June 19, 2015

The U.S. currently imports 90% of its seafood supply, and by 2030, aquaculture will be supplying 66% of all global fish consumed. This equals 93 billion tons – up from 53 billion tons in 2008, as wild-caught production is faced with dwindling ocean fish populations and declining output. As innovations continue to emerge and next-generation aquaculture operations are born, there has been an increase in momentum of investor interest in the seafood and aquaculture space.

Dynamics such as these are also driving efforts to develop technologies and production methods that would enable the establishment of fish farming operations across the interior of the U.S. near major consumer markets. Technologies including new feedstocks and filtration systems are supporting the creation of land-based recirculating aquaculture systems (RAS) that can not only bring aquaculture inland, but eliminate many risks faced by ocean-based aquaculture businesses including disease and escape.

This business model is prime for the private equity owner-operator model of investment and growth, and given the model’s potential for sustainability, cost-competitiveness, low carbon footprint, and its ability to lure consumers looking for locally produced, low-impact, high protein foods, investor interest is growing both in numbers and in scope.

“There’s money starting to sense that this is an opportunity and the timing is good,” says Joe Hankins, director of the Freshwater Institute, a project of the nonprofit Conservation Fund. “We think we’ve demonstrated that it can work. Can it work at a much larger scale? That’s really an open question.”

Driven by interest in the sector by family offices, high net worth individuals, foundations, and impact investors, Maine-based Treetop Capital is planning to launch a fund later in 2015 focused on sustainable seafood. Treetop has already made an investment in the sector, investing in Maine-based Acadia Harvest which is raising $8 million to develop a New England production source of California yellowtail, a popular sushi fish for chefs in the region.

Although not solely dedicated to seafood, larger funds are also diversifying their portfolios by taking stakes in the aquaculture supply chain. New York-based Pontos Aqua Holdings raised $75 million in 2014 for investments in equipment, services, feed and animal health. Wheatsheaf Investments Ltd. invested $5 million in Enterra Feed Corp. in September 2014, funding the scaling up of the company’s production of fish feed made from the larvae of the black soldier fly.  Wheatsheaf also led a 2014, $12.6 million financing round for Blu Wrap, which developed a technology to regulate oxygen exposure to Chilean salmon during shipping, keeping it fresher, longer. Blu Wrap has also gained the attention of other investors including Amsterdam-based Anterra Capital, which was spun off from Rabo Ventures in 2013, and early-stage venture capital firm Firelake Capital, which is investing in companies that will benefit from a growing global middle class.

Pure play Dutch investor, Aqua-Spark, has also expressed increased interest from investors. Closing on US$11.25 million in 2014, Aqua-Spark invested in Chicoa, a Mozambique-based fish farming operation, and Calysta, a California-based biotech company that uses microbes to develop a fishmeal substitute. And within the next several months, the fund expects to close on four additional deals. Amy Novogratz, managing director ofAqua-Spark says that fundraising has increased in anticipation of the funds €10 – €15 million (US$11 – US$17 million) close this coming September adding, “People see the numbers. They realize the forecasted growth.”

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