S2G’s Kate Danaher bullish on seafood’s sustainable future
Kate Danaher is the managing director of investment firm S2G Ventures’ oceans and seafood arm, which launched in August 2020 with the goal of committing USD 100 million (EUR 84.7 million) to early, venture, and growth stage companies that are targeting innovations in seafood, alternative protein sources, aquaculture, supply chain innovations, traceability and transparency, algae or seaweed products, and ecosystem services. The group aims to target its investment to companies and projects that will move the industry forward in its thinking both in how it uses technology and in how it approaches sustainability issues.
SeafoodSource: How has your first year at S2G gone? What do you see as your biggest accomplishments?
Danaher: Good! We built a great portfolio in our first year, and we like how varied our investments are. We’ve made six investments to date; one that was especially exciting for us was our investment in Sofar Ocean Technologies – along with Union Square Ventures and the Foundry Group, we participated in a Series B that raised USD 39 million (EUR 34.2 million). There’s a real need to map, collect, and aggregate data around the oceans to provide good-quality insights. Ocean data and IoT is a super-nascent space. Sofar has 1,200 low-cost buoys circulating across the globe, and through those, they’re able to generate real-time weather data that acts like a Waze app for maritime shipping.
We have a few other investments there we can’t disclose but one is a European satellite company that can track dark vessels on the water using radio frequency. We believe there is potential for companies like these to work together and provide next-level insights into maritime movement, illegal fishing, and fuel efficiencies, to list just a few ideas we’ve had.
One other thing we’ve done is invest more in aquaculture technical support. Support firms, like ReelData and Moleaer, can improve the efficiency of aquaculture and it’s great to see how much traction they’re getting in the industry.
SeafoodSource: Any other parts of the industry that are interesting to you right now?
Danaher: There are so many exciting, enabling technologies out there, and we’re looking forward to announcing additional investments in the next six to 12 months. I believe macro- and micro-algae will be the next emerging trend in the seafood sector, and we already invested in Moleaer, a technology company with a mission to unlock nanobubbles’ full potential to enhance and protect water, food, and natural resources.
We’re also really interested in the plant-based, cellular, and fermentation sectors of alternative fish. We are looking at a few cultivated seafood companies and a few plant-based companies right now, as we really think there’s something interesting there from the consumer perspective. Singapore, for example, has become a hub for the cell-based seafood industry, and they’re also riding the tailwinds of the alternative protein sector more generally. I will say that one of the challenges to investing in these sectors is valuations. The price to get into their [fundraising] rounds are matching that of meat-based or poultry-based alternatives, but it’s not yet like-for-like – they don’t have the same consumer attributes or markets, making it challenging for us.
SeafoodSource: More broadly, what’s stage two of the fund’s project look like?
Danaher: Now we’re starting to see opportunities where we can create synergies within our existing portfolio through companies that allow us to be strategic in clustering our investments. There has been an emergence of certain themes with the ability to complement what has come before, and that’s primarily ocean data, IoT, aquaculture data and technology, and animal health. We’ve seen a ton of other opportunities and are waiting to see how they can knit themselves together.
SeafoodSource: What are your general takeaways after 15 months on the job?
Danaher: Looking back over the last 15 months, we’ve been pleasantly surprised at the number of investable opportunities in the space and how many investors are interested in leaning into oceans and seafood. When we started, one of our mandates was to catalyze another USD 250 million (EUR 219.2 million). S2G has done so much work in the food and ag industry and coordinated with so many players, so we do have the advantage of getting people’s attention because they’ve had positive experiences working with S2G in the past. We thought we’d have to lead and then pull people into the industry, but we’ve been happy to see the number of investors already showing up in the space, such as Cargill, Union Square, and the Foundry Group, to name a few. We’ve now participated with a few co-investors and talked on a deal-by-deal basis with them.
One of the things we’re really excited about is the emergence of ocean-focused funds. There have been a handful of new ocean-focused funds globally pop up that have gotten their first closes – SWEN Blue Ocean Partners, Oceans 14, Aqua-Spark. They’re all continuing to fundraise, and there’s good momentum there. Overall, it’s really friendly and highly collaborative – we all recognize there is more work than we can all fund collectively, and we’re like-minded in the outcomes we’re trying to achieve in terms of ocean resiliency.
We’re also really happy to be involved with 1,000 Ocean Startups Coalition, a coalition of global investors and accelerators trying to organize around funding the first thousand ocean start-ups. The goal is to accelerate financing, visibility, and metrics, for start-ups. This effort is experiencing a strong push right now globally as investors in the sector try to encourage start-ups focused on ocean resiliency. Launched over summer 2021, the group is mostly European-focused at the moment, but we are getting organized and it will be really interesting to see what comes out of that concerted effort.
SeafoodSource: Did the review you conducted help you refine your investment strategy? Or are you happy with where you’ve landed?
Danaher: As it relates to our strategy, we have a pretty broad mandate with a dozen subsectors we’re focused on. We had a lot of discussion about whether such a broad mandate was useful to us or if it would mean we were going to miss out by not focusing on one, two, or three things. But through our investments thus far, there’s been validation for the broadness of our mandate. We learned you have to cast a wide net to realize some opportunities. We say internally, that when it comes to this oceans fund, we’re either a minute too soon or we’re right on time in terms of the readiness of the market. Lately, it feels more and more like we’re right on time. With a USD 100 million fund, we have so many opportunities to invest in interesting companies and we have to decide what’s next for this industry. Most of us investing right now are larger seed and early-stage investment funds, and there’s a larger sense in the market that there’s going to be a need for follow-on capital. There’s concern whether there is going to be a more mature investment base to support next-stage investments. When our companies are ready to raise USD 20 million, USD 30 million, USD 50 million, who’s there to catch them? We need to cultivate a good ecosystem of investors for when they reach that phase.
SeafoodSource: Regarding land-based aquaculture and recirculating aquaculture systems (RAS), it seems like there’s been some investor hesitation after a long period of bullishness for the sector. Are you noticing that, and to what do you attribute it?
Danaher: All you see right now is headlines showing the big failures in the industry, and, sure, that makes everybody a little nervous. But I think RAS will continue to grow. While it still faces its challenges, it is also an unprecedented moment in the markets. There is a lot of money moving around right now looking for investments.
In normal times, what may have been a stronger hit is now facing blowback. I think the natural question on people’s minds is the viability of RAS. There continue to be large projects coming to market with a lot of interest in them. I haven’t seen the numbers directly but I know some investors are still bullish in investing in the future of RAS, and we are as well. That said, from the get-go we said we were not going to invest directly in production and still have skepticism of how you make the model work with so much capex sensitivity and by having to figure out the production lives of fish for the first time in our history.
And while we’re not directly invested in the land-based [aquaculture] sector, one of our investments, ReelData, is reliant on RAS being successful. They are an AI enabling technology that supports the operations of land based aquaculture. Their product and team are phenomenal and they are performing really well – and yet there is the reality that if the RAS market crashes, that spells trouble for them and many other companies emerging to make this industry work better. It will be interesting to see if investors question or become price-sensitive around some of these technologies that exclusively address the RAS market. With those types of companies, there are not so many like them in the world, maybe dozens, so if they fail, there’s no longer a market to address. But we are still bullish on it. We both believe it can work and know that it has to be a part of our future. To some extent, we are bullish because we don’t see another path forward. We believe land-based can work and it will be an important part of feeding the world by taking pressure off of wild fisheries and using our natural water systems.
Photo courtesy of S2G Ventures