May 15, 2017

Pre-seed and early stage venture capital firm Innova Memphis announced the close of its newest fund, Innova Ag Innovation Fund IV, at $31 million.

The fund, which has been certified and licensed as a Rural Business Investment Company (RBIC) under the U.S. Department of Agriculture’s (USDA’s) Rural Business Investment Program (RBIP), will work with a range of national farm organizations to identify and focus on early stage investments in the agtech sector that are rooted in rural America.

As global interest rates hover close to zero, the USDA has been campaigning to drive investments from large institutional investors and pension funds to agriculturally-related businesses, and these funds, along with other RBICs such as the $100 million Open Prairie Rural Opportunities Fund, are being created to act as vehicles for those investors seeking exposure to these types of opportunities.

“We are very excited to start investing and look forward to meeting with founders and network partners to identify investment opportunities,” says Innova Partner Jan Bouten. “The fund will make that often critical, initial investment to assist promising startups on their path toward commercialization and scalable growth, all while creating opportunities and jobs in rural America.”

Innova Memphis, which originally focused on investment opportunities in the health sector, was initially announced as an RBIC by the USDA in April of 2015, along with Meritus Kirchner Capital, which has offices in Kentucky, Tennessee, and Alabama. The inclusion as RBICs grants the funds approval from the department to raise money from the Farm Credit System and private investors. Similar to hedge funds, each will take an annual fee of 2 percent of the money raised, and an incentive fee equal to 20 percent or less of returns each year.

Ecosystem Partnership Model

This fund will be Innova’s fourth since launching in 2007 out of Memphis Bioworks, and will serve to strengthen the firm’s “ecosystem partnership model” – a framework reflected by its collaboration with AgLaunch. Launched by Bioworks in 2015 and housed at the Tennessee Department of Agriculture, AgLaunch is a venture development organization, accelerator, and farmer network organization supported by research undertaken at the University of Tennessee Institute of Agriculture that will focus on a farm-centric commercialization model for agricultural innovation. Ultimately, AgLaunch has a goal of enabling 200 entrepreneurs by starting 100 new agricultural companies and supporting 2,000 high-wage jobs.

“Working directly with farmers, our Venture Development Organization has built a unique and strong support network that greatly enhances the success rate of technology commercialization in agriculture,” explained Pete Nelson, director of AgLaunch. “Innova’s early stage investment expertise and capital will act as a great catalyst for all we’re doing and we look forward to further enhancing our already strong partnership with the Innova team.”

Geographically located in the Delta region of the U.S., the Innova Ag Innovation Fund IV will be well situated to capitalize upon investment opportunities across rural America while also being able to leverage the infrastructure, natural resources, and expertise to be found around Memphis.

Target investment opportunities for the fund include farming technologies including equipment and robotics; new technologies that forward crop production, harvest, storage, supply chain logistics, and processing tools or software; precision agriculture technologies that apply to crop, water, and agri-chem management; innovations that speak to food security, safety, and nutrition, and innovations that will improve animal health and welfare systems.

Investors in Fund IV include Farm Credit Mid-America, AgriBank; AgStar Financial Services; CoBank; Farm Credit Bank of Texas; Farm Credit Services of America; FCS Financial; and Farm Credit of Western Arkansas.

“I believe I can speak for all the investment partners in the fund when I say that we’re looking forward to working with the Innova team as they bring to market new and exciting technologies that directly impact our nation’s farmers,” says Paul Bruce, senior vice president financial operations of Farm Credit Mid-America.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.