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Innova Memphis launches $31 million rural investment fund

Innova-teknoBy Tom Ballard, Chief Alliance Officer, PYA

Two well-known phrases came to mind yesterday with an announcement from Innova Memphis. The first was “patience is a virtue,” the second was “good things come to those who wait.”

A little more than three years after starting work on the proposal and two years after earning federal approval to establish a Rural Business Investment Company (RBIC), the 10-year old venture fund announced the launch of Innova Ag Innovation Fund IV.

Capitalized at $31 million, it’s the fourth fund from the organization founded by Memphis Bioworks. In this case, as the RBIC designation suggests, there is a strong focus on early stage companies in rural areas, the reason the federal program was established.

“The fund will make that often critical, initial investment to assist promising start-ups on their path toward commercialization and scalable growth, all while creating opportunities and jobs in rural America,” Innova Partner Jan Bouten said in the official news release (Innova RBIC Release).

While Fund IV will be based in the Volunteer State and draw on several areas of expertise under the Memphis Bioworks umbrella including AgLaunch, it will have a broad geographic focus, working with various national farm organizations and other partners to identify, enable and accelerate companies with high growth potential in the rapidly expanding AgTech sector.

“Because all of the funds come from Farm Credit institutions across the country, we will have a national scope,” Ken Woody, Innova President and Partner, explained. “We’ll have as much focus on rural as agriculture.”

He added that Innova’s 10-year history of early stage investment, its knowledge of the agricultural sector, and its commitment to rural communities were important considerations for the U.S. Department of Agriculture (USDA) which gave its conditional approval two years ago and executed the final license recently.

“We plan on investing in AgTech companies coming out of accelerators,” Woody said, citing AgLaunch’s own program as a model and the Innova team’s partnerships with other accelerators.

Target investment areas are:

  • 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; and

The $31 million in funding exceeds the target that Innova announced in April 2015 when it received the required conditional approval from USDA to solicit capital for the fund.

“We’re pretty tickled to have exceeded that goal,” Woody says.

Investors in the new fund include Farm Credit Mid-America, AgriBank, AgStar Financial Services, CoBank, Farm Credit Bank of Texas, Farm Credit Mid-America, Farm Credit Services of America, FCS Financial, and Farm Credit of Western Arkansas.

While Fund IV will be seeking the best investment opportunities on a national basis, Innova’s connections in Tennessee and the rest of the Mid-South present opportunities for the region. After all, enhancing rural economic development in the Volunteer State has certainly been a key topic the last several years. Those needs and opportunities were highlighted by Governor Bill Haslam’s “Rural Task Force” that issued its report about 19 months ago. One of the organizations that participated in the work of the task force will be a key partner assisting Fund IV.

The previously referenced AgLaunch is a venture development organization, accelerator and farmer network organization focused on a farm-centric commercialization model for agricultural innovation. It’s a partnership between Memphis Bioworks and the Tennessee Department of Agriculture. Many of our readers know Pete Nelson, AgLaunch’s Director, who has travelled the state for several years advocating for agriculture-based innovation strategies and corresponding investments in them.

Fund IV becomes the third licensed RBIC in the nation. The first was Meritus Ventures, which has an office in Knoxville. The second is the Advantage Capital Agribusiness Fund.

As captured in this teknovation.biz article, then Agriculture Secretary Tom Vilsack announced conditional approval for two new RBICs in April 2015 – the one announced yesterday that is being run by Innova and the other that is a partnership between Meritus Ventures and the Kirchner Group.

Innova’s plans from the outset were to focus on early stage opportunities, while Meritus Kirchner was designed to help at the later stage of capital requirements.

Grady Vanderhoofven, Co-Founder and Partner in Meritus Kirchner Capital, told us yesterday that the joint venture firm is “continuing to explore the best approach to a growth stage fund focused on companies located in rural areas, but not exclusively on agriculture-related companies, (and) with an emphasis on companies in Appalachia.”


Tom Ballard

By Tom Ballard, Chief Alliance Officer,
Pershing Yoakley & Associates. P.C.

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