In September 2020, a few days after Muhammed Akinyemi didn’t receive payment for a 6-month poultry cycle investment made in ThriveAgric, he informed his lawyer about this but didn’t take legal action.
He was expecting the sum of ₦581,000 ($1,200) for the ₦510,000 he’d invested in March. Akinyemi had also invested ₦200,000 in April, which was due (₦224,000) in October.
“At first, I just felt it’s money, and it’s with them. Whatever the problems are, within a week or two, they should resolve it,” Akinyemi said. “But I found out that they hadn’t addressed the issue to all their subscribers; rather they were explaining to individuals. And there was no specificity as to when it would be resolved.”
Unfortunately, a few weeks later, Akinyemi’s car broke down and he urgently needed money to fix it. ThriveAgric hadn’t yet paid him and he was running out of patience. He was one out of hundreds of ThriveAgric’s retail investors who hadn’t received the payments.
His lawyer sent a warning notification to ThriveAgric, threatening to sue if the issue wasn’t resolved. Akinyemi also put out a tweet calling out the company to fix the problem. He tried to rally around other retail investors who hadn’t been paid, but a number of them didn’t want any media attention.
“We fought it from the legal and social aspect,” said Akinyemi.
Over 500km away, in Southwestern Nigeria Osun State, Esther*, a poultry farmer who partnered with ThriveAgric, had lost over 1,000 birds because there was little to no movement.
“It was a difficult period losing my birds in the middle of the pandemic,” Esther said. She was one out of many farmers within ThriveAgric’s network who suffered massive losses.
While the losses incurred varied among the farmers, depending on the capacity of their pens, ThriveAgric shared that there were over 400,000 mature birds that had no buyers. Despite efforts made by ThriveAgric to rent more cold rooms for storage of processed chickens, the lack of buyers and difficulty in moving the birds during the pandemic meant that over 90% of the birds were lost. The losses started happening as early as April 2020, until the end of the year.
With hundreds of unpaid, angry retail investors dragging ThriveAgric online, asking for their money, and farmers recording millions of naira in losses, this was ThriveAgric’s darkest hour.
Founded by Uka Eje (CEO) and Ayodeji Arikawe (CTO) in 2017, ThriveAgric started as an agricultural technology startup that provided access to finance, premium markets, and data-driven advisory for smallholder farmers. It financed agriculture projects through crowdfunding. In the space of 3 years, ThriveAgric had grown to become a notable African Agritech startup, with backing from Y Combinator—one of the world’s most successful startup accelerators—in 2019.
How did it get into this mess?
“It was a mix of different events. The pandemic meant that offtakers couldn’t pay for the goods we’ve already supplied,” Eje said. “Farmers were also suffering losses in the farm, and we lost over 100 million naira worth of produce in transit because they were held up on the road. No movement during the pandemic.”
The dilemma for ThriveAgric was that its owing offtakers—FMCGs and restaurant chains—made repeated failed promises on when they’d repay.
“They’d promise to pay next week and, banking on their words because they hadn’t defaulted before, we’d in turn promise our retail investors that they’ll be paid next week, only for the offtakers to go quiet,” Eje said.
The offtakers too were anticipating that the pandemic would wind down and business activities would return, but it took longer than expected. This affected ThriveAgric’s communication with its retail investors as it repeatedly failed to fulfil the promises it made to its retail investors. The fact that its large network of farmers were also experiencing losses also exacerbated the situation as ThriveAgric had invested in them by providing seeds and chicks, expecting to receive returns when they were sold. Many of those farmers haven’t recovered from those losses till today.
A popular question that came up during this period was whether ThriveAgric’s claims to be covered by insurance were true. The company explained that the insurance covered the farming activities and not the retail investors’ investment—the logic being, if the farming process went well, the returns on the investment by the retail investors were guaranteed. Also, in this situation, the fact that farmers were unable to sell and the offtakers were owing weren’t valid bases for requesting for insurance claims.
American serial entrepreneur Elon Musk once described the experience of running a startup as being similar to the act of chewing glass and staring into the abyss. “After a while, you stop staring, but the glass chewing never ends,” Musk said. ThriveAgric’s experience validates this description.
All through this turbulent phase, the company maintains it didn’t take its retail investors for granted.
“One of the things we realised was that this money we were owing was important for these people; for some it was house rent or school fees,” Eje said. “It was money that meant a lot to them. Regardless of how people reacted, it was their money, and they needed it back.”
Salvaging the situation
As the situation escalated, different parties showed up to help out.
“We stepped in as quickly as we got wind of the situation and did the best that we could at the time by guiding the team on the right approach to take, as well as by providing the practical support they needed in what was a very time-sensitive situation,” said Kola Aina, General Partner, Ventures Platform, one of ThriveAgric’s investors.
Ventures platform helped with recruiting an interim CEO, Adia Sowho, who was then VP of Growth and Managing Director, Nigeria, for credit platform Migo. It also restructured the finance and communications team.
When ThriveAgric came knocking, the first question Sowho had to answer was “Did she care enough?”
“The big question for me was, do I care enough about ThriveAgric and what it’s doing? And am I willing, because I wasn’t bored,“ Sowho said.
With the answer to that question being yes, in October Sowho agreed to step in, with Eje stepping down to the role of chief operating officer (COO).
“Food security is an important part of our economy. It doesn’t get enough love and support as far as I’m concerned,” Sowho said. “If every Nigerian were a farmer, we’d be feeding ourselves and the continent, which is literally ThriveAgric’s vision.”
Solving for Y
Tasked to initiate a turnaround in a new company and entirely different sector, the guiding principle Sowho turned to was first-principles thinking, a reverse engineering technique that has its origins from the teachings of Aristotle and has been made recently popular by leaders in Silicon Valley.
“For me, I tend to work with first principles. At the end of the day, whatever problem you’re trying to solve, whether it’s a startup, enterprise, or even conglomerate turnaround,” Sowho said. “They all involve the two or more parties exchanging value. With ThriveAgric there was an equation and it was broken.”
“It was this hazy chain of unfulfilled agreement that just ended up in a crisis. And, of course, when it hits the public sphere, it makes the news.”
To fix the broken equation, Sowho deployed three things: structure, governance, and documentation, concepts she claims startups tend to be wary of. The different teams and processes were restructured in order for the company to solve existing problems and be “10 steps ahead of any risk before it materialises”.
“A lot of the things I did were an outcome of the experience that I have working in building organisations,” Sowho said. “These things don’t happen by accident. The success of any enterprise has to be by design.”
Sowho and Eje worked on structuring the financing plan for the repayment of the retail investors and hiring for key roles. Alongside Sowho, a new Chief Financial Officer (CFO) and a head of risk were hired. As the new hires got to work, stabilising the ship, co-founder and CTO Arikawe couldn’t help but wonder why they joined the company at such a time.
“These people joined us during the crisis. I was thinking, didn’t you look up ThriveAgric online, a company that people are bashing, before joining,” Arikawe said.
The typical response from the new hires was that they believed in what the company was doing and were willing to put their names on the line.
“Our CFO joined us and 2 days later he’s on a call where investors were insulting him,” Arikawe said. “A similar incident happened with Sowho, who joined and 1 week later had 300 angry people on a Zoom call with her.”
In a few months, the presence of additional hands, fresh ideas, and the “bridge” capital (temporary financing) provided by Ventures Platform helped stabilise ThriveAgric.
Transparency—the currency of trust
During this period, members of the support team and other departments had to work overnight for many days.
“Everyone was stretched but we had a lot of empathy for the people and also a sense of responsibility to ensure that things don’t go wrong again,” Arikawe said.
On one of those nights, the engineering team in collaboration with the support team, decided to enhance transparency around the repayment schedule by creating a new payout dashboard—Payout.thriveagric.com—that reflected each retail investor’s exact repayment date.
This was done to fix an issue with the initial payment dashboard which automatically indicated that the retail investors had been paid, as soon as it was due date. This feature caused retailer investors to be confused and angry, because they hadn’t been paid.
“When we initially built the payout dashboard we didn’t foresee a period like this where we wouldn’t have been able to pay. People always got paid on or before payout day,” Arikawe said.
With the new payout dashboard, the retail investors could also see how many other people have been paid. A feature which the engineering team hoped would provide extra comfort and ease tension.
Utilising the bridge loan secured, over the span of 9 months ThriveAgric was able to pay back the hundreds of customers it was owing. Akinyemi was paid in November and December 2020. ThriveAgric also repaid the bridge loan in 2021.
Unexpected support and lessons
During the turbulent period, there was a lot of pushback from retail investors but also surprisingly a lot of support from investors, financiers, and friends.
“I remember people calling and asking, what’s the challenge, what do you need?” Arikawe said. “For example, one of the people we sold birds to but hadn’t paid called to apologise that he’s trying his best. He was owing us because someone else was owing him.”
After 6 months at the helm of ThriveAgric, Sowho left to join telecom giant MTN Nigeria as its first-ever female Chief Marketing Officer while Eje returned to the position of CEO. During his time as COO, Eje worked on ensuring that repayment and communications with different stakeholders happened seamlessly.
“Essentially, I ensured that the core business operations ran smoothly and built a system to ensure that the defaulting offtakers paid,” Eje said. “I also identified other funding opportunities outside crowdfunding.”
Reminiscing on her experience, she said, “You often wonder whether you can hack it with a turnaround, and I did, so that’s one thing I learned. Now people are calling me the queen of turnaround after one event.”
Another valuable lesson for Sowho was how she was able to manage her productivity considering that she joined ThriveAgric during the pandemic and managed things virtually.
“I didn’t realise how focused I could be, because I’m one of those people that like to do everything all the time, all at once,” Sowho said. “But I think in this situation, the urgency required that I stay very focused.”
There were ThriveAgric team members she didn’t meet until about 2–3 months into the job, because she was very focused on talking to the people nearest to this issue.
For the team at ThriveAgric, the incident was a learning moment for them.
“We’re learning to scale with structure. Right now as we explore different opportunities, we look at the risks and how to scale sustainably,” Eje said. “For us, we’re still certain about what we want to do. It’s still day one.”
Kola Aina believes the incident was a reminder as an investor that “supporting companies through difficult times is one of the truest forms of portfolio support.”
ThriveAgric has since paused crowdfunding from retail investors to focus on institutional investors. Since the pivot, ThriveAgric has sealed investment partnerships with several commercial banks, the CBN, World Food Program, and USAID. Its landmark partnership came recently in the form of a one-year project in partnership with USAID-backed West Africa Trade & Investment Hub (Trade Hub).
The partnership, which aims to empower at least 50,000 farmers across Nigeria, will be supported with a $1.75 million co-investment grant from Trade Hub. The startup is also focusing on building out its farmer-centred technology solutions which currently serves over 200,000 farmers. The company’s focus is to build the largest network of profitable farmers across Africa.
“Agritech is not just about having a website and asking people for money,” Eje said. “It’s about building the infrastructure that supports the food production value chain.”
Sultan Quadri contributed to this story.
*Name changed to protect source’s identity.