Exclusive: TerraMagna Sows $2M Seed For Brazilian Farm Lending

Agriculture fintech company TerraMagna raised $2 million in seed funding for risk mitigation, providing farmers in Brazil access to working capital.

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ONEVC led the round and was joined by MAYA Capital, Accion Venture Lab and a group of angel investors. In total, TerraMagna has raised $2.7 million since the company was founded in 2017, Bernardo Fabiani, executive director and co-founder of TerraMagna, told Crunchbase News.

Independent Brazilian farmers typically finance 80 percent of their working capital each planting season to purchase items such as seeds, fertilizer, herbicides and pesticides, he said. However, they are traditionally ignored by banks that lack the ability to reach farmers across the country, and instead rely on short-term financing.

“We noticed that there is asymmetry between what people know about the fields, and that brings all kinds of trouble when you are talking about financing and underwriting risk,” Fabiani said.

Instead, TerraMagna is adding technology to this process, leveraging satellite imaging technology and data sources to underwrite six- to 12-month loans for small and medium-sized farms in Brazil.

Prior to the seed round, the company was focused on developing the technology, but with the new cash infusion, TerraMagna will expand its operations and sales. The company also plans to expand into additional loan products, such as machinery and irrigation financing.

“We are bringing trust to the value chain,” Fabiani said. “With sales, you need senior people on board. This is not the kind of business where you can just phone people. You have to be in the fields and get to know the farmers.”

The Brazilian agriculture market is a $30 billion industry that was relatively unimpacted by the global pandemic. In fact, soybean prices went up along with the exchange rate, he added. At the same time, credit-lending opportunities shrank, resulting in TerraMagna receiving double the amount of requests.

Bruno Yoshimura, co-founder of ONEVC, said in a written statement that it was the right time to invest in fintechs focused on agriculture.

“TerraMagna is leveraging a novel technology that is using satellite images that only became available recently for underwriting algorithms and collection strategy,” Yoshimura said. “With this technology, TerraMagna can provide safe loans for agriculture, reduce the cost of capital and increase the agricultural loan market. On the supply side of the money, investors in Brazil now have an appetite for such investments after real interest rates dropped to almost zero.”

Photo of TerraMagna co-founders Rodrigo Marques and Bernardo Fabiani.
Blogroll illustration: Dom Guzman