Serra Ventures closed its agtech fund on $45 million earlier this month largely through commitments from within the same network of high-net-worth individuals that have supported its generalist venture funds.
Tim Hoerr, who is Champaign, Illinois-headquartered Serra’s chief executive, told Agri Investor the firm started with a target of about $30 million for what marks its first sector-specific vehicle.
Though it raised the target after initial prospects with more institutional types of investors, he said, 90 percent of the Serra Capital Ag Tech Fund’s capital ultimately came from high-net-worth individuals making commitments of between $250,000 and $2.5 million.
“If you drew a 150-mile circle around Champaign, Illinois, you’d probably find the preponderance of the LPs within that circle,” said Hoerr, who has helped manage Serra’s micro-venture funds as chief executive since its 2008 founding, according to his LinkedIn profile.
“Most of them have been an entrepreneur or a successful professional and built up some wealth over time. If you’re based in Peoria, Illinois; Rockford, Illinois or Indianapolis, Indiana, you’ve had exposure to ag.”
Serra’s own existing ag exposure has included investments in Ontario, Canada-headquartered crop marketing hub Combyne; controlled environment agriculture-focused AI software company iUNU; and Agrible, a predictive analytics company sold to crop inputs provider Nutrien for $63 million in 2018.
Hoerr explained that Serra’s decision to raise a sector-specific vehicle came amid a pause on fundraising for its flagship fund series designed to allow for portfolio adjustments prioritizing cash return targets. He added that the firm also expected some investors not yet ready to commit to a new generalist venture fund might have more interest in a smaller, more focused strategy.
One factor in the decision to focus on agtech, he added, was encouragement from several industry-related strategics the firm already has relationships with, including Nutrien, that viewed investments with the firm as extension of internal research and development efforts. Another factor, he said, was the strong performance of Serra’s existing ag-related investments relative to other sectors of focus like healthcare and information technology.
“Ag did stand out. It has outperformed statistically against the other categories. Not massively outperformed, but enough to attract our attention,” Hoerr said.
The nine investments already completed from the Serra Capital Ag Tech Fund have included cattle breeding technology provider Vytelle; inventory software-focused Barn2Door and DroneSeed, which uses drones to plant tree seeds following fires. DroneSeed also has a carbon credits partnership program called Carbon Catalyst, which seeks to deliver verified credits alongside private family forest landowners.
The Serra Capital Ag Tech Fund will target a 4x return on invested capital, net of all carry and fees through at least 25 investments it hopes to close by the end of 2023, Hoerr said.
Although Serra’s multi-sector funds have traditionally focused on early-stage technology companies, Hoerr said the agtech strategy targets slightly more mature businesses between the seed and Series A stages of development.
“This is a bit of shift for us, moving a bit down the lifecycle as an entry point,” he said. “We see massive de-risking that happens between seed and A. You often get very good visibility on the progress from the seed, but you are not quite paying the A price, so it’s a nice place to enter, when it works.”