Money Does Grow on Trees — Why We Invested in MoringaConnect
June 23, 2016
Raising capital is one of the biggest hurdles to launching any business. This problem is even greater in countries like Ghana, where we made our most recent investment in MoringaConnect.
While venture capital firms poured close to $80 billion into U.S.-based early-stage companies last year, early-stage companies across the entire African continent raised less than $200 million. That’s less than a quarter of 1% percent of the amount raised by their U.S. counterparts.
We’ll continue to explore funding, or lack thereof, and the consequences that flow from it in a future series of posts. For now, I want to focus on MoringaConnect and why we’re so excited about this investment.
Founded by Kwami Williams and Emily Cunningham in 2013, the company produces and sells moringa-based health & beauty products in the U.S., Europe, Asia, Ghana, and, eventually, the rest of Africa.
What is Moringa?
Moringa, sometimes referred to as the “Miracle Tree,” is one of the most nutritionally dense plants in the world. Literally every part of it can be consumed or used in some way.
The leaves, which are typically processed into powder, contain 4x more vitamin A than carrots, 4x more calcium than milk, 2x more protein than yogurt, 30x more iron than spinach, 7x more vitamin C than oranges, 3x more potassium than bananas…I could keep going. Viewed as a superfood by consumers, the powder is often sold as a dietary supplement, in tea packets, or incorporated into snack foods. Research from Johns Hopkins University has indicated that it could also be useful in preventing and treating a host of diseases.
The oil, obtained by pressing moringa seeds, is a prized cosmetic ingredient. In addition to having a longer shelf life and ability to diminish scars, wrinkles, and stretch marks, moringa oil has the highest naturally occurring concentration of behenic acid of any other oil (behenic acid is a fatty acid that, when added to cosmetic products, smoothes and moisturizes skin and hair). It’s an essential part of my own daily routine.
The management team
Let me highlight one aspect of why we invested in MoringaConnect — its management team.
I’m willing to bet most of you have heard about the issues facing the African continent — high unemployment, a “skills” gap, poverty, and food insecurity, to name a few. Some of you are skeptical of entrepreneurs in countries across Africa. When we talk to prospective VestedAngels, they immediately raise concerns about the trustworthiness of the entrepreneurs across the continent. They’ve received emails from Nigeria’s 419 scammers or Ghana’s Sakawa Boys, or maybe they’ve seen Apple’s Prince Oseph commercial featuring Bill Hader and Siri. However, what you haven’t heard about (enough at least), is the “reverse brain drain” that’s been taking place recently: sub-Saharan Africa is increasingly becoming the go-to place for highly-educated, skilled, and entrepreneurial founders to start their next business.
Bridging that gap between perception and reality is one of the key reasons why we founded VestedWorld. We love and trust every management team that we invest in and we want the rest of the world to see and understand why.
At this stage in our fund’s life, each investment is a “bet the firm” investment and we have to be 1000% positive that it’s the right move. We’re exceptionally proud to be backing Kwami, Emily and the rest of the MoringaConnect team.
We look for key attributes when we evaluate management teams. We spent well over a year interacting with the management team. I personally spent 60 hours with Kwami and other members of the MoringaConnect team in Ghana. Kwami and Emily impressed us with their character, leadership, passion and commitment to the venture.
Starting a company in Ghana is not for the faint hearted. In its three-year life, MoringaConnect has seen some challenging times, but Kwami and Emily have made the necessary sacrifices and decisions to take care of their employees and run an ethical, revenue generating business.
Kwami could have gone to work for NASA as an aerospace engineer. Instead, he saw the poverty in his home country and decided to address it. After graduating cum laude from Harvard, Emily could have pursued any number of career paths; she decided to pursue her passion for rural development and join Kwami in building a company that can lift people out of poverty.
Every entrepreneur we invest in could be doing something far simpler and more lucrative, perhaps working for blue chip companies or the latest aspiring unicorn. They could live in parts of the world that have a reliable power infrastructure and well-maintained roads. They choose the path less taken, the one that looks beyond personal gain and leads to a better world.
What’s the market size?
In 2015, the market size for moringa products was approximately $4 billion and it’s growing at an incredible rate of 9% per year. By 2020, it will be a $7 billion market. This growth is being driven by several categories, including:
Nutritional supplements, a $93 billion global market in 2015
Snack foods, an industry valued at $374 billion globally
Beverages, the global tea industry alone is valued at $15.4 billion
Organic personal care, a market estimated to reach $16 billion worldwide by 2020
This is great news for MoringaConnect, because it means they don’t have to become overly reliant on one segment to continue to grow.
What’s the opportunity for a new entrant in this market?
Despite market promise, however, moringa producers have not had enough output to meet the rising demand for high quality moringa oil and powder. Buyers must scramble to secure increasingly scarce, production-quality moringa.
We talked to several businesses in the U.S., Europe and Asia that incorporate moringa oil or powder into their products and the feedback was the same across the board: if they could find a supplier who meets their quality standards, they’ll buy everything that supplier can provide.
MoringaConnect is vertically-integrated throughout the moringa value chain, meaning they:
Grow and source moringa leaves and seeds from their own farm and from a network of more than 1,500 farmers that they work with on an exclusive basis
Process leaves into powder and seeds into oil
Package the powder and bottle the oil
Market and sell the powder and oil directly to the buyer.
Why did we invest?
We look at the following things when we invest in a company:
size of the market
the management team
the company’s ability to capture market share
the margins that the company earns on its products
the business model
Related to those factors is the company’s financial performance:
its ability to manage working capital
the ability to generate cash
how quickly the business will become profitable
overall sales and revenue growth
We invested in MoringaConnect because:
Prevailing trends and the rapid growth in consumption of organic foods promising health benefits and premium organic beauty products.
The company’s cost of producing its finished products is relatively low due to advantageous growing conditions and low costs of agricultural and factory labor in Ghana.
The management team is dedicated, passionate, smart, and have spent the last few years gaining invaluable industry experience.
The company has made significant strides working out the kinks in their supply chain, identifying and selling to their target customers, increasing product offerings, and building their brand.
There are several potential sources of wholesale demand for the company’s products.
Investing in early stage companies anywhere in the world comes with some risk, and with agricultural products in Ghana, there are some additional risks. We spent 19 months thoroughly assessing each of those risks prior to making our investment decision.
You can sign-up on our site as a VestedAngel to receive more information about how we assessed MoringaConnect, the risks associated with the investment, and an in-depth analysis on why we invested.
What about impact?
Every investment that we make must have the potential to earn competitive risk-adjusted returns. We believe that by investing in businesses that have the potential to scale and become profitable, we can increase the flow of capital into early stage businesses in developing countries that will provide more jobs and pay people fair wages.
Since becoming fully operational in 2014, MoringaConnect has:
Engaged over 1,500 farmers across Ghana
Provided more than $200,000 in new income to farmers
Planted over 250,000 trees in rural communities
A majority of these rural farmers live on less than $2 per day. By growing and selling moringa leaves and seeds to MoringaConnect, they can earn up to $3,500 per acre. This is a 4–10x increase in income per acre depending on their crops.
MoringaConnect plans to expand its farmer network to more than 5,000 farmers by the end of 2018. The company will play an instrumental role in lifting each of those farmers and their families from below the poverty line. That’s real and measurable impact.
We’re incredibly proud that we led MoringaConnect’s investment round and we look forward to working closely with the management team to ensure that the business is a resounding success.
Whether you realize it or not, we all have a vested interest in the success of companies like MoringaConnect. In 2015, the U.S. Government provided $172 million in foreign assistance to Ghana to accelerate its transition towards being an established lower middle-income country. The faster Ghana’s economy grows, the less foreign assistance they’ll need. Government spending can be redirected to resolve other issues.
It pays dividends to invest in your world. We encourage qualified investors and those interested in advising companies like MoringaConnect to become VestedAngels and VestedAdvisors.
Originally published at medium.com on June 24, 2016.