Cimbria Capital, a water and agribusiness-focused private equity firm headquartered in Houston, plans to target between $50 million and $75 million for its debut fund, according to its founder and managing partner.
Brian Iversen told Agri Investor that for the past three years, Cimbria has worked to build a track record with investors by developing two stand-alone deals in the water sector. Using capital from 35 investors – mostly individuals and family offices in North America and Europe contributing an average of $300,000 – Cimbria has backed AMI Global, which offers internet of things applications for water and agriculture, and VRC Technologies, a specialty chemicals provider servicing the agricultural and oilfield markets.
“We didn’t believe that we had an ability to raise a blank check for Fund I before we had some real evidence that we know what we are doing,” Iversen explained. “Those two companies are meant to be that real evidence, and that’s what we’re going to use as part of our fundraising efforts.”
Iversen said that Cimbria provided investment memos similar to those presented to larger investment committees to each of its investors, many of whom the firm expects will also commit to Fund I. Cimbria will target larger family offices in its Fund I fundraising and offer potential LPs access to a data room with some detail on term sheets in place for its existing deals.
“The fact that we can walk into a room now and say something to people that we met with three years ago, and what we are saying is not different, that makes the most difference,” Iversen said.
A little slower
Iversen, who previously worked on renewable energy investments at Riverstone, said that he sees growing investor demand for exposure to both ag and water investments. Part of what attracted him to the sector was its nascent stage and the fact that it would be easier to establish a name for the firm than in a more crowded market like energy.
“Things are a little slower in ag,” Iversen said. “In many places in ag, you have to wait six to 12 months to get to the next season, so the timing on private equity in those investments has to be a bit more thoughtful. You need to, probably, be more patient than your gut would tell you if you’re trained in private equity somewhere else.”
Iversen, who is from Denmark, said that Cimbria plans for three quarters of the investments from Fund I to be dedicated to companies in North America, with the remainder focused on opportunities in Nordic countries. He explained that due to the region’s strict environmental regulations, many water-related businesses there are technologically ahead of their North American peers, and Cimbria’s strategy will focus on helping such companies expand into new markets.
“If you were a market leader in the Nordics, there’s a real chance that you are already a real leader in the North American market,” Iversen noted.
The ongoing drought in northern Europe is just the most recent in a string of events that have helped highlight the key role of water in agriculture for investors, Iversen said, explaining the firm’s focus on the sub-sector.
Cimbria will not invest in land or water rights and will instead focus on companies with a connection to precision agriculture, irrigation, water drilling and other related services involved in efforts to increase water efficiency in agriculture.
Here too, Iversen added, the firm’s patient approach has been an asset in a market that continues to be dominated by smaller businesses.
“A $50 million deal is hard to find in water,” he said. “A $5 million to $10 million deal is not hard to find, but it’s hard to work it and you need to be willing to spend real time to make it work.”