- US-based venture capital firm Innova Memphis has announced a $40 million first close of its Innova Ag Innovation Fund VI.
- The fund will invest in pre-seed, seed and early-stage startups addressing the evolution of agriculture through automation and digitization technologies.
- Fund VI is part of the Rural Business Investment Program (RBIP) designed to bring more capital to rural areas of the US.
- The $40 million close brings Innova Memphis’ total capital under management to over $100 million.
Innovations that ‘farmers actually want’
Innova will use the new fund to continue investing in farmtech startups, as they are best poised to actually help farmers and growers, Innova partner Jan Bouten tells AgFunder News.
“We really want to invest in innovation and entrepreneurs that support the farmer, the producer, and are very close to the production of the goods,” he says. “That’s where we see a lot of fundamental issues: labor shortages, transparency requirements, environmental sustainability.”
“What we saw in the first generation of agtech was technology for technology’s sake. People looked at data from the farmer and tried to leverage it in their individual businesses. We look at it as the reverse: How can the farmer and the grower actually benefit from the use of and the leverage of that data?”
He adds that many of Innova’s investors come from Farm Credit institutions in the US, so “being close to the farm is important for them.” More than 300,000 farmers are represented through that investor base.
“We work closely with the Farm Credit banks, which brought us a lot of initial deal flow, adds Dean Didato, another Innova partner.
“If you look at our portfolio and Fund IV, we have six portfolio companies based in Iowa, and sometimes they’re third- or fourth-generation kids that have been in farming and keep saying, ‘Why do we continue to do it this way when there’s got to be a better way?'”
“We have a lot of return investors from our first ag tech fund,” says Bouten. “And we’re starting to tap into that knowledge base so that we really work with our investors to make sure that innovations farmers actually want see the light of day.”
Farmtech investment heads to the Heartland
Since its founding in 2017 by the Memphis Bioworks Foundation, Innova has made a number of early-stage investments into agtech-focused companies: Food safety startup Clean Crop Technologies, precision ag-focused Rantizo, and irrigation management startup Kilimo, to name a few.
Fund VI will, like its predecessor, invest in pre-seed, seed and early-stage startups, though Bouten suggests Innova will write bigger checks this time.
“When we started [Innova Memphis] in 2017, there weren’t a lot of accelerators out there. At this point there are a lot of accelerators and incubators for the ag side of things,” he says. “A lot of them are in Iowa, a very rural and agriculture-driven state. So it isn’t California.”
Innova’s Fund VI is part of the United States Department of Agriculture’s Rural Business Investment Program (RBIP), which is designed to bring capital and infrastructure support to rural communities in the US. Through the RBIP, Fund VI is licensed to operate as a Rural Business Investment Company (RBIC) in order to make VC investments in rural areas.
“We definitely see a lot more deal flow coming from [rural] places now that they’ve actually it’s gone through the rigors of dealing with startups,” says Didato.
Bouten and Didato say they see “huge opportunities” in areas like robotics, artificial intelligence and mobility.
“We are actually seeing some agrifintech activity that’s being funneled back to our LPS,” adds Didato. “Our limited partners are looking at those portfolio companies and saying, ‘We need to bring them on board as part of our financial services platform.’ So it’s starting to come full circle.”