CREO Syndicate: Investors “sitting in the wings” waiting for aquaculture to break through
There has been a rapid increase in the amount of capital invested in climate-friendly blue foods in the past five to seven years, and huge growth in the number of companies entering the wider aquaculture space, according to Maggie Fried, head of the ocean and aquaculture investor consortium at CREO Syndicate.
CREO is a New York City, U.S.A.-based non-profit working with a network of approximately 200 global investors, primarily family offices, to invest and catalyze USD 1 trillion (EUR 977 billion) of capital into climate and sustainability solutions towards the decarbonization transition by 2025. It works with about 200 family offices and family foundations to catalyze capital into climate and sustainability solutions and the decarbonization transition. Within CREO, the Oceans, Seafood, and Aquaculture Investor Consortium (OSAIC) is a dedicated group of 35 single-family offices and funds collaborating to catalyze more than USD 250 million (EUR 248.7 million) in investments into decarbonization initiatives, including aquaculture and the blue food sector, in the Americas and Europe.
Speaking at the Blue Food Innovation Summit in April 2022 in London, U.K., Fried said her group was guided by the Nature Conservancy’s Towards a Blue Revolution report on impact investing in sustainable aquaculture.
“We are poised on the brink of a waterfall of capital coming into the space which will help us to grow a robust and sustainable aquaculture sector,” she said.
The report identifies the sector as “an opportunity that is both environmental and financial in nature,” and highlights current forecasts that suggest producers will need between USD 150 billion to USD 300 billion (EUR 149 billion to EUR 298 billion) in capital expenditure in the next ten years just to provide the infrastructure needed to accommodate consumer demand.
“That’s a conservative USD 12 billion to USD 25 billion [EUR 11.9 billion to EUR 24.8 billion] per year, on top of the need for investment in upstream and downstream, and we are not even close to the amount of capital we truly need to build this sector,” Fried said.
Fried said there is a diverse pool of investment money available, including via accelerators, venture capital funds, corporate ventures, family offices, infrastructure finance initiatives, private equity, and institutional capital.
“Aqua-Spark paved the way with the first sustainable aquaculture fund, but since then, lots of small- to mid-size venture funds have set up, and these will play an increasingly crucial role in catalysing funds into the space,” Fried said. “In 2022, the total of all investment funds in the sector is estimated at around USD 3.15 billion [EUR 3.13 billion]. Of the 22 funds available, 15 are venture capital funds, 12 of which have been set up in the past two years. [Venture capital] funds are currently worth USD 1.05 billion [EUR 1.04 billion].”
Investors are streaming into biotech and companies creating hardware and software solutions needed to provide production efficiency, and into aquafeed and fish health firms and manufacturers of specialist equipment required for land-based seafood production, such as recirculating aquaculture systems (RAS), Fried said.
“These sub-sectors have large addressable markets that can generate the required returns, because a solution or product developed for salmon for example, can potentially be transferred to shrimp, then applied to chickens and pigs,” she said.
Currently, the CREO Syndicate has about 60 percent of its portfolio invested in alternative aquafeed firms, with insect-meal producers and single-cell protein feed producers accounting for the biggest share. Around 20 percent of the syndicate’s portfolio is directly tied into aquaculture ventures, while 10 percent is focused on ancillary technologies, and seaweed products, consumer products, and health and genetics products making up the remainder.
Turning to the pipeline and the future, Fried spoke of a growing interest in shrimp, particularly in the U.S., where she said there is “room to drive sustainability, tech, and health.”
“Many investors are looking at seaweed and although the checks are smaller, there is a lot of money lined up to go into that sector,” she said. “Software solutions to improve farming are showing lots of activity, along with RAS farming, flow-through systems, and opportunities outside of salmon. We are also starting to see interest from investors and movement on dealflow, in product processing and in technology to improve supply-chain transparency."
Despite growing activity in blue food investments, Fried said she is concerned that a lopsided supply chain is developing that will see seafood being produced while upstream and downstream sectors get left behind. Sectors such as feed, new production and processing methods, packaging, markets, supply chain logistics, and consumer demand need more investor attention, she said.
“Will there be enough high-quality venture opportunities for funds to have a differentiated pipeline, be successful in getting the returns they seek, and set up second and third round funds able to write larger checks? Who will fund real assets, infrastructure, debt?” she asked.
Fried spoke of regular conversations with family offices who either don’t have a mandate to invest directly in this sector or the expertise to do so, but want help to get involved.
“Other investors are also sitting in the wings, but they are waiting to see how successful the current funds are. It’s an interest time to be in this developing sector,” she said.
Photo courtesy of CREO Syndicate