As CoBank’s Vice President of Public Private Partnerships, Chris Shaffner manages the bank’s Rural Business Investment Company (RBIC) portfolio, new equity investments, as well as the Rural Investment Opportunity Fund in partnership with Capitol Peak Asset Management and the U.S. Department of Agriculture.
Traditional investment strategies have long-failed to recognize the opportunities in rural America, and while we know that a strong U.S. economy is driven by a strong rural economy, investment capital has been slow to challenge the common, if unsubstantiated, assumption that performance outcomes in rural areas rarely beat urban investment returns. But that’s beginning to change.
In April 2014, eight Farm Credit institutions joined forces in providing $150 million to create the Advantage Capital Agribusiness Fund, a Rural Business and Investment Company (RBIC), an important public/private partnership with the U.S. Department of Agriculture. Spurring equity investment in rural companies has long been a high priority for U.S. Secretary of Agriculture Tom Vilsack, who, in announcing formation of the new RBIC said, "This new fund will allow innovative small businesses throughout rural America to access the capital they need to grow and create jobs. This new partnership 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."
An RBIC operates like a private equity fund—a fund manager raises money from a group of investors and then invests that money in a variety of private businesses. Under the RBIC structure, the fund is licensed by USDA but no taxpayer funds are utilized.
The Advantage Capital Agribusiness Fund holds true to Farm Credit’s mission of supporting rural communities and agriculture by making equity investments in later-stage small businesses involved in agriculture, processing and marketing of agricultural products, farm supply, input suppliers, and rural communications. The first investment made by the Farm Credit-supported fund was in February of this year to Iowa Cage-Free, LLC, enabling the company to transition six traditional egg-laying facilities into cage-free operations. Just months later, the fund made an investment in North American Natural Resources, Inc. (d/b/a American Botanicals), a manufacturer and supplier of bulk herbs and botanical products in Missouri. Earlier this month, the fund invested in Hortau Corp., a CA-based provider of precision irrigation management systems working to provide innovative tools designed to help agricultural producers manage water shortages in periods of drought. Through investments like these, the Advantage Capital Agribusiness Fund will continue to provide investment dollars to exciting, agriculture-related businesses that are vital to rural communities’ ongoing economic strength.
CoBank, one of the eight Farm Credit organizations that provided funding for the Advantage Capital Agribusiness Fund, has also partnered with Central Iowa Power Cooperative to form Midwest Growth Partners, a $41 million private equity fund that will invest in growth-oriented companies located in the upper Midwest. Managed by Midwest Growth Advisors, with CoBank participating as a limited partner, the fund’s goal is to strengthen the economic fabric of Midwestern communities. The fund is projected to have nearly 50% of the commitment invested by the close of 2015.
Both Farm Credit and the public sector understand that equity-backed companies are job creators and economic catalysts in their respective communities. We also see the positive, tangential impact that these companies can have on local supply chains, civic infrastructure, and workforce capabilities. Farm Credit’s commitment to strengthening rural communities through the provision of equity capital hints at exciting things to come. Rural opportunities for capital investment are vast and can perform at levels equivalent to those in traditional urban-based portfolios. With these new investment efforts underway, Farm Credit reinforces its support for rural communities and agriculture, with the added hope to inspire new investors to see what Farm Credit has known all along—the long-term viability of our rural economies depends on providing rural entrepreneurs with innovative and responsive financing opportunities.