What the Inflation Reduction Act Could Mean for Food & Health

On August 7, 2022 the United States Senate approved the Inflation Reduction Act (IRA). It is anticipated to pass the House of Representatives and be signed into law in the near-term future.

The IRA allocates more than $369 billion for climate change and clean energy investments. Of that amount, approximately $40 billion, will go to the USDA for climate-smart agriculture programs, biofuel development, forest restoration work, renewable energy tax credits, conservation technical assistance and rural electric cooperative carbon capture and storage and resilience projects.

While many details of the allocation and expenditure of these funds remain unclear, the IRA gives us some guidance as to how these funds will be deployed and the technologies that will benefit from this injection of cash.

Climate-smart agriculture and resilience

The IRA provides $19.9 billion for implementation of conservation practices on farms, ranches, orchards, and forests across the country including practices that promote drought resilience in the West through river restoration projects, habitat restoration, and irrigation management and efficiency.

Based on a one-page description, the allocated funds will supplement existing agricultural conservation programs currently oversubscribed by as much as 3 to 1. The funds will be used to help farmers and ranchers implement and expand conservation practices that reduce potent greenhouse gases like methane and increase storage of carbon in their soil and trees and incentivize sustainable practices — like optimizing fertilizer use and expanding cover crops. An ancillary goal of the allocations is to improve farmer profitability from adoption of sustainable land management practices.

$8.45 billion of the $19.9 billion in new funds will be allocated to the Environmental Quality Incentives Program, which provides important technical assistance to farmers targeted toward sustainable practices that reduce greenhouse gas emissions.

The Environmental Quality Incentives Program (EQIP) is a voluntary conservation program that offers farmers and ranchers financial cost-share and technical assistance to implement conservation practices on working agricultural land. Examples of EQIP special initiatives available for funding include transitioning to organic production, using cover crops, promoting soil carbon amendments, prescribed grazing, nutrient management, and many others. The practices eligible for funding under the EQIP include many practices promoted by iSelect portfolio companies. The full list is available at the USDA website.

The IRA also provides $3.25 billion annually for the Conservation Stewardship Program and $1.3 billion annually for climate-focused technical assistance.

“The Conservation Stewardship Program (CSP) is a comprehensive initiative focused on protecting the natural resources connected with agricultural lands and practices. The CSP provides financial and technical incentives for farmers to begin new conservation activities in addition to maintaining their existing conservation efforts. It is awarded based on a point-system for a farm’s utilization of specified ecological techniques. High-scorers “win” a five-year contract during which they receive payment for conservation practices. Conservation activities that are rewarded by the CSP include everything from building natural buffers around waterways to establishing pollinator habitat improving cover crop rotation.”

There are many details to be resolved with respect to the funding, awards and distribution of these newly allocated funds. iSelect is watching this closely and anticipates that there will be a myriad of benefits to our portfolio companies and the farmers who buy their products.

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.