By Opportunity Zone Magazine Staff

New York Opportunity Zone investment shop Activated Capital is preparing to launch a $25 million OZ fund dedicated to investing in operating businesses in the US heartland, in a bid to unlock high-growth opportunities overlooked by the conventional VC community.

Activated, which has also raised $5 million towards a $75 million OZ fund focused on real estate, anticipates offering blended investments combining real-estate projects with more speculative but higher-return startup investments.

“We’ve been speaking to investors, and they’re very eager,” says managing partner Josh Burrell.

The need for clear regulatory guidelines had stalled OZ investments in operating businesses, but Burrell says the Treasury’s latest guidance has now cleared the way for investors.

“We had to wait for the latest round of regulations, but now we’re happy,” Burrell says. “We have every intention of doing an operating-businesses fund.”

Burnell recently toured Tennessee, Missouri, Michigan, and elsewhere to identify suitable projects. One startup that caught his eye: Agatha, a tech company in Johnson City, TN, that’s seeking $200,000 in OZ seed money to develop a murder-mystery smartphone game that lets users unlock clues by walking around.

“You make progress in the game by walking in real life,” explains founder John Cannon. “The goal is to get everyone to walk more so we become a healthier society.”

An injection of OZ capital would allow Agatha to finish developing its app, which Blue Cross Blue Shield of Tennessee has agreed to test and potentially roll out to its 3.5 million customers, Cannon says. It would also allow Agatha to hire talented local workers.

“We have a university here in town that graduates very good computer science majors, but most leave to work in Atlanta or Charlotte,” Cannon says. “I’d like to hire them and have them stay in Johnson City.”

That’s the kind of impact Activated hopes for, Burrell says, and a reminder that operating businesses can often deliver more direct and tangible social and economic impacts than real-estate projects.

“In terms of having a transformative impact, where you can measure the impact of jobs and community impact, businesses are going to be the biggest driver for that,” he says.