Food-based investments are finding a place at the investment table more than ever lately. Large Bay Street firms like Dundee and Sprott have invested in organic beef. The number of farmland-based securities in Canada has blossomed over the past several years.
But in Alberta low-profile venture fund, Avrio Capital, has been finding and fertilizing unique agriculture-based companies for years now. Over the past decade the fund has grown a lovely bouquet of investment funds.
Avrio may not be a name recognized by the average Canadian investor, but the company has grown its own niche as a respected venture fund firm dedicated to identifying and invest in companies "involved in the health, wellness and sustainability" of the agriculture sector. The company has gone about its business with little fanfare, opening and closing a series of venture funds that have launched many new products into the Canadian food sector while providing outsize returns to investors. "We quietly go about our business," says Avrio principal Jim Taylor. “But we were doing Ag way before it was hot. We claim we were doing it before it was cool," he says with a chuckle.
Avrio's founders Jim Taylor and Aki Georgacacos were working at a crown corporation Farm Credit Canada way back in the early 2000s. FCC has a mandate of investing in Canadian farm operations. At the time the organization had an equity arm that invested in up-and-coming farm-related companies. But FCC made the decision to invest through funds that held the companies rather than be the manager of the funds themselves. Which was smart. Having a government organization involved in venture funding can be a delicate thing--having to "fire" people or turn down investments quickly become political at government organizations. So FCC decided to take a step back. Taylor and Georgacacos left the organization, and along with Tom Kaneb, raised money from Alberta state-pension plan, AIMCO as well as FCC, to create FCC Ventures, North America's first fully dedicated agriculture and food fund.
Today the company is known as Avrio. The team identifies innovative food and agriculture companies and then works hands-on as an investor alongside of companies in the portfolio. Offering contact with Avrio's knowledge base and resources, the fund takes active role in each investment and offers financial support as well as the advice, planning, and support for growth plans needed to transform emerging companies into successful globally competitive enterprises. Over $125,000,000 has been invested in 52 agriculture and food sector companies over the past 12 years. Some of the company's early ventures may be recognizable to the average Canadian. Brookside chocolate-covered almonds are now found in Shoppers Drug Mart across Canada. That investment has paid off handsomely. Avrio made $40 million when they exited a company. The company also helped Wolf Trax, a specialty fertilizer company, come to market, as well as a Quebec company that builds "variable rate" irrigation systems (that apply different amounts of water to different areas of the field). The company's most recent fund also included Bare Foods Company, which markets premium baked apple chips made from nothing but apples and cinnamon, a product that is on the cutting edge of modern food trends. General Mills recently reduced the number of ingredients it uses by 11,000. Bare Foods takes that trend to its logical end. "It's all about reducing the amount of chemicals in the bag. With Bare Foods, you look at the bag, the only thing in there are apples and cinnamon."
Business seems set to continue to bloom. In California the drought is increasing the value of food products from elsewhere. Around the world demand for food products continues to grow as populations in developing countries take on more middle-class lifestyles, which means more higher-end food products. "The portfolio is in good shape. We sometimes feel like being in internet in 1996," says Taylor.
Like typical venture funds the investments don't pay off right away. Typically the fund makes its money back after five years. But it is in years six, seven and eight of an investment cycle that the investments really pay off. The FCC Ventures fund achieved a lifetime IRR of 20 per cent, keeping investors happy. Avrio Ventures Limited Partnership I is liquidating its holdings and expects to provide investors a similar return. Most recently the company announced initial commitments of $65 million to its latest fund, Avrio Ventures Limited Partnership III, which remains open to new investors and expects to have a subsequent closing some time over the next several months. Most investors in Avrio's funds are institutional players but there are also investments from family offices, which can come in with investments as low as $2 million. "We'd love to hear from some high-net worth people," says Taylor.