Posts Tagged ‘oceans’

Stocking the Investment Pipeline in Sustainable Seafood

November 21st, 2013

Impact IQ – There’s now a good answer for impact investors who wonder where to look for deals in sustainable seafood and ocean preservation: Fish 2.0.

Last week’s two-day event to cap the year-long business competition showcased 20 finalists and semi-finalists with a wide range of seafood businesses from distribution and marketing systems to tracking and data technologies to aquaculture production schemes. The ventures varied in both social and environment impact and investment-readiness, but the many investors in attendance seemed to find at least some deals of interest.

“Awareness about sustainable seafood has increased and continues to rise,” said Mitchell Lench of Treetops Capital, a New York fund that invests in microfinance, green housing and small business development. “It was useful to see so many different types of sustainable seafood companies all in one place.”

The three winning ventures, which split $75,000 in prize money, typified the breadth of the entries. The winning company, Blue Sea Labs in San Francisco, operates a direct-to-consumer seafood e-commerce site and logistics service that helps fishermen gain higher profits by eliminating middlemen from the distribution chain. “It’s an area ripe for disruption and new technology,” said Martin Reed, Blue Sea’s CEO, who says the company’s logistics system saves 25 percent on shipping but, more importantly, reduces late delivery by 65 percent.

The runner-up was Cryoocyte, a Cambridge, Mass., startup that is developing a way to freeze fisheggs, a longstanding challenge. By freezing eggs when they are abundant, fish farms could produce at full capacity year-round, improving their own profits and productivity. The technology, if proven, would have a host of other applications as well, such as the creation of a genetic egg bank to preserve endangered species, helping fish farms to recover more quickly from floods and disease outbreaks, and enabling hatcheries to ship eggs further than they can currently send fingerlings.

In addition to the prize money, Cryoocyte found potential customers at Fish 2.0. “We met people here telling us they want to use our services because we can make their businesses better,” said Dmitry Kozachenok, the company’s CEO and recent graduate from Harvard Business School.

The third-place finisher, Ho’olulu Pacific, based in Oahu, Hawaii, is a local operation, with a network of 70 backyard aquaponic systems that provide fish and vegetables to native Hawaiians to improve their diets and boost their incomes. The $1,500 kits include everything needed for the systems, as well as a contract for the company’s representatives to collect the surplus for sale to grocery stores and restaurants.

The semi-finalists attracted attention as well. Each of the 10 contestants in the 90-second “fast pitch” competition received multiple votes from the audience. The result was a tie, between Smartfish, previously featured on Impact IQ, and Inland Shrimp Co.

“What was most inspiring for me was to see over 150 impact investors, technical experts, grant-makers, experienced business leaders, and emerging entrepreneurs share ideas for the future of seafood,” Monica Jain, the longtime sustainable seafood advocate who masterminded every aspect of Fish 2.0, wrote on National Geographic’s Ocean Views blog. “I expect that connections made last week will contribute to multiple new investments and business relationships in the sustainable seafood sector.”

Impact IQ provides original reporting and analysis for investors and entrepreneurs pursing social, environmental and financial returns. This article is part of Impact IQ’s series on Oceans and Sustainable Fisheries, in association with SOCAP, the annual Social Capital Markets conference in San Francisco.

Impact Fund Invests in Aquaculture to Preserve Oceans

November 15th, 2013

Within a few years, most of the fish we eat will be farmed, not caught.

That could be a boon for already over-stressed oceans. But the worldwide explosion of aquaculture since 1970 has left its own trail of environmental destruction, from toxic concentrations of waste, to outbreaks of disease, to the continued over-harvesting of smaller ocean fish for feeding their penned brethren.

A wave of aquaculture startups are trying to tackle those challenges with better technology and management. Aquaponic, or closed-loop, systems use fish waste to fertilize vegetables. Alternative sources of proteins, from insects to microbes, can substitute for fish meal. Farms are beginning to grow fish safely with fewer chemicals and antibiotics.

Aqua-Spark, a new fund launching this week, is likewise taking a different approach to financing such aquaculture ventures, with the aim of reducing environmental risks and boosting output to feed a protein-hungry world. Aquaculture now produces about 60 million tons of seafood, or 41 percent of global supply. The UN’s Food and Agriculture Organization estimates that at current rates of consumption, an additional 23 million tons of seafood will be needed by 2030.

“The only way to go up is farming,” says Mike Velings, the Dutch founder and managing director of Aqua-Spark. ”If we don’t do it in a good way, the pressure on the oceans will only get bigger and bigger.”

Aqua-Spark, based in Utrecht, Netherlands, grew out of A-Spark Good Ventures, a broader investment company Velings founded after after building a successful human resources outsourcing firm. Also managing the new fund is his wife, Amy Novogratz, former director of the TED Prize, which is awarded at the well-known innovation conference. Socially responsible investing runs in Novogratz’s family; her sister is Jacqueline Novogratz, the head of Acumen, an early impact investment fund.

They are seeking to build a network of small- and medium-sized companies that meet sustainability criteria and can share technology, feed and distribution. Aqua-Spark is looking to make up to 10 investments per year of between 250,000 and 5 million euros ($336,000 to $6.7 million), in both developed and developing countries.

“The big issue is coordinating the efforts of all the organizations to orchestrate this rapid growth,” Novogratz says. “Right now, that’s not happening.”

Velings and Novogratz met in 2010 aboard the Mission Blue, a 10-day voyage to the Galapagos Islands organized by ocean advocate Sylvia Earle, a National Geographic explorer-in-residence and TED Prize winner, to build support for protecting sensitive marine areas. At the time, many conservationists were hostile to aquaculture because of well-documented problems with farmed salmon and other species.

“Everybody was very negative,” Novogratz recalls. “There’s been a huge switch in the past three years.”

To find its deals, Aqua-Spark has partnered with WorldFish, a Malaysia-based spinoff of the “green revolution” pioneer CGIAR (Consultative Group on International Agricultural Research), which gives commercial support to promising ventures. It also scouted for ventures at this week’s Fish 2.0 business plan competition at Stanford University, where Velings was a judge.

Aqua-Spark is structured specifically for the aquaculture industry, in which companies often require intensive capital investment to develop production and distribution capabilities. Typical venture funds aim to return capital to partners within seven to 10 years, via acquisitions, public offerings or follow-on financing of their portfolio companies. Aqua-Spark will be an evergreen, or open, fund that intends to stay involved with companies for the long term. Valuations will be determined every six months, letting new investors get in and old ones recoup their capital, after an initial lock-up period. Aqua-Spark expects to pay dividends after an initial investment period of five to seven years. The couple has committed 2.5 million euros ($3.36 million) of their own to cover management costs and will charge investors a management fee of 1 percent, lower than typical venture funds.

“It takes a long time to build. It’s risky,” Velings says. “But once you have built an aquaculture business, there are steady, quite high returns.”

Private investors are increasingly interested in other segments of the $390 billion global seafood market, and other investors have done individual aquaculture deals. Aquacopia, a $16 million venture capital fund, made five seed and Series A aquaculture investments through 2009 and is now looking for exits, says co-founder David Tze, now managing director at Oceanis Partners, which advises investors and entrepreneurs on aquaculture deals.

But Aqua-Spark is unique in seeking to build a network of companies and shape aquaculture’s future. Aqua-Spark’s first hurdle is lining up its own investors. To launch successfully, the fund is seeking a first closing of 15 million euros ($20.3 million) from high-net-worth individuals, family offices and foundations drawn to the funds social and environmental benefits. Over the next decade, Velings and Novogratz hope to place as much as 200 million euros ($270 million),  which will require the participation of more mainstream investors.

“Everybody realizes you have to do it in a sustainable way or the seafood business will end,” Velings says. “There’s still a big battle to be fought.”

(Notes: Impact IQ provides original reporting and analysis for investors and entrepreneurs pursing social, environmental and financial returns. A version of this story first appeared on Bloomberg.com under the headline, “New Fund Lets Investors Fish for Returns in Farmed Seafood.”

This article is part of Impact IQ’s series on Oceans and Sustainable Fisheries, in association with SOCAP, the annual Social Capital Markets conference in San Francisco.

Photo: Fish farmers at a hatchery in Gazipur, Bangladesh. Photo by Finn Thilsted, 2012, via WorldFish.)

SmartFish: Catching Gold in the Fish Market

November 4th, 2013

Photo credit: Annie Waller

The Japanese fisherman caught a goliath grouper and began to cry. That was when Hoyt Peckham knew things had to change.

Peckham had been in the fishing industry for decades, fishing and advising fishing communities in Maine, the Caribbean, Mexico, Polynesia, and Southeast Asia. He had organized exchanges among Japanese, Hawaiian, and Mexican fishermen to share practices by hosting each other in their home waters.

The Japanese fisherman cried in part because he would never be able to catch a fish like that at home. Old, slow-growing groupers the size of a person are long gone in Japan. But even more, he said, he cried for how poorly the fish was handled. In Japan, even the smallest fish is handled and packaged with care on the boat to preserve quality.

In Mexico, even a prize like the goliath grouper was not killed properly, bled, iced, or even kept out of the sun. It had deteriorated considerably by the time it got to port. Destined to have a fishy taste, it would be sold at a low price.

The fisherman’s tears moved Peckham to found SmartFish, a for-profit company that rescues value in the fish market by helping fishermen deliver better-quality fish to the docks and sell those fish in premium markets. By helping fishermen get more for each fish, SmartFish aims to reduce overfishing while improving local livelihoods.

They’ll Pay for Quality

Last year, Peckham partnered closely with the Mexican nonprofit Comunidad y Biodiversidad (COBI), which formed in 1999 to promote marine conservation in the Gulf of California. COBI actually helped to develop the model and co-write the business plan. SmartFish is a semifinalist in the Fish 2.0 business competition at Stanford University November 12 and 13.

Los Cabos in Baja California Sur is home to many high-end restaurants, catering to the world’s elite, where hotel rooms can run up to $5,000 a night. The one thing that hasn’t been elite in Baja is the seafood.

The hotels are situated right next to some of the best fishing seas in the world, or the “world’s aquarium” as Jacques Cousteau called it. Yet, the seafood these hotels serve isn’t sourced fresh locally. The fishing communities are disconnected from the hotels, some of which displaced locals when they were built. Until now, local seafood has been considered low-quality.

This isn’t a reflection on the fish itself. Rather, poor handling delivers the fish to market in bad shape, ash-colored, flaky, and smelly. Such poor handling, Peckham says, turns “golden fish” into lead in a kind of reverse alchemy that reduces fishing income and in turn necessitates higher catch-volumes.

“They’re catching fish that’s worth gold in the market,” says Peckham. “But in the ways that it’s caught, it’s worth less than lead, less than plastic.” Recycling a plastic bottle in Mexico fetches 9-10 pesos, he says; poor-quality fish sells for 5-7 pesos a kilo. “How can you get less for a good-eating fish than a dirty, plastic bottle that’s been cooked in the sun and run over by cars on the side of the road?”

So Smartfish is working with local fishermen to preserve their bounty with higher quality, higher prices and lower volumes. SmartFish has found that the high-end hotels are more than willing to pay a premium for excellent quality fish. While paying for quality, they receive sustainability as a bonus. The value of sustainable seafood is becoming well-understood in the U.S., but has not yet become a significant factor in Mexico.

COBI has been working in artisanal fishing communities across Mexico, with the aim of promoting ecological sustainability and reducing overall catches.  If its work is to succeed longterm, COBI knew it needed to offer communities alternative financial models. While trying to foster new connections between seafood buyers and fishing coops, the organization realized that fishermen really need market orientation. SmartFish helps COBI provide its communities with opportunities to capture a greater profit, says Amanda Lejbowicz, COBI’s Program Coordinator for Baja California and Science.

“If SmartFish is a success, it helps all of us because we have the same goal,” she says.

Scaling Up with Tech

Community-embedded organizations like COBI currently make it easy for SmartFish to teach and ensure best fishing and sustainability practices.  But Peckham knew that, as the business scaled regionally and eventually globally, they’d need to systemize their verification processes. SmartFish has struck a partnership with Shellcatch, a catch-verification technology company.

Shellcatch’s software allows the company to monitor catch method and by-catch in an automated manner. This information is shared with the rest of the supply chain. The verified and traceable seafood caught on Shellcatch-equipped boats can thus be differentiated from the rest of the market.

The company’s devices are the size of a paperback novel and are waterproof and impact resistant. They require no user input from the fishermen, so there is very little maintenance involved. Shellcatch passes along the cost of these devices to retailers concerned about the origin and sustainability of their fish.

Launched in Chile in 2008, Shellcatch spent three years gaining the trust of Chilean fishermen. By 2011, fishermen realized that Shellcatch helped them better compete in the international marketplace and allowed them to translate responsible practices into access to higher premium markets and prices.

Previously, such markets were mainly available to large companies who could pay for certifications or create their own branding and marketing.  The fishermen are now so invested in the idea that they promote Shellcatch’s product on Chilean TV.

“We wanted to empower [the fishermen] with technology so that they could be the main characters in [driving] sustainability and traceability in the industry,” said Alfredo Sfeir, Shellcatch’s founder.

For SmartFish, the Shellcatch partnership allows them to expand to small fishing communities regionally, and eventually globally, and to places where partner organizations like COBI don’t yet exist. By 2015, Peckham says, “Our fish will be fully traceable.”

Editor’s Note: This article is part of a series on Oceans and Sustainable Fisheries, in association with SOCAP 13, the Social Capital Markets conference in San Francisco, Sept. 3-6.

Impact Investors Fish for Deals to Save the Oceans

September 26th, 2013

Investments in sustainable fisheries and ocean preservation ventures need to move from “uncoordinated innovation” to the “marketplace building” stage of development, with easy-to-understand and profitable models that can capitalize on growing interest from impact investors.

That is the consensus of impact investors after a series of oceans-related panels and discussions at SOCAP13, the social capital markets conference earlier this month. In a schema laid out by the Monitor Institute for impact investing more generally, after marketplace building comes “capturing the value of the marketplace.”

“The investment community is getting engaged, whereas even a year ago they were not engaged,” said Monica Jain, who launched Fish 2.0, a business-plan competition that has attracted dozens of high-quality seafood ventures.  ”Lack of engagement was one of the barriers…You don’t just trip over a deal and do it. You have to comfort level with the industry.”

Still, the challenges in ocean investments are very different than with other food system investments and investors at SOCAP, such as Imprint Capital‘s Taylor Jordan, expressed a need for more “proven [investment] models.” Christina Ly of Sonen Capital suggested that fisheries ventures might do best to “seek philanthropic grant or impact-first money,” implying that the sector was not yet ready for investors seeking market-rate returns.

Beau Seil of Unitus Impact, agreed that ocean-related companies he sees in the investment pipeline are often in need of “a fair amount of capacity building.” In Indonesia, for example, Unitus Impact spent time working with an entrepreneur to evaluate and learn to trust his knowledge of stocks, fishermen, and markets. Unitus, as a part of its investment philosophy, also works to bring on local investor partners, who can run interference if the government or other players try to inhibit the entrepreneur’s activities.

The consumer market needs further development as well.  “Consumers don’t quite get it yet,” said Aaron Enz of Watershed Capital Group. “I don’t think that people are aware that when they’re eating shrimp cocktail, that it really is a cocktail,” that is, a mix of chemicals, pharmaceuticals and wastes from commercial shrimp farming.

Seil expounded upon the fish and seafood supply chain being overrun with middlemen — a fish can change hands 14 to 15 times before it hits the plate in the US, he said. The opaqueness makes it hard for sustainable suppliers to differentiate themselves. “If you take the skin off, most chefs don’t know what [fish] it is; this doesn’t happen with pork chops,” Enz added. “Opaqueness enables more poor behavior and monopoly.”

Taryn Goodman of RSF Social Finance said it’s not easy to clean up such supply chain inefficiencies. She said, “There are a few main fish processors that dominate the space making it difficult for others to get in.”

Nonetheless, Goodman said RSF is “not scared” of investment in fisheries and aquaculture. “But the challenges are different than with other food.” She sees the biggest opportunities in traceability, processing technology (like better freezing methods), branding, and developing better market linkages.

Despite all of the challenges, the panelists agreed the period of “uncoordinated innovation” has an important upside. With plentiful opportunities and few competitors, investors said they have greater willingness than in other sectors to collaborate and help each other – increasing each others’ comfort level in an unfamiliar marketplace.

Editor’s Note: This article is part of a series on Oceans and Sustainable Fisheries,  in association with SOCAP 13, the Social Capital Markets conference in San Francisco, Sept. 3-6.

SOCAP13 Video: SOCAP13 Video: Jeff Leifer – Mapping the Blue Market: Opportunity and the New Oceans Economy

September 5th, 2013

Jeff Leifer, CEO, Circadian Media Lab, is a strategist, social entrepreneur and leading reformer with over 30 years experience at the intersection of technology, media and finance. Jeff recently launched Circadian Media Lab, a values-driven strategic consultancy and interactive media company that frames scalable, transformational stories across the digital landscape. Backed by a team of creative technologists, CML has established itself as a media catalyst using tools that harness the power of social engagement to shape more authentic media experiences.

Prior to launching CML, Jeff thrived in the world of finance, pioneering reforms to safeguard taxpayers before establishing his own investment banking firm. Jeff spent the next decade working with local governments to increase transparency and fortify public finance accountability before his firm was acquired by a large commercial bank.

Jeffʼs passions have drawn him all over the world in connection with global initiatives, working alongside internationally recognized dissidents such as Andrei Sakharov, negotiating nuclear non-proliferation accords as a State Department liaison, and working with indigenous peoples in an ongoing effort to preserve the Amazon rainforest.

More recently, Jeff created the Interchange Leadership Initiative on Technology and Sustainability, and has been a guest lecturer at Stanford Business School, Yale School of Management and University of California, among others. He has continued to serve on the boards of non-profits committed to the environment, arts and meaningful change in the culture.