For an ecosystem that covers a majority of the planet, the oceans have basically been ignored by startups and investors alike.
Sure, plenty of money is spent on ocean-based industries, but most of today’s marine investments are into either extractive industries like fishing or oil and gas, or activities like shipping, which aren’t extractive but don’t exactly benefit marine ecosystems.
However, in recent years, there has been a sea change in perspectives. Founders and investors have started to look for opportunities to conserve, and even enhance, the ocean’s resources rather than exploit them.
“There is tremendous potential for the ocean to provide more food, more efficiently, with less environmental impact and even regeneratively,” said Reece Pacheco, a partner at Propeller.
Because the oceans take up so much of the planet and the space is relatively uncharted, there are plenty of opportunities for investors to find niches ripe with financial and environmental upsides.
“Our systems are at a point where it is more productive to work with nature than against it,” said Sanjeev Krishnan, chief investment officer at S2G Ventures. “While energy and agriculture are further along the J-curve, the oceans sector is more nascent but presents an investable opportunity that impacts almost every sector of the global economy.”
In that way, ocean conservation tech mirrors climate tech, which has been growing so fast that some have called it “recession-proof.” Of course, some question whether any sector is truly recession-proof and that applies to ocean conservation tech as well.
That doesn’t mean that investors aren’t bullish, though. “I’m not sure I would characterize the ocean economy as recession-proof, but the investment opportunities are real from a venture capital perspective,” said Tim Agnew, general partner at Bold Ocean Ventures.
Even some of the most intractable and high-profile problems facing the world’s oceans, like plastic pollution, are inspiring investors to dive in.
“People have been looking at solving these problems in the wrong way,” said Daniela Fernandez, managing partner at Seabird Ventures. “Profitability and scalability depend on the approach and business model that is being implemented to solve the plastic pollution crisis. We have to think beyond community beach cleanups — there are actually extremely investable approaches to solving the plastic problem.”
Investors like Fernandez are looking with fresh eyes at both new problems like plastic pollution and old ones like aquaculture and fisheries management. In the process, they’re betting that innovative approaches to solving those problems will not just create returns but create disruptions and innovations that spill over into adjacent sectors.
“Part of our thesis is that ocean conservation technologies can solve big problems for big ocean-going industries and adjacent industries,” said Kate Danaher, managing director at S2G Ventures.
But, she added, there’s still more room to grow. “We need to make the case to even more climate-focused and generalist investors.”
To get a better idea of how startups and investors are thinking about ocean conservation tech and the opportunities therein, we spoke with:
- Tim Agnew, general partner, Bold Ocean Ventures
- Peter Bryant, program director (oceans), Builders Initiative and Kate Danaher, managing director (oceans and seafood), S2G Ventures
- Daniela V. Fernandez, founder and CEO, Sustainable Ocean Alliance, managing partner, Seabird Ventures
- Rita Sousa, partner, Faber Ventures
- Christian Lim, managing director, SWEN Blue Ocean Partners
- Reece Pacheco, partner, Propeller
Tim Agnew, general partner, Bold Ocean Ventures
What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?
Our investment thesis is focused on innovations that modernize the seafood supply chain, expand production in a sustainable way and address the impacts of climate change. We believe this investment opportunity is in its early stages and will be a major theme over the next decade as it becomes clearer how impactful the ocean can be in addressing the climate crisis and feeding a growing, more urbanized population.
Ocean-related businesses are at the beginning stages of adopting new technologies to increase efficiencies and productivity.
Is there a meaningful distinction between the tech used by startups focused on coastal regions and the tech built for the open ocean?
Answer is yes and no. Ocean shipping and ocean wind are obviously very different animals from kelp aquaculture and climate resiliency, but both are migrating toward more tech-enabled solutions, including digital technologies, artificial intelligence, data gathering and analysis.
A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way?
We just looked at a company that has a booming business of gathering plastic bottles on beaches, separating the types of plastic and selling to companies that are anxious to be able to offer recycled bottles or other products.
There is considerable research going into the transition from plastic packaging to biodegradable packaging. There is plenty of potential for profitable businesses, although the process of cleaning up the oceans is going to require time and money.
What technology are you excited about that has the most potential to create new markets?
Seafood traceability solutions; ropeless traps; microalgae and seaweed are a hugely untapped resource with multiple market opportunities; ocean and weather data collection and analysis.
The ocean today only accounts for 15% of the world’s protein and 2% of its calories. What is the potential for the oceans to provide more, and what should that look like?
The oceans will provide more food that has a much lower carbon footprint than land-based animal protein. Shifting demand from beef to seafood could have a major impact on GHG reduction. Seafood aquaculture, both on- and offshore, is growing much faster than wild-caught seafood and will become a major source of high-quality protein.
What are some of the keystone problems that an ocean-based food system faces?
Social license concerns about aquaculture, species sustainability and the need to broaden consumer tastes to reduce pressure on overfishing.
From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?
RAS and closed system aquaculture.
4 investors discuss the next big wave for alternative seafood startups
Peter Bryant, program director (oceans), Builders Initiative, and Kate Danaher, managing director (oceans and seafood), S2G Ventures
What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?
Peter Bryant: We invest in technologies and business models that enhance the conservation, regeneration and resilience of ecosystems, optimize the production of and use of resources derived from the ocean, and provide consumers with a sustainable, traceable and secure food.
Kate Danaher: Part of our thesis is that ocean conservation technologies can solve big problems for big ocean-going and adjacent industries. Innovations that create deflationary solutions like saving fuel, lowering water usage or can build diverse revenue streams through multiple industries will be best positioned to weather this economic winter, raise capital and gain traction in the market.
As these types of innovations begin to show commercial results and have a positive environmental impact, we expect that investment in the sector will continue to increase, spurring more oceans-focused funds and increased interest from broader climate funds.
What role have impact investors played in ocean conservation? Investor networks?
Bryant: Within ocean conservation, there are technologies and entire subsectors that are still developing and need patient capital for R&D, reaching product-market fit, and in some cases, creating new markets. Patient capital lets commercially viable companies de-risk themselves and provide them with the runway they need to hit milestones to attract more traditional capital.
Impact investors have also catalyzed the growth of the ocean investment landscape by providing the first capital into ocean funds. Before 2018, there were only a handful of ocean-focused funds; however, in the last 18 months, more than 18 ocean-focused funds have been launched.
This is exciting not only because it will lead to hundreds of millions of new dollars invested in the oceans, but also because it demonstrates that venture and growth equity investors have seen the potential of oceans and are willing to set up funds with an oceans focus. Impact investors who are willing to invest early in these funds are playing a pivotal role in attracting the capital needed to grow the investment landscape in oceans.
While the number of new oceans funds that will be deploying capital in the next few years is exciting, this capital is not enough to fund the needed innovations in ocean resilience, management and adaptation. Likewise, philanthropic funding for marine conservation, which doubled to $1.2 billion in 2020 from $520 million in 2010, is alone not enough.
We believe that investor networks can attract more capital into this space and educate new investors on the impact and financial potential of ocean investments.
Is there a meaningful distinction between the tech used by startups focused on coastal regions and the tech built for the open ocean?
Danaher: While at a high level, there are often a lot of similarities between these companies, the type of technology needed, the durability of the hardware and the use of the data collected can differ significantly between the open ocean and coastal regions.
The hardware needed for data collection on the open ocean has to be able to withstand the extreme conditions there. On the other hand, a company that collects data along the coast is more likely to focus on coastal resiliency, including measurement of erosion, water levels, runoff and mariculture. The hardware for each situation may need different capabilities.
A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way?
Bryant: Like any sector, there are parts that are investable and some areas that are a better fit for philanthropic support. Investment and philanthropy are both necessary to ensure healthy and resilient oceans. For plastic waste, some parts of the value chain do not have the potential for profit, and for those areas, philanthropy is a critical tool to achieve impact.
What technology are you excited about that has the most potential to create new markets?
Bryant: Seaweed is an emerging market with the potential for applications in everything from food, beauty products, climate-friendly packaging and alternatives to conventional products with a more significant energy footprint, like leather, plastics and ink.
The ocean today only accounts for 15% of the world’s protein and 2% of its calories. What is the potential for the oceans to provide more, and what should that look like?
Bryant: As the global population continues to grow, blue foods — aquatic foods captured or cultivated in marine environments — are a highly sustainable way to address climate change and food security. Seaweed and shellfish, in particular, require no land use or inputs and can meet demands for key dietary nutrients while sequestering carbon and improving marine systems.
Interest in seaweed is expected to grow 133% in the next two years as the market grows for functional, plant-based and regenerative foods. The demand for shellfish is also expected to rise, although at a slower rate.
Sustainable aquaculture also represents an opportunity to relieve pressure on wild fish stocks while meeting the growing demand for protein. There are limitations on the availability of sites for responsibly managed near-shore aquaculture, which some countries have already hit. As a result, there are a number of companies exploring offshore aquaculture technologies, which would increase production capacity while potentially decreasing any negative impacts on the surrounding ecosystem.
Ocean-based farming on a commercial scale is much newer than land-based commercial farming, and it is critical that we look to the lessons learned to ensure that we scale blue food production in a responsible way that can be beneficial to the planet and not harmful.
What are some of the keystone problems that an ocean-based food system faces?
Bryant: Because of the ocean’s fluid nature, it is harder to control pollution dispersal and challenges associated with algal blooms. This, alongside the sheer scale, means that regulating and monitoring resource extraction is extremely challenging.
Illegal, unreported and unregulated (IUU) fishing is a direct threat to ocean ecosystems, sustainable fishery management and the livelihoods of the millions of people who live in coastal areas and depend on marine ecosystems.
Changing ocean conditions as a result of climate change also impact our ability to capture and cultivate aquatic foods in the ocean. Rising ocean temperatures and acidity levels threaten shellfish farming.
Likewise, increasing levels of microplastics and toxins in the oceans are negatively impacting wild fish, as well as shellfish and seaweed production (as filter feeders, both seaweed and shellfish could end up contaminated by high levels of toxins in the water).
Left unchecked, the damage we are doing to the ocean would not only kill off the existing resources that we depend on, but make the ocean an untenable environment to cultivate the food our growing population needs.
From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?
Danaher: Feeding a growing population in the face of climate change and a volatile macro environment will require that we take a “yes, and” strategy to building a healthier and more sustainable seafood production system. We will continue to evaluate a variety of solutions, from sustainable aquaculture and macroalgae to alternative and plant-based seafood, to ensure that our future system can support the health of people and the planet.
Daniela V. Fernandez, founder and CEO, Sustainable Ocean Alliance, managing partner, Seabird Ventures
What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?
In 2023, we are focused on providing follow-on investments to the eight companies we’ve invested in. These companies are focused on these core impact areas:
- Pollution reduction and the circular economy.
- Blue carbon and carbon (CO2e) removal.
- Blue foods.
- Ecosystem preservation and restoration.
- Ocean data, literacy and research.
- Sustainable blue economy: job creation.
We’re looking to further expand our investments, focusing on marine transportation and blue carbon.
As for growth trends, we are seeing a lot of climate tech solutions crossover with the oceans. Many ocean conservation technologies will have a climate play.
We are also seeing new opportunities around “credits” for conservation, restoration and regeneration, such as plastic or blue carbon credits. Another exciting opportunity is around wave energy.
What role have impact investors played in ocean conservation? Investor networks?
In today’s market, the amount of investment going into specific sectors of climate is misaligned.
The investor network for ocean conservation is very niche at this time. We’ve identified more than a dozen investors who are 100% focused on oceans. It’s imperative that more investors become educated and interested in this space. There are definitely crossovers between ocean impact investors and climate tech investors, and ocean impact investors and impact investors.
Is there a meaningful distinction between the tech used by startups focused on coastal regions and the tech built for the open ocean?
Startups focused on the coastal regions are built for the protection and adaptation of local communities. The tech built for the open ocean may not need to depend on the coastal regions to operate.
However, there may be a direct connection — people in fisheries who live along the coastlines and are out in open water, deploying technologies for open-water applications.
In addition, the open ocean remains a very harsh environment to deploy tech.
A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way?
People have been looking at solving these problems in the wrong way. Profitability and scalability depend on the approach and business model that is being implemented to solve the plastic pollution crisis.
We have to think beyond community beach cleanups, as there are actually extremely investable approaches to solving the plastic problem. Take for example the development of new alternative materials for packaging such as LOLIWARE, Sway, B’ZEOS and Cruz Foam, or new methods for reuse, like Returnity and Dispatch Goods. RePurpose Global has devised a profitable approach to plastic cleanups by changing how we think about the “plastic credit.” The “plastic credit” creates economic value for underserved, marginalized communities and organizations or brands interested in reducing their plastic footprint.
Plastics has become more of a Global South challenge over the years, since the Global North generates more plastics and a lot of it is either burned or displaced to the Global South.
What technology are you most excited about that has the most potential for creating new markets?
We’re most excited about wave energy, blue foods, alternatives to plastics, sustainable packaging, seafood bycatch reduction technology, and renewable, regenerative products made from sustainable sources like seaweed.
Other interesting areas include blue carbon financing and blue foods technologies with a data play, focusing on sustainable food production, as well as data for measuring and collecting climate data.
What are some of the keystone problems that an ocean-based food system faces?
One of the problems is that just like on land, the effects of climate change can impact the success of the produce. Another potential problem is that by shifting to more sustainable options, there may be a steep learning curve for producers who want to use developed economies’ technologies to scale operations.
Finally, there is a range of regulations and permits that needs to be addressed in order to ensure sustainable best practices are established and effective.
From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?
There are the obvious answers of growing more sustainable seafood through ocean farming or focusing on plant-based seafood alternatives. But there is also fascinating and promising progress being made in the field of cellular agriculture.
Rita Sousa, partner, Faber Ventures
What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?
As an impact fund, our Faber Blue Pioneers Fund invests in early-stage, deep tech startups aiming to make a positive impact and having clear alignment with the UN SDGs, namely UN SDG13 and UNSDG 14.
While there is still a lack of specialty private funding in the early stages of ocean-focused tech companies, we see significant increasing interest from impact investors in this space around the globe.
What role have impact investors played in ocean conservation? Investor networks?
The economic return of businesses that ultimately contribute to the sustainability of the oceans is often long term. This is why impact investors play a crucial role, since the combination of impact and sustainability KPIs with financial metrics is essential to make impactful investments, which, when analyzed purely from a financial/ROI and payback time point of view, would be left behind.
Is there a meaningful distinction between the tech used by startups focused on coastal regions and the tech built for the open ocean?
Wind, waves and climate constantly shape our coastline and affect open sea conditions. Real-time monitoring of ocean systems is both needed for coastal regions and the open ocean. However, especially in the Atlantic Ocean, tech built for offshore remote and harsh conditions need proof of increased safety and resilience properties.
We’re also seeing fast progress in robotics, sensors, AI and communication systems tech currently being developed for the open ocean. These have strong potential to provide access to ocean data and meaningful information for different applications and industries, such as sustainable fishing, inspection of offshore infrastructures, ocean surveillance and others.
A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way?
Plastic pollution is a relevant problem, but there are many other equally important ocean problems that are invisible to the human eye. The challenge is to find profit-with-purpose founders who are passionate about solving these issues and are building their companies with a business model that actually works. They also must understand their potential clients’ business case and economic assessment and, as a consequence, potential willingness to pay.
What technology are you excited about that has the most potential to create new markets?
We are excited about technological areas, rather than specific technologies. We’re seeking:
- Blue biotech solutions from sustainably sourced blue bioresources.
- Innovative sustainable food and feed ingredients.
- Technologies for the sustainable development of aquaculture.
- Solutions for the “greening” and decarbonization of blue economy-related industries.
- Technologies for plastics collection.
- Bio-based and biodegradable substitutes.
- Ocean intelligence solutions in the fields of robotics, remote sensing, smart ports and AI.
The ocean today only accounts for 15% of the world’s protein and 2% of its calories. What is the potential for the oceans to provide more, and what should that look like?
The potential for the oceans to provide more protein and calories is significant. There is scope for better management of existing aquaculture operations to help increase production; research into new species that can be farmed; and more advanced and sustainable forms of aquaculture.
All this could help ensure that the populations of wild fish remain healthy, while also providing more protein and calories from the ocean.
What are some of the keystone problems that an ocean-based food system faces?
Key problems include:
- Overfishing: Global fish stocks are being depleted as demand for seafood increases. This has led to unsustainable fishing practices.
- Pollution: Ocean-based food systems are threatened by a variety of pollutants, including plastic waste, agricultural runoff, industrial pollutants and oil spills. Pollutants can damage marine habitats and the food chain.
- Habitat destruction: Coastal development, trawling and dredging can all lead to the destruction of important habitats for fish and other marine species. This can lead to lower biodiversity and productivity of ocean-based food systems.
From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?
Low trophic aquaculture (for example, kelp) is very interesting. It focuses on producing species that are lower on the food chain. This type of aquaculture is typically used to produce species such as shellfish, algae and other organisms that require fewer resources to grow. It can be a more sustainable form of aquaculture than traditional aquaculture, which focuses on species higher on the food chain.
Christian Lim, managing director, SWEN Blue Ocean Partners
What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?
In 2023, we will continue to invest in innovations that help regenerate ocean health across three verticals: solutions for overfishing, solutions for ocean pollution and marine-based solutions for climate change.
We focus on startups with potential to achieve both systemic impact and competitive market returns. The sector is growing tremendously: We made nine investments in a bit more than a year, which reflects great momentum.
What role have impact investors played in ocean conservation? Investor networks?
Venture capital impact investors have been playing an increasing role by investing in innovations that help reduce overfishing, pollution and greenhouse gas emissions, addressing pressures on the ocean at the source. Investors have also supported enabling technologies, like biodiversity measurement through eDNA or satellite detection of illegal fishing.
Is there a meaningful distinction between the tech used by startups focused on coastal regions and the tech built for the open ocean?
There is no generalizable distinction. But if we take specific cases, one can see different impacts and business models, as well as bridges. For example, some startups are making conventional coastal aquaculture more sustainable and profitable by optimizing feeding and health management. Others are developing off-shore farming systems, which is a completely new space. But there are bridges, such as technologies that help automate feeding, which is important for off-shore farming to succeed.
A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way?
The solution to plastic pollution is to transition from a linear to a circular plastics economy. The circular economy can be very profitable, as it is fundamentally a more efficient economic model. Entrepreneurs have understood this, and we’re seeing startups in this space scale up rapidly.
We have made our second investment in the circular plastics economy and will unveil it shortly. We are clearly seeing momentum in circular economy startups offering solutions that are circular, more convenient and competitive on both price and performance with legacy linear solutions.
What technology are you excited about that has the most potential to create new markets?
Cultivated seafood, eDNA and digitalization of maritime transportation are innovations that come to my mind as creating new markets.
The ocean today only accounts for 15% of the world’s protein and 2% of its calories. What is the potential for the oceans to provide more, and what should that look like?
The OceanPanel’s blue paper, “The Future of Food from the Sea,” found that the ocean could provide over six times more food than it does today. Technologies like off-shore farming have the potential to create massive new areas for production in a more sustainable way than coastal fish farming, without seabed pollution, in particular.
While many Asians eat seaweed daily, most Westerners eat seaweed a few times per year, if at all. All these give an indication of the potential for growth in blue foods.
What are some of the keystone problems that an ocean-based food system faces?
Ocean warming, acidification, pollution and habitat destruction are all threatening the ocean as a food source. This can affect billions of people.
From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?
They both have potential, but right now we are seeing an acceleration in the development of aquaculture, in particular through the emergence of breakthrough precision aquaculture technologies. This tech enables farmers to optimize their operations in unprecedented ways and is foundational for new farming methods, such RAS and offshore farming.
Reece Pacheco, partner, Propeller
What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?
Ocean conservation tech and the broader ocean-climate sector will continue to see growth in investment for a few reasons:
- We’re now well into the United Nations Decade of Ocean Science for Sustainable Development, which has built awareness of the issues facing our ocean and has been a call for investment in more solutions.
- Alongside that momentum, there has been a lot of philanthropic and grant capital deployed into labs/institutions. These academic organizations and people are now starting to spin out that IP into startups.
- Blue-economy investors have recently closed funds and are ready to deploy.
The macroeconomic picture will certainly factor in, but we’re confident in the ocean’s resilience. It’s simply one of the best resources we have in the fight against climate, and that means opportunity.
What role have impact investors played in ocean conservation? Investor networks?
Impact investors and networks play an important role. We’ve seen a number of startups that first received impact/philanthropic investment to get started. Investor networks and communities are critical to helping these founders access capital.
A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way?
I’m most interested in “turning off the tap,” if we use the overflowing bathtub analogy. I think that’s where there’s greater value, both in terms of impact and return on investment. Whether it’s new systems for management on land or truly compostable alternatives/bioplastics, they appear to have a greater chance of scaling up.
As for cleanup, from my research, ocean plastic pollution is not a profitable endeavor and doesn’t appear to be a venture-scale opportunity.
What technology are you excited about that has the most potential to create new markets?
We are excited about ocean-based carbon dioxide removal. We are seeing novel approaches with very innovative technologies and go-to-market strategies that make us confident in the growth of the carbon market and the ocean’s role in providing safe, scalable, additional and effectively permanent carbon storage.
The ocean today only accounts for 15% of the world’s protein and 2% of its calories. What is the potential for the oceans to provide more, and what should that look like?
There is tremendous potential for the ocean to provide more food, more efficiently, with less environmental impact and even regeneratively. We are early in this journey toward growing a vibrant food system in the ocean, but we see creativity and innovation everywhere, from small-scale local ocean farmers to large-scale opportunities.
Typical of climate, we need all solutions on the table right now. The future will likely hold a mix of options.
What are some of the keystone problems that an ocean-based food system faces?
Storms, spills, marine heat waves, viruses and effluent are a few of the problems in ocean-based food systems, but it’s important to remember that terrestrial agriculture has its issues too — droughts, fires, runoff, pesticides and so on.
From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?
Seaweed has the most growth potential. It’s early, and I don’t think we’ll see seaweed on our plates in Western countries soon, but as a crop, it has so much potential to regeneratively produce calories and biomass.
Seaweed is also on trend with plant-based diets. We’re already seeing kelp burgers, seaweed bacon and dried dulse snacks, among other products. If production and price can hit a sweet spot, I think we can see seaweed start to find its way into tons of products, like how crops like soy have.
We have to remember that terrestrial agriculture has had thousands of years of iterations. Aquaculture, particularly seaweed farming, is still in its infancy in terms of the innovation and value that can be unlocked.
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