Aquaponics Operation Raises $6.5m in Series A and USDA-backed Debt

Organic Nutrition (ONI), a budding aquaponics operation in south Florida has raised a $1.48 million Series A round from private individual investors while also securing a $5 million USDA-guaranteed loan through the Bank of Florida.

The company will soon break ground on a 117-acre property in Boynton Beach, Florida, which contains a 55-acre man-made lake where the firm will operate a “de-coupled” aquaponics system. The company also has plans to produce black soldier flies on the property as well, completing what the company calls an “integrated agriculture model.” An initial site plan has been approved by Palm Beach County.

Aquaponics is a smaller subset of indoor farming where farmers grow vegetables integrated with, or on top of, fish farms, so that the waste generated by the fish can fertilize the plants.

Aquaculture experience

ONI president Ernie Papadoyianis and vice president Sal Cherch each have more than 30 years in the aquaculture industry and hold a patent on the company’s Aqua-Sphere tank system. Aqua-Sphere is a floating, circular tank system for water-based aquaculture where the farms are in existing bodies of water as opposed to tanks on land. The system removes the solid waste produced by the fish, which is then mineralized to produce the necessary nutrition for the plants, and used as fertilizer in hydroponic greenhouses.

This “decoupled system” is in the minority of aquaponics systems, which are typically coupled systems with the hydroponics systems and fish tanks physically stacked on top of one another.

But Papadoyianis says there are distinct advantages to separating the fish from the plants because coupled systems can lead to issues with “off” flavors that sometimes require the fish to be purged to fix the problem.

Coupled systems also lend themselves to fish that can thrive in confined spaces like tilapia, which is a particularly competitive product produced cheaply in China and Latin America.

Instead, ONI will be growing the company’s trademarked hybrid striped bass.

ONI’s greenhouses will use multiple types of hydroponic hardware but Papadoyianis wants to keep things simple in the early days.

“We’re firm believers in not overcomplicating things unnecessarily,” he said.

Organic certification?

As the name implies, Organic Nutrition is in the process of obtaining USDA organic certification for its produce through Quality Certification Services (QCS) in Florida. While most USDA organic certifying agencies do not certify hydroponic farms because they do not use soil, an implied prerequisite of organic’s definition, the regulations as written, leave some forms of hydroponic growing as an open question. Essentially the National Organic Standards Board (NOSB) has stopped short of explicitly permitting or disallowing hydroponic farms using non-synthetic growing mediums and inputs from being USDA certified organic.

Ryan Brouillard, crop and livestock certification manager at QCS, said “We see it as a useful and productive agricultural system and there is a lot of demand for organic hydroponics. Other certifiers look at the rules as written and see that it is a soil-based standard so I can see where they are coming from too.”

ONI’s future plans involve a complete site build-out of 21 greenhouses with over 500,000 square feet of hydroponic growing and seven Aqua-Sphere production systems, capable of producing over 350,000 lbs of fish.

Phase one of construction, which includes four greenhouses totaling 100,000 sq. ft. is set to begin in September with the full aquaponics operation, fish and plants, up and running in the first half of next year.

Insect farming plans

A later phase of the business will see the construction of a black soldier fly farm for the sole purpose of feeding ONI’s striped bass.

Papadoyianis and Cherch turned their attention to insect farming in 2009 and have spent that time developing a fish feed formula from flies that they will eventually use on their farm. They began looking into insect farming after decades of feeding wild fish meal to farmed fish.

“We can’t keep using fish to feed fish. We harvest billions of pounds of fish out of the wild. It’s like robbing Peter to pay Paul. We’ve got to solve the protein bottleneck and it’s not going to be a single solution in my mind. Gradually replacing 6-7 million pounds of fish meal is not going to sit in one person’s lap.”

He said that ONI landed on black soldier flies because of their short life span and the low cost of their ideal food: food waste.

“If you have to pay for your feedstock, the economics don’t work. The nice thing about the black soldier fly is it eats fruits, vegetables, meat, chicken, fish; any organic matter other than cellulose.”

Earlier this year, another startup that believes in the black soldier fly as an ingredient in fish feed, Protix from the Netherlands, raised the largest ever funding round for an insect farming business, raising €45 million ($50.5 million) in equity and debt.

AgriProtein is another startup that believes in the black soldier fly; based in South Africa, it raised $17.5 million in growth stage funding from strategic investors in Europe, North America, and Asia in December 2016, bringing it fundraising total to around $30 million.

There is still only a small number of startups addressing the fish feed problem, which one firm valued at  $100 billion, although startups in seafood and aquaculture technology raised $193 million in 2016, a 271% increase on the $52 million raised across both 2014 and 2015, according to AgFunder research.

Photo: Organic Nutrition Inc.