Innova Memphis, an early-stage venture capital firm, has closed its latest fund, Innova Ag Innovation Fund IV. This marks the firm’s fourth fund.
Founded in 2007 by the Memphis Bioworks Foundation, Innova focuses on starting and funding high-growth companies in the biosciences, technology and agtech fields. Bioworks is focused on invigorating Memphis and the surrounding Delta region focusing on agriculture/food, logistics, materials, and human health.
As part of the USDA’s Rural Business Investment Program (RBIP), the fund has been certified and licensed to operate as a Rural Business Investment Company (RBIC). The RBIP is part of the White House’s Made in Rural America export and investment initiative designed to draw capital and infrastructure support to rural communities in the US.
The goal of each RBIC is to help fill the need for business and development capital in rural areas. A minimum of 75% of funds from an RBIC must be made in rural areas with a population of 50,000 or less, a minimum of 50% of funds must be invested in smaller enterprises, and a maximum of 10% may be invested in urban areas.
Innova’s interest in agtech started many years ago, but Innova partner Jan Bouten became particularly motivated when he learned that Advantage Capital Agribusiness Partners completed the RBIC certification process and closed a $154.5 million fund with the initial goal of reaching $100 million.
Under today's unique circumstances, AgFunder is re-opening Fund III for a limited time to enable investors to join our mission and invest alongside us as LPs in a second close. Learn more here.
“We started investigating how it works and had our first meeting with Farm Credit to gauge their interest,” Jan Bouten, partner, tells AgFunderNews. “We really wanted to combine Innova’s background in early-stage investing with AgLaunch Accelerator director Pete Nelson’s background in agriculture and agtech.”
Also, having grown up in a heavily agricultural region in the Netherlands, the focus on agtech was a natural progression for Bouten, who also has a lengthy tech investing history.
The $31 million fund will focus on early-stage investments located in rural America, and will work with various national farm organizations and other partners to identify, enable and accelerate companies with high growth potential in the rapidly expanding agtech sector.
Considering that Silicon Valley reigns supreme in tech and that many other cities are clamoring for the title of “agtech capital,” limiting the fund’s focus to rural regions may cause some to pause.
“In general, I think companies should be where their customers are. That is one thing we are going to do very heavily. For every investment we make, we will talk to end users and farmers about it,” Bouten tells AgFunderNews. As for finding enough companies that fit the RBIP’s investment requirements, he isn’t fazed.
“Since we first announced that we are going after this, we have seen a lot of companies and I don’t forsee any issues fitting those criteria.” In fact, he believes that more and more startups may eschew the city centers for rural areas both as a way to cut down on big city expenses and to get closer to their end users. For Bouten, the ability to interface with the customer is critical.
Located in the heart of the Delta region, Innova believes it is perfectly situated to identify these opportunities locally and throughout the US.
Innova has identified five key focus areas for the fund:
- Farming technology, equipment and enabling innovation, including robotics.
- New technologies pertaining to crop production, harvest, storage, supply chain/logistics and processing/productivity tools and software.
- Areas of precision agriculture such as crop, water, and chemicals management.
- Innovations addressing food security, safety, and nutrition challenges.
- Novel animal health and welfare systems and practices.
And while he isn’t ruling any technologies out at this point, Bouten has some clear parameters for the technologies that fit the fund’s goals.
“We will mostly be looking at the adaptation of existing core technologies to this field. I don’t think we will look at a lot of deals where the core technology still has high risks, or needs another five to seven years of R&D before we know if it actually works,” he explains.
“The benefits that we are seeing from having such amazing technology put in consumer devices in the last 10 years has driven down the cost of very powerful sensors, processors, networks that until fairly recently were not available to put to work in agriculture because it would cost too much. The time is right now to take advantage of the billions of cell phones and devices that have made all this stuff really cheap so we can now introduce it to agriculture.”
Innova is in the process of finding the right partnerships to aid it with this endeavor, and has already indicated that it will work closely with the AgLaunch Accelerator. AgLaunch is a venture development organization, accelerator and farmer network organization, which focuses on a farm-centric commercialization model for agricultural innovation. Bioworks created AgLaunch, in conjunction with the Tennessee Department of Agriculture as part of its mission to boost the region’s vitality and with the goal of focusing on the agriculture and food entrepreneurial community.
Although the parties do not have an official relationship requiring Innova to invest in the program’s companies, Bouten recognizes a strong synergy between the fund and AgLaunch’s focus. As for additional partners, Bouten is in the process of identifying other outlets.
“Thanks to AgFunder’s report on accelerators and all the agtech and foodtech resources that exist, we have been quite active in talking to many of those accelerators and programs and will continue to do so over the next couple months to solidify partnerships where it makes sense,” he says.
In May 2016, the first agtech-focused RBIC launched, called the Open Prairie Rural Opportunities Fund. Managed my Midwest agtech investment firm Open Prairie Ventures and totaling $100 million, it marks the firm’s fourth fund.