Exclusive: We did our due diligence, says Livestock Wealth investors

Livestock Wealth’s lead investor has stated that it did the requisite due diligence before investing R10 million (~$530,000) into the company. The agritech startup, which allows investors to make investments in livestock and farmland, is accused of operating without licensing by South Africa’s financial services regulator.

Mineworkers Investment Company (MIC), which has a net asset value of over R7 billion, (~$373 million) has stated that it performed due diligence before investing in embroiled South African agritech startup Livestock Wealth. The startup is facing allegations of operating without licensing and using another entity’s license number by the Financial Sector Conduct Authority (FSCA). The startup has disputed those allegations.

In October 2022, MIC, through its Khulisani Ventures investment arm, invested R10 million (~$500,000) into Livestock Wealth for a 5% equity stake as part of the startup’s seed round. “We followed our internal due diligence process for MIC Khulisani Ventures,” said Oren Fuchs, senior stakeholder manager at MIC. “The matters raised by the FSCA were not flagged in this initial process.”

According to its website, MIC Khulisani Ventures is a R150 million (~$8 million) early-stage investment vehicle that invests inblack-owned innovative, high-growth businesses in South Africa. It invests up to R30 million (~$1.6 million) in such startups. MIC added that it has engaged the company’s management team to fully understand the matter and how they plan to resolve it.

Another investor also says due diligence was done

In 2019, as part of Rand Merchants International’s AlphaCode Incubate program, Livestock Wealth received a R2 million (~$106,000) additional grant as part of the program’s enterprise supplier development (ESD) initiative which sought to support early-stage, high-potential, black-owned financial services and/or technology firms. When the startup initially joined the incubator in 2016, it was a crowd-farming platform that connected cattle farmers to retail investors and received an unspecified amount of grant funding.

According to Dominique Collet, founding partner of AlphaCode, after the initial grant funding, Livestock Wealth was considered for additional funding and extensive due diligence was conducted. Collet adds that Livestock Wealth had pivoted its business model with the company becoming the farmer that leases and operates the cattle farms, to ensure that the cows were managed in farms that they have complete control of. With these controls in place, they had become a supplier to a large retailer of beef.

“At the time of conducting the legal and regulatory due diligence in 2019, it was not determined that Livestock Wealth required a [financial service provider] licence to conduct the activities it was conducting at that time. It did require a [credit provider] licence which they had,” Collet said in a statement to TechCabal. The due diligence, according to Collet, also concluded that Livestock Wealth held sufficient insurance to cover the services they were offering per regulatory requirements.

Livestock Wealth allows users to invest in individual cattle or pregnant cows and claims to provide returns of between 10-15% per annum from the sale of meat. The startup earns a commission with each transaction. The accusations come at a time when the startup is expanding its model to farmlands.