Seafood industry investors buying into the blue economy
Public appreciation that oceans provide essential protection to both the planet and humanity is growing, according to Chris Gorell Barnes, co-founder of private equity firm Ocean 14 Capital.
The entrepreneur, marine conservationist, and co-founder of the Blue Marine Foundation said “tremendous trigger-points,” which include documentaries like Blue Planet II and Seaspiracy, as well as reports from the United Nations Intergovernmental Panel on Climate Change (IPCC), have brought unprecedented public interest to the oceans. Additionally, luminaries such as U.S. Presidential Special Envoy John Kerry have been highlighting the role that the ocean plays in mitigating the climate crisis, and the new U.N. Decade of the Oceans platform is drawing attention to the need to reverse the decline of ocean health, Gorell Barnes said.
“The result is this swelling realization of ‘Wow, the oceans are important,’ and if we don’t have a healthy marine ecosystem, then we have zero chance of mitigating the climate crisis,” Gorell Barnes said. “We’ve also got money recognizing regulations are being introduced – we’ve got all of these drivers coming into play to wake the blue economy.”
While philanthropy has been very successful at instigating change in this space, the decision to launch Ocean 14 – a partnership between the founders of Pontos Aqua, the Blue Marine Foundation, and Vedra Partners – came from wanting to do more, Gorell Barnes said.
“If we are to transform the ocean and regenerate it, we need to galvanize multi-billions of dollars in institutional capital and we need to transform the existing industry. There’s also a real demand-supply challenge in our favor, which gives us the opportunity to do something groundbreaking,” he said.
Over the next five to 10 years, demand is “expected to increase significantly,” Bluefront Equity Founding Partner Simen Landmark said, adding that “the industry is under pressure to deliver requested supply.”
“The supply side is struggling with both biological and technical challenges that need to be solved to keep track with the increasing demand. Substantial investments are needed to solve many of these challenges that are crucial to deliver sustainable proteins to a growing population. That said, over the course of the last decade, the seafood space has gone from an industry with little attention to one of significant focus as people understand that it’s a significant part of a sustainable food solution,” Landmark said.
Bluefront Equity, a Norway-based investment company entirely concentrated on the seafood value chain, also believes that the industry is at the “beginning of a substantial growth phase,” and will be “increasingly dependent on investments and industrialization” to overcome its supply challenges, Landmark said.
Existing industry potential
In terms of its emphasis, Bluefront primarily seeks to invest in supplier companies that contribute toward increased traceability, better fish health and welfare, and enhanced quality of the end-product. Additionally, it’s looking to help advance the seafood industry’s digitization.
“We have worked as founders, advisors, and investors in different parts of the seafood space for the past 15 years. We are strongly focusing on solving the seafood supply challenges and we are particularly excited about the increased attention toward sustainability, and fish and ocean welfare,” Landmark said.
Among its investments and working partnerships are companies that are developing products that will solve biological and technical challenges, and these are expected to lead to innovations and technologies that improve hygiene, health, sustainability, and industrialization across the value chain, according to Landmark.
“Oxygen and the use of ozone as a disinfectant are examples of products our portfolio companies are delivering,” Landmark said.
For Lighthouse Finance, aquaculture has been the point of focus since the company’s inception. The international advisory firm, which specializes in capital raising, asset finance, and management across the seafood value chain, has operations in Norway, Denmark, the United States, and India. It has an active portfolio of around USD 500 million (EUR 453 million) that could reach USD 600 million to USD 700 million (EUR 543 million to 634 million) by the end of this year, according to the company’s CEO, Roy Høiås.
Høiås said much of the new investment seen across the aquaculture space stems from the “super-profitable” salmon-farming sector, but that this interest has also permeated to other farmed aquatic species, which is giving aquaculture a much broader industrial impact globally.
“Ten years ago, people were just talking about fish in terms of what we were catching. Today, we are not so much talking about fishing because we know that some of the ways that we harvest from the sea are not sustainable,” Høiås said. “At the same time, more and more of the salmon farmers have been consolidated, listed, and industrialized, leading more of the financing market to understand that there is big money here. But just five or six years ago, nobody thought anything about aquaculture. Sustainability is another big driver in this that if we combine all of these factors together, we see why there has been a major shift over the past one-and-a-half to two years in the financial investment market, with aquaculture suddenly becoming very interesting.
While Lighthouse Finance works with several start-ups, gaining insight into future technologies from these ventures, Høiås said, adding that the investment firm sees “so much potential” in the future of the industry.
“It differs from sector to sector and region to region, but there are huge opportunities to be had by helping this industry to become more sustainable and ESG-oriented, and also more profitable,” Høiås said. “Unless these companies are so big that they can do everything themselves, they should think differently – about how having a partner makes them better and by making them better, they will probably be more profitable, sustainable, and have a knowledge platform that they can build on in the future.”
Ocean 14 also maintains that significant opportunities are present within the existing industry to drive efficiency, sustainability, and economic gains. As such, 50 percent of its investments will be in growth equity and companies that have been around for a while. Another 20 percent of its portfolio – roughly EUR 14 million (USD 15.5 million) – is allocated to late-stage ventures, particularly technology, data, and automation innovations that can be complementary or “plugged in” to its growth businesses, thereby de-risking the venture companies, Gorell Barnes said.
“It’s just now that people are starting to be interested in it, but our USP is that there is a huge existing industry that is ripe for transformation, innovation, and disruption. And focusing on that with our knowledge is the best opportunity to drive what we call a ‘convergence of drivers’ – having simultaneous sustainability and economic gains,” Gorell Barnes said. “That’s very much where we focus, while everything we do is aligned to SDG 14 and how we can improve and restore the ocean’s health and make money for our investors at the same time.”
Ocean 14’s investment thesis is broken down into two key schematics – food security and marine/coastal ecosystems, with the intention to build a portfolio of 20 to 25 companies split evenly between growth stage and late-stage ventures.
“At the moment, as a fund, we are not touching parts of the blue economy like shipping, sustainable tourism, deep-sea mining, etcetera, but in terms of food security and marine ecosystems, we are open to almost anything. We do think that there is the opportunity to drive a delta of change,” Gorell Barnes said.
The aim, Gorell Barnes said, is to find good companies that are not necessarily doing everything well, but that can be helped to improve and be more impactful, sustainable, and valuable.
“More companies are now realizing that the businesses that are going to be more valuable are the sustainable and impactful ones. We can help them on that journey,” he said.