Financing multimillion dollar venture | Sunworks Farms partners with venture capital investor
There never seems to be enough money at Sunworks Farms to really grow.
Getting bigger seems to take more and more cash just to keep the wheels turning, said Ron Hamilton, owner of the organic farm near Armena, Alta.
“When you have rapid growth, there is a constant pull for every dollar ever made and ever made in the future to go back into the company,” he said.
“We can sell products and can grow the products, but it requires more capital to grow more and sell more.… Once you use your equity up in your land, it’s hard to grow. Financing is always difficult. If you have equity in land or money in the bank, it’s easy to grow.”
Hamilton and his wife, Sheila, needed a different way to finance the business when they decided to build a multimillion-dollar humane poultry slaughter facility on the farm.
They turned to the agriculture investment firm Avrio Capital for help.
The Calgary-based venture capital firm, which specializes in investing in agricultural and food businesses, became shareholders in Sunworks Farms last year.
Hamilton said working with Avro’s team of financial experts improved their business acumen.
“Our business became much more professional.”
Working with venture capital investors does come at a cost, including giving up some control of the business.
“It isn’t for the faint of heart for the venture capital company or the person it’s investing in,” said Hamilton, who hopes to be operating the facility by fall.
“There are risks on both sides.”
Jim Taylor, a partner in Avrio Capital, said the investment community in keenly interested in investing in good agricultural and food companies.
“Investors like industries and companies that can solve really big problems,” said Taylor.
One of the biggest challenges he sees is the demand for more food grown on the same land base.
Like Sunworks, Avrio Capital is looking to raise money to make more investments.
The company is hoping to raise $125 million for its fourth venture capital fund. The previous three offerings raised $75 to $100 million, all for investments in agriculture and food.
One of its earliest investments was in Wolf Trax, a micronutrient fertilizer coating company from Winnipeg. It was recently sold to Compass Minerals for $85 million.
Other investments have included Manitoba Harvest, a hemp processing company, and Farmers Edge, an agriculture technology and agronomy company.
Taylor said raising money isn’t easy, but it helps when the company has a good story and good investment opportunities.
Avrio Capital has invested in more than 50 companies in the past 12 years. Money sources include Alberta Investment Management Co., Export Development Canada, Farm Credit Canada, private family funds and the partners’ personal investment.
Taylor said it also approaches companies that it has previously invested in, as well as companies that are interested in investing in agriculture and food.
“To make investments we need money so we don’t miss opportunities.”
Taylor said Avrio is particularly interested in companies that can deal with the problem of metabolic syndrome, which concerns food-caused diseases such as diabetes.