After the important milestones achieved by some of its portfolio companies last year, Aqua-Spark is ready to try to scale up sustainable aquaculture solutions, as can be deduced from its recently published Impact Report 2022. The success of the aquatech company eFishery or the feed company Protix may be the proof of concept that investors needed to be convinced that the aquaculture industry can make a real impact on the environment while achieving comparable financial returns.
"2022 was a year of record growth in aquaculture, further increasing the need to move this industry to healthy and sustainable production being the absolute industry norm. Increasing population and income is expected to continue to increase aquaculture production, and it is imperative that we do so within planetary boundaries," Aqua-Spark's co-founder, Amy Novogratz, told WeAreAquaculture.
"Our own portfolio is starting to show the positive impact from technology and other new innovations in the industry – for example, last year we saw a 47% increase of feed saved across the portfolio, decreasing the environmental footprint," she added. "In addition to the impact we saw in 2022, our portfolio brought our investors a 24,3% net return in 2022, setting the example that more sustainable production can also bring comparable or even better returns than traditional industry."
"In 2022, the main focus was on supporting our existing portfolio," the report says in taking stock of its investments last year, when Aqua-Spark completed 24 follow-on rounds with 14 of its portfolio companies. Nevertheless, the company made two new investments – KAS and Blue Revolution Fund – and raised record funds in the fourth quarter. In addition, Aqua-Spark has been particularly pleased with their achievements in three performance indicators that they consider key for them.
Firstly, as Amy Novogratz explained, feed saved increased by 47%. Moreover, its portfolio companies produced more than 42.5 million meals last year – "seafood that is healthier, more sustainable and more affordable" -, that's 23% more than in 2021. Finally, the number of fish saved through the use of alternative feed ingredients has also increased from 58.6 in 2021 to 66 million in 2022, this is 13% more than the previous year.
Between 2015 and 2022, Aqua-Spark invested in 26 complementary aquaculture companies and closed last year with 326 investors from 31 countries. Of the more than EUR 457 million (USD 486.3 million) in assets managed by the fund in 2022 – in 2021, they were close to, but did not reach, EUR 300 million (USD 329.3 million) – 66% are invested in farm management technologies, feed ingredients follow with 16% of assets, 11% dedicated to farm operations, 4% to health and disease, 2% to consumer products& distribution, and 1% dedicated to financial infrastructure.
Despite the good results, the Aqua-Spark 2022 Impact Report keeps that the important thing from now on is to scale up solutions and that, to do so, more investment is needed, including from the public sector. "There have been incredible developments in the industry over the past decade, but growth projections for aquaculture out to 2030 and beyond show us that the level of blue transformation still needed is enormous. This will require innovation and change at scale".
Aqua-Spark's holistic approach, which has built a synergic portfolio of companies with a shared vision and the same ultimate goal, makes one of the key points of its strategy the investment in aquatech companies. Production technologies that not only improve farm management practices but also improve resource use and product traceability. By expanding access to sustainable practices and technologies, they increase the profitability of smallholder farmers and, with it, their livelihoods.
But not only that, increased technology adoption also gives global buyers better access to data-driven shrimp and fish production from small-scale fish farmers, reducing the need for consolidation in the sector. Companies such as eFishery or XpertSea have shifted their focus from technology adoption to in-depth analysis of fish farm data. "In doing so, they're changing the value of sustainable practices while holding supply chain players more accountable, and creating a growing demand for data analysis from buyers and retailers worldwide," the report notes.
The result of all this is new opportunities in the aquatech and digital seafood market, and, what Aqua-Spark has been looking for years with its model, much more investors interest in supporting them. Undoubtedly, the example of eFishery, the first aquatech company being valued at over USD 1 billion – and one of its 2022 portfolio impact milestones although not made public until last month – will be definitive to get those investments to scale up sustainable solutions for the industry.
"Becoming a unicorn (or narwhale as they call them in the blue economy), was a magnificent achievement for eFishery in an industry that only a decade earlier had minimal tech available," the report says. "This will soon open the gates that have been keeping investors away from the industry, and increase investment industrywide, through setting an example that aquatech startups can massively scale."
Besides the adoption of technology, another input that Aqua-Spark intends to take from farm to market is the elimination of industry dependency on wild-caught fish for feed and broodstock. Seeking alternative solutions, especially from feed ingredients, has been a priority for them from the beginning. "One of the areas that has received our support from the start is identifying alternative feed ingredients to wild-caught ingredients like fishmeal and fish oil, but also to soy and plant-based ingredients. This will, in turn, help to reduce the footprint of feed production, which is the single largest contributing factor to aquaculture's overall environmental footprint."
According to the report, alternative feed solutions that can be produced close to local markets are gaining enough traction to reach industrial levels. However, Aqua-Spark acknowledges that until recently, most of the thinking about cooperation and change in the industry has been based on discussion and trial and error, as there have not been enough products at scale to initiate real change. However, in 2022, one of its portfolio companies, Protix, finally had enough insect production capacity to create a broad market demonstration.
The leading insect ingredient company's achievement last year was the result of its collaboration with shrimp importer Klaas Puul, shrimp feed manufacturer Skretting, and seaweed producer Veramaris to supply supermarkets across Europe with more sustainable shrimp produced in Latin America. Albert Heijn, part of global retailer Ahold Delhaize, was the first retailer to commit to the project as part of its bid to meet its own greenhouse gas emissions reduction target and its wider sustainability agenda.
"Having built the largest insect factory in the world and producing at capacity, Protix is a stunning example of how access to sustainable production changes the way the industry values it: producing insect products at scale and with a predictable quality, Protix allows the industry to test its products and include them in their commercial diets," the report states. A new proof of concept demonstrated for Aqua-Spark which, this time, gives an example of how a solution can not only scale but do so thanks to the collaboration of the entire value chain.
What are Aqua-Spark's plans for this year? As mentioned, the company is poised to expand sustainable aquaculture solutions, starting with increased investment in technology that will enable a new growth model following the example of its 'unicorn' company, eFishery. "In 2023, Aqua-Spark will build further on this movement by investing in a similar business model in Vietnam that supports the already large population of smallholder farmers, and in Kenya, which will help develop the local ecosystem," the report advances.
It will also continue the path marked by Protix and its inter-industrial alliance so that the entire value chain is involved in the search for alternative feed ingredients. "We aim to mobilize our industry partners and experts to provide institutional investors with investment opportunities in businesses backed by commercial commitments and science-based evidence," the report claims. "This will justify unlocking the capital needed by the alternative feed ingredient industry to reach scale."
But in addition to scaling solutions and continuing to nurture its ecosystem, Aqua-Spark has highlighted another objective in its 2022 Impact Report: increased awareness of biodiversity. The company considers its mission to educate and inform its public not only concerns industry participants but "also stretches to an audience outside of the industry, including investors." They are therefore convinced that increased awareness of biodiversity will mobilize significant pools of capital towards regenerative farming and have started by backing the next round of funding from the seaweed company Sea6 Energy to accelerate the expansion of production capacity and the development of new end products, such as the production of biodegradable packaging.
"Our experience combined with governments stepping up, new regulations, and funds launching leads us to believe that the need to increase blue food production, while decreasing its footprint and negative effects on our planet, is starting to reach critical mass. In addition, the solutions needed to pave the way are working, available on the market, and starting to scale up," the report concludes. "2023 feels like a new chapter in which industry stakeholders will step up and commit to a new way forward—in fact, it's already started. The next big task will be driving more institutional capital into this space, to scale the solutions and further the work."
Aqua-Spark is a global community of investors committed to the future food system supporting the growth of a new sustainable, commercial aquaculture industry. With over 300 investors from more than 30 countries, between 2015 and 2022, Aqua-Spark invested in 26 complementary aquaculture companies. This synergistic portfolio enables the companies to support each other in a mutually beneficial way. To demonstrate that this system can work at scale on a global level Aqua-Spark aims to build its portfolio to 60-80 companies focussed on unique solutions.
