‘Fear factor’ holding VCs back from aquaculture tech investments

At the inaugural Animal AgTech Innovation Summit in San Francisco on March 18, the role of technology in delivering sustainability and efficiency to aquaculture was in the spotlight. The summit gathered innovators and investors in the food industry to share knowledge and build partnerships to bring innovations to market.

“There are 700 different aquatic species that are being farmed globally today,” says Mike Velings, co-founder and partner of Netherlands-based aquaculture investment firm Aqua-Spark. “The aquaculture industry is larger than the beef industry; it’s already larger than fisheries for human consumption and people think that it will double before mid-century and potentially even triple before mid-century, which means a lot of new behaviors and a lot of new developments in an industry that’s relatively young.”

Vellings chaired the session, “The rise of aquaculture: transforming the industry through digitization, closed systems and alternative protein feeds,” where the panel comprising executives from aquaculture-related companies shared their insights into the industry, its opportunities and challenges, and the innovations that are addressing those challenges. They included US biotech firm and FeedKind protein manufacturer Calysta Inc; San Francisco-based startup Aquabyte whose platform applies computer vision and machine learning in aquaculture management systems; US-based startup Manolin, whose software platform helps fish farmers optimize sea lice treatments and improve fish health through data analytics; Norwegian salmon farmer Cermaq; and Japanese conglomerate Mitsui & Co.

Sea lice clearly topped the discussion as the industry’s main concern, followed by the need for sustainable feed sources. But technological innovations are starting to address these, for instance Aquabyte’s computer vision technology that promises to help farmers understand the size distribution in the pen and use that information to better help grow the fish; Manolin’s software platform, which measures sea lice treatment effectiveness through data analytics; and Cermaq’s iFarm, which monitors factors such as growth, sea lice, disease, lesions and others aspects that affect the health and welfare of the individual fish.

But while new technologies are being developed to improve fish health and welfare, reduce the environmental impact of aquaculture, and ensure high-quality and consistent supply to the market, bringing those innovations to market may be not as easy because the animal agtech space is lagging when it comes to technology investments.

The problem may be the “fear factor” among venture capitalists and investment firms and their unfamiliarity with aquaculture, suggested the panelists. Aquaculture industry insiders know the industry will be “a big thing for the future” and a very important protein generator but this knowledge is only beginning to fan out. Still, while VCs are starting to recognize the opportunities, the ocean’s status as an “unregulated uncertainty” further makes investors adopt a wait-and-see stance.

“In the States I think people don’t recognize how big an industry aquaculture is. They know a couple of oyster mom-and-pop shops from up and down the coast, but what they don’t recognize is how much seafood is consumed around the world. But that’s changing,” says Tony Chen, CEO of Manolin.

Alan Shaw, president and CEO of Calysta, suggested that the onus is on the industry to build confidence in the financial institutions and get them interested in aquaculture. He added that what the industry also needs is “a big success” to get enough investment capital flowing into the industry. “If people can see that you can make money, because at the end of the day, it’s all about making money. You have to be able to show that it’s (the technology) economically viable. You have to give people a return. The market will always win out,” he says.

The adoption of new technology also rests on their scalability, Shaw added. Take feed, for example; he says fish farmers will not adopt it if it is not at a scale where it becomes readily available in places where it is needed. “If a technology can’t scale, it’s useless. People don’t buy science. They buy technology. They buy product. And product has to scale for people to adopt it.”

The bottom line is that a proven product or a proven business model will not succeed if it is not scalable, he suggested.