What is Different about Running with a Cheetah?

Our Debt, Equity and Smallholder Management Models

Mission Summary

CropsInvestments

(Markets and Finance)Cash

Agriculture & Food

Markets

Finance

Focus on markets and finance

because they are lacking in

traditional development

approaches

Farmers produce little for sale• So no commercial loans• So no reliable market causing much

waste

Food businesses lack crop inputs• So limited growth and investment• So they import needed volume

competing with nearby farmers

UnderlyingProblems

Dysfunction in the Value ChainCheetah must work on both halves because the problems are linked in a

vicious cycle that damages investments.

UnderlyingProblems

3 innovations needed: Finance solutions

for farmers, and SMEs,

and farmers must become investable

3 Dimensions,9 Aspects of the Cheetah Model for Ending Smallholder Poverty& CreatingProfitability

SolutionSummary

From MIT group that made the first major review of microfinance:

“… the structure of [microfinance’s] success in lending to the poor is such that we cannot count on it to be a stepping-stone for larger businesses to be created and financed. Finding ways to finance medium scale enterprise is the next big challenge for finance in developing countries.”

Microfinance

Small loans averaging $300 filling

microfinance space

Less successful and smaller in rural areas

and for agriculture

Best suited to micro enterprises with no

usage control

Credit often based upon peer pressure or

average risk factors

Cheetah’s Finance Innovations

Loans (and equity) $5000-$500,000 filling “Missing Middle” gap

Designed for communities or

midsized businesses

Requires strict structural control,

which is built in

Credit based on production capability

Africa Farmers

Collateral Fund

Business (Farmer’s

Group)

Markets (Economic

Benefit)

Lending Bank (Capital)

Partners with Cheetah company to assure proper use of loan

proceeds and access to markets

Cheetah company guarantees first 10% of loan and manages

markets and logistics

Bank issues and enforces commercial grade loan

Provides loan collateral

Cheetah Innovation: Metafinance• Provides needed debt

to finance farmers for higher yields

• Reconnects loans to commercial benefits

• Provides needed equity to finance ag-food value chain businesses (SMEs linking to farmers)

Africa Agriculture Equity Fund

Inve

stab

le

Cheetah Innovation:

Micro Venture Capital

Achieving Commercial AcceptanceDebt / MetafinanceBanks rarely give serious loans to smallholders because of high failure rates. 5 solutions:

Collateral:• Farmers have few assets so banks need

guarantor to give loan. • Cheetah puts collateral on deposit in USD (no

currency risk).

Bank Enforcement:• With Cheetah’s coordination, bank makes and

manages loan.• Farmers know local banks have more ability to

collect loans.

No Cash:• Loan is placed directly with farmer group by

Cheetah. • They get the ag inputs or equipment rather than

cash.

Cross Collateralization:

• Proceeds distributed to small groups as in the microloan model. If a small group fails to repay, the larger group is still must.

Market Managed: • Cheetah provides a market for the crops• Bank gets paid first.

Achieving Commercial AcceptanceEquity / Micro Venture CapitalVenture capitalists avoid small investments because too much work needed to get returns. 3 solutions:

Prove Opportunity

•Pilot businesses internally in the nonprofit before placing investments.

Replay Opportunities

•Use a franchise model to replicate success so that future investments have a lower risk and reduced cost of investment management.

Share Opportunity Cost

•Share back-office services companies to lower investment costs, risks, and improve quality.

Cheetah Collateral Fund: Metafinance with Catalytic First Loss Capital

• The Africa Farmer’s Collateral Fund creates manageable layers of risk

• Mission driven investors take highest risk and catalyze additional investment

• Percentages are approximate targets

Sub-Debt 2 (Mission Driven Investors)

Program Absorbed Risk

Possible Government

or Major NGO Shared Risk Program

(45-60%)

Senior Debt(Low Risk; Protected by

Other Investors)

Sub-Debt 1(More Risk but still Protected by Other

Investors)

10%

20%

20%

50%

Farmers lack access to crop input & equipment finance

Farmers lack access to markets & value chain

Africa Farmers Collateral Fund

Africa Agriculture Equity Fund

Financing Solutions with Companies, Foundations, Governments and Accredited Investors

Africa Farmers

Collateral Fund I

Economic and Social Returns

Africa Agricultural

Equity Fund I

Economic and Social Returns

Africa Farmers Collateral Fund I

•Farmers turn in crops, they are sold, loan is paid•If crop does poorly, crops produced are sold, farmers achieve no profit, loan is paid•If farmers do not pay, other farmers cover costs, loan is paid•If group fails, bank enforces loan and farmers make payments over time•Supplier (usually investee of AAEF Equity Fund) of crop inputs or equipment covers a minimum of 10% of first loan losses, including profits from other groups, loan is paid•Fund investors are in tiered risks A, B, C so losses covered in lower tiers

Africa Agriculture Equity Fund I

•Companies are sold to outside investor•Fund has preferred shares, equity is converted to debt and repaid (this is built into the fund model from outset – for more information see SEAF model)•Future fund buys out current investorsInvestor

Exit Strategies

Investment Steps

Ideate •Identify opportunities•Select

Pilot •Prototype•Validation requirements

Activate •Demonstrate business model•Verify validation requirements met

Propagate •Invest•Grow in origination and new locations

Board approval required to advance to each new step.

Target Investment Criteria

ProfitableHigh impact –

change livelihoods significantly

Ag or ag value chain

Replicable – can be replayed and

cross cultures

Scalable and able to grow quickly

meeting the needs of many

High need, fills a critical gap, ‘last mile’ to farmers

High leverage – few employees or low

investment changes many lives

Cluster – fit with other investments to multiply effect

Red: priority preference

Green: important preference

A Disciplined Model to Move From Pilots to Scale

Innovation: Making Farmers Investable Why have cooperatives failed?

Coops are the answer:

•Cooperatives have worked to lift farmers for over 200 years in all cultures•Coops succeed with joint marketing, financing and purchasing and sharing other costs and investments.

Coops fail in Africa for three primary

reasons:

•Shortage of finance

•Lack of trust – corruption

•Unreliable market access dominated by middlemen

Cheetah’s solutions to the problems:

•New finance models

•Make all farmer activities accountable and enforceable

•Partner on markets, owning all logistics

Example of Structure for Organizing SmallholdersF

AR

MIN

G ,

MA

RK

ET

S A

ND

FIN

AN

CE

Farmer Group

Farmer Group

Accountability and mgmt with Teams of 5-15 self-selected farmers

Structure is a combination between savings/microloan groups and coops

Pearl Foods partners with farmers on markets and other opportunities.

Pearl is unifying point for coop marketing. Controlling crops secures investments

Timu

Wakalimu

Team

Farmers

Farmer Group

Team

Farmers

Pearl Foods

Cheetah (& Loan

Guarantors)

Masoko, Markets

Benki, Bank Finance and

Accounts

Wateja Customers (Buyers of Crops)

Step

-by-

Step

Sca

ling

Proc

ess

Goi

ng to

Sca

le:

Wha

t is

Built

Current State of Fund Needs

Curr

ent S

tate

of

Fund

Nee

ds

Risk MitigationAfrica Farmers Collateral Fund I Africa Agriculture Equity Fund I

On-the-ground presence, active management in portfolio companiesCheetah keeps control of accounting, reducing likelihood of corruption

Shared back office services and location reduces startup costsPreferred share position for investors in many cases

Local village leadership for most activities bridges cultural gapsLoans 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

Equity Fund Debt Exit Strategy

Created by SEAF (30 yr. proven experience, impact investment model)

Local Investors, Employees

Common Shares

Cheetah investment –

preferred shares

1. Cheetah raises needed investment and has board control

Common Shares

3. Loans are repaid, shares divided pro rata by others

Common Shares Cheetah shares

4. Company is revalued by pre-agreed formula

Local investors equity – common shares. However by contract Cheetah controls accounting function to guarantee

transparency. Sale of shares is restricted by agreement.

Cheetah Preferred (15% minimum), dividing repaid Preferred Shares with Common, (optionally, Cheetah

may be repaid while retaining equity)

6. Equity and control revert to local shareholders

Fund investment –preferred shares A & B

Common SharesEquity to

Debt Round 1

Cheetah shares

2. Preferred shares divided into loan and equity

Preferred shares

Loans repaid Cheetah sharesPreferred

shares

Preferred shares

Common shares Cheetah equity subordinate to fund debt

5. Remaining preferred shares are converted to debt and repaid (24-36 months)Fund equity – preferred

shares, may be limited by coupon value

7. All shareholders enjoy profit distributions pro rata with ownership

Exit Strategy: the Process for Fund Liquidity

Terms Africa Farmers Collateral Fund I LLC

Africa Agriculture Equity Fund I LP

Manager or General Partner

Cheetah Development, Inc., a 501(c)(3)

Size Up to $3.5 million by 31 Dec 2015 Up to $20 million by 31 Dec 2015

Target Return 2% 12% – 15%

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

7 years, 2 one year extensions.

Target investors Governments, Corporations involved in agriculture or food, foundations, NGOs.

Commitment Minimum 10 units or $100,000.

Fees & Expenses

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

3% per annum of total commitments, partially paid up front for incubation and R&D. Fund pays its operating expenses.

Legal Counsel Dorsey & Whitney LLP

Audit Firm Recognized audit firm(s) to be selected

Summary of General Fund Terms

Securities DisclaimerThis document is for informational purposes only and does not constitute an offer or solicitation to sell shares or securities in the Company or any related or associated company. Any such offer or solicitation will be made only by means of the Company's confidential Offering Memorandum and in accordance with the terms of all applicable securities and other laws. None of the information or analyses presented are intended to form the basis for any investment decision, and no specific recommendations are intended. Accordingly this document does not constitute investment advice or counsel or solicitation for investment in any security. This document does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or any invitation to offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. The Company expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) reliance on any information contained herein, (ii) any error, omission or inaccuracy in any such information or (iii) any action resulting therefrom.

Thank you!

www.CheetahDevelopment.org