Extreme Impact Investing

Food & Agriculture

By 2050, the world needs almost 2x food production – and is falling farther behind every year.

Plus growing middle class demands better food, protein, and nutrition meaning value-added production.

Biggest food needs are in Africa, Asia and Middle East.

Experts agree that Africa is needed to make up most of the demand.

Africa

Africa has the capacity:• 65% of world’s open farmland & 97% of local

water unused

• Temperate climate supports multiple crops/year

• Studies have shown that either Uganda or Tanzania could feed the continent alone.

Africa has huge domestic demand:• Fastest growing population in the world.

• Fast growing middle class with disposable incomes and demand for better food choices.

• 50% of food imported, by 2050 will rise to 80% unless trends are reversed but the world faces a food shortage.

Vast majority of farmers are smallholders, so bringing them into the value-chain is key to success.

Smallholder Farmers

Smallholders are the solution not the problem:• Credit for crop inputs brings 10x yields and

commercial viability.

• Aggregating smallholder production delivers volumes economical for food processors.

• Affordable labor is advantage for high-value crops

Smallholders are a huge market:• Largest and fastest growing demographic on

earth.

• Buyers of crop inputs, implements, storage and preservation, irrigation.

• Higher incomes lead to consumer products purchases

Smallholders can feed Africa and the rest of the world.The Opportunity:

Biggest Market –and with Little Competition

Subsistence Farming & Food, Rough

Statistics for Most African Nations

Half of people are chronically malnourished

Half of year famine:

wet/dry cycle becomes

feast/famine

Half of food imported, esp. by value: local

markets are huge

Half of farmer’s

production never

consumed

3

The Problem: 4 Halves of the Have-NotsIn the midst of hunger and market demand, most crop yields from the growing season are lost. Why are the opportunities unrealized?1. It is the lack of processing, preservation, and logistics businesses that causes most hunger and poverty.

2. Current investment models are often inadequate: • They usually look for existing businesses rather than

filling value-chain gaps.

• They apply a classic portfolio approach that restricts opportunity to large-scale well-developed companies.

• They don’t address the entire value-chain and instead restrict themselves to one segment.

• They try to achieve centralized and significant scale too fast.

• They don’t bring needed capital, including equity and debt.

• They don’t understand that local entrepreneurs (and corruption) are poorly prepared to engage with investors.

3. Farmers are so small they cannot address markets.

4. Aid often addresses problems by offering “free” solutions, only weakening sustainable businesses and requiring continuous infusions of capital to sustain.

Farming for profit with new agronomy practices

Credit ratings identify starting group in village

Repayment of loans (usually larger than microcredit)

Accountability to coop, banks and outsiders

Bank accounts and payments not in cash

Work as group especially selling jointly rather than opportunistically

Expand credit with larger loans & build a credit history with a few years success

See link between hard work and profit

End of deep poverty and thus start a shift in mindset

Achieve standard terms from commercial banks

Offer multiyear loan terms for equipment

Manage large yields, complex agronomy and/or special handling

Market awareness Divide land for food and cash crops

Reliable contract growing Sustainability, food safety, and traceability standards engaged

Fa

rme

rs

Ach

ievin

g

Inv

es

tab

ilit

y

Fully

Commercial

Farmer

Over $5000 / yr

cash income

4. Expand

production

Enter middle class

3. Introduce high

value crop (fresh or

dried fruits and

vegetables, ancient

grains, herbs, spices)

Become a certified

Sunborn farmer

2. Expand first

crop to max scale

for single family

with hoe (2-5 acres)

Incomes of $500-

$1000

1. Learn to grow

familiar crop

successfully at

small scale

Yields jump 8 fold or

more

Subsistence

Farmer

Farmer Success in 4 Steps

Under $50/yr

cash income

Irrigation for up to 3 harvests/year

Hand Tools for specialty farming

One-Stop Farmer Supply Shops supplies everything the farmer needs

Local Storage and Packaging for managing post-harvest losses

Branding becomes multinational

Cold Store for margin multiplier for year round markets

Solar Dryers help end harvest losses

Branding and Packaging for increased margin

Tech for traceability

Hand Tools to farm more land and with sustainability

Cargo Bikes to get increased crop yields out of the field

Soil Testing increases efficacy of expensive loan inputs & avoids poor soils

Rela

ted

In

ve

stm

en

t O

pp

ortu

nitie

s

Invest $250

Yrs 1-2

Min 8% IRR,

Any crop, Year 4IRR x 4 (30%), Year 6 or 7 Revenue x 3, Year 8

Baseline

ProjectionsInvesting

The Solution:Integrated Model

Linking Poverty

To Opportunity

The Impact: How Business Changes Lives

2. Investments are placed in

gaps in the value-chain to

enable farmers to convert

crops into cash.

3. In order for smallholders to become

investable, they must be accountable. That

unlocks opportunity for them and us.

5. Once smallholders have access to

cash, human development naturally

occurs. They put their children in school,

get medical treatment, improve their

housing and food. Studies show that

economic development outperforms aid

in delivering life changing results in

nearly every category, from infant

mortality to HIV incidence and beyond.

1. Our relationship with the smallholders

is as a partner. When they succeed we

succeed.

6. When we can shift from aid to

investment, the money can multiply

rather than just be spent. Without that

there is not enough money in aid to really

address poverty.

4. Turning crops into cash fundamentally

means that rather than giving to the poor

or selling to the poor, we are buying from

the poor – true economic development.

Scaleable and replicable model

For-profit with integrated investment model

Standardized smallholder engagement processes

Branding of smallholder foods

Traceability to integrate smallholders with int’l food markets

The Core Competency:Smallholder Management with Unmatched Capabilities for Competitive Advantage

Assets: Examples of Intellectual Property

Two corn fields

planted the same day.

Left is a Pearl Foods farmer.

Pearl guarantees markets

and structures crop finance.

Kabisa’s cargo bike can carry ½ ton

and has patents issued in the USA

Reservoir’s

solar food

dehydrator

can dry 3 tons

of food per

year.

All materials are

locally available

and easily

maintained

Doors at top and

bottom control temps

for optimum drying

Efficient heat collection creates

substantial solar gain so that products

can be dryed on mostly cloudy days

and even in the rain. This is the only

totally passive solar food dry able to

make this claim. This means that

places that grow lots of food (rainy

places) can also dry it.

Food is not exposed to

direct sunlight during drying

so nutrition and flavor

profiles are better than

typical dried foods.In good weather

conditions, food dries

in one day. Otherwise it

make take two days.

Most value-add

happens

outside of

developing

nations. The

dryer pushes

value-add

down to the

smallholder.

MetafinanceIs a mode of debt financing that engages

local commercial institutions with

smallholders. It has been hailed as the

first viable solution for input finance.

Loans are much larger than microfinance

and are made at a group level, using some

of the systems proven in microlending. It

includes the first method of establishing

credit ratings in a village where no credit

may have previously existed. The rating

system incorporates an algorithm of 8

variables and more than double initial loan

repayment rates.

“Franchising”Is a model we use to make our

investments replicable, lowering their

costs. In order to make businesses

replicable requires us to carefully

document all processes. This IP is our

internal trade secret.

…plusInvestment Model with Blended Capital

Micro Venture Capital

Branding

And More

Cheetah values diversity and cultural

distinctiveness. However, elements of local

culture can be highly destructive, for

example, encouraging corruption.

Therefore, Cheetah is continuously and

actively building a healthy culture that can

be modeled and replicated in “franchises”.

Culture

LOVECOURAGE

IMP

AC

T

The Plan: First Step Objectives Exceeded Next: How we Scale 1. Successful Proof of Concept

• Past 3-4 Years, $7 Million Invested

• More than prototype, 50 villages, 3 countries

• Income changes from under $50 to over $1000 per year

• Significant partnerships

• Strong team in place

2. Next: Going to Scale• 18 month period to complete

• $40M to be invested

• Result: social impact and business performance

3. Business Expansion• 5 years

• 1 million families

• 10 companies

• 7 countries

• Pipeline for $200+ million to be invested

4. A Movement• 1 Billion Lives Changed

How we Reliably Scale:1. “Franchising” makes businesses replicable at

lowest cost, increases chance of success,

crosses cultures, lowers bar for leadership

skill/experience.

2. Partnerships with aid organizations brings

public trust, large numbers of organized

smallholders, village presence, organizing and

training capacity, and credit data.

3. Agreements with food/agriculture value-chain

companies brings service fees and large

numbers of farmers already engaged in high-

value crops.

4. Risk mitigation in the form of finance from

governments, multilateral organizations and

donors providing non-dilutive risk capital with

advantageous terms.

The Platform: Managing the Investment

Protecting the interests of the smallholders is not only the right thing to do, it is the smart thing. Having middle-class smallholders as partners protects the business future of the investee companies.

A sustainable value-chain cannot be built on the backs of the permanently poor.

Cheetah

• Enables investees

• “Master franchisor” holding company

• Back office service income from investee companies

• Manages Metafinance debt fund

• Owner and/or manager of some “franchisee” locations

Investee Companies

• Engages smallholders and helps them profit through related investments

• Geographic “franchise” rights to investors

• Perpetually licenses IP from foundation with royalties based on revenue

Foundation

• Protects and Advances Mission

• Owns IP

• Board membership of companies and Cheetah

• Applies and qualifies for grants

• Promotes smallholder interests (esp. Sunborn)

• Thought leadership via B2P program

Cheetah

• Back-office services for investee companies

• Lowers costs and risks, manages corruption

• Expansion prep• $3M, 20% IRR, 8 yrs (Advance

expansion work)

• Training and process• $2M, 20% IRR, 3 yrs

(Accenture)

• Metafinance debt fund• $3M, 2% IRR, 18 mo (finances

farmers through local banks)

Investee Companies

• Pearl Foods• $11.2M, 44% IRR, 8 yrs (End-

to-end farmer services)

• Reservoir• $10.3M 70% IRR, 8 yrs (Solar

dried foods)

• Soilyze• $4.7M, 80% IRR, 8 yrs

(Complete soil testing)

• Kabisa• $1.9M, 37%, 5 yrs (Cargo

bikes)

Foundation

• Intellectual Property• $1M (Registrations, develop

new IP)

• B2P• $500k (Launch effort and

fundraising)

• Sunborn (farmer “owned”)• $2.5 (Build brand and

associations)

• Grants and marketing

• $300k

The Investment: Current Round $40.4M, 45% IRR

Cheetah: $5M, 20% IRRMetafinance: $3M, 2% IRR

Total: $28.1 M, 59% IRR blended

Total: $4.3 MImpact Beyond Cheetah

Terms Debt Fund Equity Investments

Manager or General Partner

Cheetah Development

Size Up to $3 million by 31 Dec 2016 Up to $40 million by 30 June 2017, immediate follow on round expected of $150 - $300 million

Target Return 2% IRR 30% IRR compounded

Return Timing 18 months, one 6-month extension. Multiple series with rollovers.

8 years

Target investors Accredited investors, foundations, family offices and individuals. Impact investments interested in Africa, agriculture, developing world poverty reduction, and/or women’s economic empowerment.

Fees & Expenses 1.5% per annum of total Commitments. Fund pays its operating expenses.

Not applicable.

Legal Counsel Dorsey & Whitney LLP

Audit Firm Recognized audit firm(s) to be selected

For Investors: Investment Terms

For Investors: Risk MitigationDebt Fund Equity Investments

On-the-ground presence, active management in portfolio companies

Cheetah keeps control of accounting, reducing likelihood of corruption

Shared back office services and location reduces startup costs

Preferred share position for investors in many cases

Local village leadership for most activities bridges cultural gaps

Loans made by local commercial banks that have rights of

loan enforcement

Usually have controlling interest in companies

Money stays in US dollars to avoid currency exchange Prototype many company activities before receiving

investment

Farmers cross-guarantee loans between members of groups Partnering when possible reduces investment required

Farmers receive crop inputs or equipment rather than cash;

loan is paid by delivering crops

Keeping companies small and scale achieved through

franchising reduces risks of concentrated capital

Diverse crops and climates Franchising approach creates a higher dedication to

standardized procedures, thus more predictable outcomes

Ready to run with the Cheetahs?

www.CheetahDevelopment.org

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