The Innova Ag Innovation Fund IV has invested in five of the Silicon Prairie’s leading startups. However, its origin suggests just how unlikely this was.
In 2007, Innova Memphis was founded by Ken Woody as part of the Memphis BioWorks Foundation. This foundation was part of an effort in Memphis, Tennessee to jumpstart the region’s efforts in the biosciences. In particular, the early stage venture firm focused on investments in medical devices (hardware), software and other information technology, and logistics companies. This made sense because of the core strengths of the Memphis region with Smith & Nephew Orthopedics, Wright Medical, Medtronic Spinal Division and Federal Express.
For nearly a decade, investments in these spaces were the bread and butter of Innova Memphis, and the firm was recognized for being a key player in the Memphis ecosystem. However, as the company evolved, it started to examine AgTech as a fourth area of interest. And in so doing, the firm looked at another regional strength of the area, that being some of the most fertile farmland in the country and the opportunities posed by providing growers with access to enabling innovations.
During this process, the company uncovered the USDA Rural Business Investment Program (https://www.rd.usda.gov/programs-services/rural-business-investment-program) which was created because “access to capital is vital to businesses and often is scarce in rural areas.” Because it had already made some investments in AgTech, particularly technologies associated with row crops, Innova decided to apply for the program.
The company created an AgTech fund, the Innova Ag Innovation Fund IV, or Fund IV – partnering with a group of eight national farm credit banks, including Farm Credit Services of America based in Omaha, Nebraska. This partnership helped the company raise $31 million to be invested in AgTech in rural areas. In fact, the program requires that 75% of the capital be deployed into areas deemed micropolitan or smaller (50,000 or fewer people).
The AgTech fund typically writes checks as small as $25k to a maximum of $3.1mm (10% of the fund). This makes Innova Memphis a particularly good partner for many rural startups in Iowa – where the Iowa Economic Development Authority has a matching loan program at extremely good rates. A couple of Innova’s investments there have taken advantage of this mechanism to leverage non-dilutive capital with Innova’s funds.
The fund was approved by the Secretary of Agriculture in 2017, and the company started to look for investments. In talking with Dean Didato, one of Innova’s partners, the company was particularly pleased with opportunities in the Silicon Prairie – particularly those in Iowa and Illinois. Didato explained, “One of the reasons that we find so many good deals is that founders tended to know farming. These founders grew up on farms, watched parents struggle with technology as part of farming, and started looking at the problems differently. This led several founders to attempt new, interesting solutions to older problems.” Didato went on to explain, “Our founders are able to identify and have empathy with farmers because they are cut from the same cloth.”
This led Didato and his small team to examine a variety of companies in the region throughout the Silicon Prairie – although their investments have been in Iowa and Illinois.
Didato described his companies with glowing praise particularly around their ability to innovate in rural areas. Innova Memphis has invested in five companies in the Prairie:
- Earthsense in Champaign Illinois – Earthsense is a hardware/software company that integrates smart genetic collection of crop traits in the field – expediting the effort to identify successful breeds of crops.
- Rantizo in Iowa City, Iowa – Rantizo provides drones that spray chemicals on crops – allowing farmers to get to specific sections or add additional chemicals to crops.
- Tractor Zoom in West Des Moines, Iowa – Tractor Zoom provides software tools to farmers to connect to auctions. This tool allows farmers to both find equipment for sale and to push their own equipment out to be sold.
- SwineTech in Cedar Rapids, Iowa – SwineTech has an alerting system that provides livestock owners with knowledge of piglets in distress.
- Agrisync in West Des Moines, Iowa – Agrisync is a mobile communications platform that helps farmers communicate with local consultants and service professionals.
Obviously building relationships with founders is critical to Innova Memphis’ success at finding Silicon Prairie related deals. Kyle McMahon founder of Tractor Zoom explained why they are working with Innova Memphis, “They have a proven track record of investing in great companies.”
This track record has been a decade in the making, but McMahon said that it was more than their longevity. “They get it. They have built great companies and have been on high performing teams before. Tractor Zoom is able to leverage that experience any time we need it. Plus, everyone knows them, so your startup gets instant credibility.”
This helps to explain why Innova has already made seventeen investments out of Fund IV. They have been able to leverage this reputational excellence with their connectivity. Some of this connectivity comes from their roots in Memphis. Having nearly fifteen years of experience working in AgTech, even if the national fund is only three years old, helps create credibility and trust in the industry.
Innova has earned their Silicon Prairie credibility through long relationships and expertise. So, don’t let the name fool you Innova Memphis is really part of the Silicon Prairie.
For more information about Innova Memphis, please check out their website at www.innovamemphis.com.