher. It can be rebranding, increasing market reach, expanding production capacity, or acquiring new machinery that can speed up operations. Increasing the degree of “investor readiness” can enable you to decrease the length of time to obtain the investment and decrease the costs associated with it. How does it look, and what are investors looking for before investing?

You should have a clear business model that outlines what you offer, who your customers are, and how you make a profit. You need to be aware of the market trends and forces of demand and supply and demonstrate how you are going to adapt and fit in to maintain competitive advantages. Investors want to see how you understand your target market and how it interacts with your product.

How is your operation landscape? Do you keep your financial records, however small they are? This is an important aspect for tracking your expenditure and even planning how to acquire inputs for production and meet labor costs. Investors need assurance that their funds will be used effectively. Having your books in check shows an understanding of your business expenses and demonstrates that you are financially responsible and transparent, which builds trust. Learn the basics of financial management: budgeting, accounting, and forecasting. Consider working with a financial advisor to help prepare your books for potential investors.

Another key component that you must curate is scalability and growth potential. Can your business grow? That is what one will assess before injecting cash into your project. Be it lending, offering credit or forming a partnership, growth potential is an indicator of return on investment. For instance, how many bags of beans are you likely to harvest? Having a plan for expanding production, reaching new markets, or increasing value-addition demonstrates that your agribusiness is capable of scaling up.

Being investor-ready also means identifying risks and having mitigation strategies in place. Complying with relevant regulations and environmental, labor, and trade policies; demonstrates that your business is prepared to operate sustainably. But how many youths in food processing, are aware of the process and requirements for registering their entities? Connecting with industry experts and mentors can offer you guidance on improving your business practices. Networking with successful agripreneurs and organizations can also help you learn how to approach investors and present your business effectively.

What can you benefit when you are investor-ready?

Getting your firm investor-ready is more than just getting capital; it's also about preparing yourself for long-term growth. Here's what you can gain:

• With investor backing, you can expand production, invest in technology, and improve efficiency. You are able to demonstrate how your product is going evolve and are ready to embrace the responsibility that comes with growth. It opens avenues to access the necessary capital for supporting your products.
• Increased Market Reach: Funding can enable you to reach new consumers, whether through marketing or distribution channels. In terms of food and nutrition security, market access is a crucial pillar and a win-win for the producers and consumers. When market you access markets you enhance food and nutrition where people can buy you produce or food products and in exchange, you earn income to support other development needs.
• You will enjoy operational stability where, with proper funding and systems in place, you’ll reduce disruptions, improve productivity, and position your agri-business to handle increased demand.
• Being investor-ready enhances your credibility with customers, suppliers, and industry peers, positioning your agri-business as a serious player in the industry. You can build the capacity of your team that are able to speak clearly about your value chain, product, or service benefits to consumers and make your value proposition stand out.

Challenges to Becoming Investor-Ready

What could prevent your agricultural innovation or venture from becoming investor-ready?”  Several factors might prevent your start-up or agricultural innovation from being investor-ready. It is painful when an opportunity passes you by because you are missing something simple that you could have put in place in the beginning. Bootstrapping enables you to learn the ins and outs of your business, make strategic decisions, and intensely focus on building the offering you have for consumers. Here is a highlight of some barriers you might be facing:

• Insufficient Financial Data: At first presentation, you may use some projections but as things advance, an investor will need to see reliable financial statements. Limited access to financial training and resources can make it difficult to present your business in the best light as a youth.
• Regulatory Barriers: Inconsistent government policies or difficult registration processes can discourage young agripreneurs from formalizing their businesses, which limits their access to investment opportunities. You will find some certifications take longer to be approved and at some point, you get frustrated when doing the follow-ups. This demoralizes the spirit of entrepreneurship in the food and agriculture sectors.
• High Costs of Compliance: Ensuring compliance with all relevant regulations can be costly, especially for a start-up. Without sufficient funds to navigate these requirements, becoming investor-ready remains out of reach for many.
• Lack of Clear Market Positioning: Without knowing your unique selling proposition, it’s hard to communicate the value of your business to investors. This can happen when your idea is not profitable enough or, quite simply, what you are proposing is not technically feasible, believable or based upon valid marketing and revenue assumptions.

Building a Sustainable Future with Youth in Agribusiness

Agribusiness holds immense potential for Sub-Saharan Africa’s youth. By focusing on becoming investor-ready, you can attract the resources and partnerships necessary to grow your business, boost economic growth, and contribute to food and nutrition security.

You need to embrace the journey of understanding and refining your business model, solidifying your financial management, and building a strong network. This groundwork will not only prepare you for investment but also establish a robust foundation for the sustainable future of African agriculture.

FSPN Africa is already working with youths in Agri-business in Kenya to build their capacity for investor-readiness through its tools, where they can access training in business development, food safety, and government regulations standards. These initiatives are aimed at scaling agribusinesses, which are formidable pathways to increased food access that result in improved food and nutrition security as well as income generation.

For more information, contact info@fspnafrica.org