VC firms raising $125m are latest Rural Business Investment Companies

Meritus Ventures and Innova Memphis were selected by the USDA to be RBICs and are raising $125m between them to invest into early-stage rural and agtech companies in Tennessee.

The US Department of Agriculture’s Rural Business Investment Program (RBIP) has expanded with the launch of two new Rural Business Investment Companies (RBIC) to attract investment into the US rural sector.

Both venture capital firms, Meritus Ventures and Innova Memphis, have established new funds under the scheme focusing on investments in central and southern Appalachia and agri biosciences respectively. Both firms are based in Tennessee.

Meritus is targeting $100 million for its Meritus Kirchner RBIC II, a partnership with Kirchner Group, a boutique merchant bank. And Innova’s Ag Innovation Fund I is targeting $25 million.

“The two funds will complement each other,” Grady Vanderhoofven, co-founder and fund co-manager at Meritus Ventures said in a statement.

“These are only the third and fourth funds nationally selected for RBIC since the program began in 2002,” Ken Woody, the Knoxville-based president of Innova added. “It is a major accomplishment for any fund to go through the rigorous selection process of the USDA. It is a strong validation of the great work going on in Tennessee today for two firms here to be selected.”

The scheme’s first RBIC, Advantage Capitalraised $155 million in April 2014 and has made two investments in rural businesses so far: a chicken egg production company in Iowa and American Botanicals, a manufacturer and supplier of bulk herbs and botanical products from Missouri.

RBIP also created the $10 billion Rural Infrastructure Opportunity Fund last July to facilitate private loans for job-creating rural infrastructure projects across the country.

“These two new private funds will provide innovative small businesses throughout rural America access to the capital they need to grow and create jobs,” Secretary of Agriculture Tom Vilsack said in a statement. “At USDA, we are working hard to re-energise the rural economy and we are enlisting more and more private sector partners to help achieve that goal. Rural Business Investment Companies will allow us to facilitate private investment in businesses working in bio-manufacturing, advanced energy production, local and regional food systems, improved farming technologies and other cutting-edge fields.”

The Farm Credit System is likely to make up a large portion of the investor base as with Advantage Capital’s fund, alongside some local institutional investors, according to Meritus’ website.