US agrifoodtech investor S2G Ventures has unveiled the first deals made out if its new $100 million fund dedicated to supporting the burgeoning ‘blue economy,’ which aims to improve the health and viability of marine ecosystems.
The Chicago-based VC firm claims it is the largest fund of its kind in North America.
“[The ocean] is an extension of our land-based food system and it’s an ecosystem where the resources are being depleted and are not being treated well,” Kate Danaher, managing director at S2G Ventures, tells AFN.
The new fund is “really tied into the impact thesis that S2G wanted to have and it was a natural extension of the food and ag focus,” she adds. “But the reason we hadn’t really gotten into it [earlier] is that it’s so different soil. We really wanted to make sure that we were hiring people who could focus on it and had experience in it, so it was more of a slow burn that was coming for a while.”
S2G’s Oceans & Seafood Fund has so far invested in:
- ReelData (Canada) – software platform aiming to increase the profitability, sustainability, and scalability of land-based aquaculture by using sensors, AI, and user-friendly interfaces to provide producers with insights and automation.
- ViAqua Therapeutics (Israel) – biotech startup creating orally administered, RNA-based treatments for farmed shrimp, with an initial focus on a feed supplement which combats white spot syndrome virus.
- Moleaer (US) – develops aeration tech to form ‘nanobubbles’ – 2,500 times smaller than a grain of salt – that can be used to efficiently treat water through oxidation.
It has also backed two as-yet undisclosed startups: one which is developing technology to track illicit fishing operations, and another which has created a ‘zero-waste’ method for producing fishmeal and oils.
Future deals out of the fund will cover seed to Series B rounds, Danaher confirms. Deals can range from $500,000 to $5 million, but the sweet spot will be between $1 million to $2.5 million, with the possibility for additional later-stage additional investment down the line.
Big ocean, big opportunities, big challenges
The blue economy opportunity is massive, with the global aquaculture market alone valued at $203 billion, according to Grandview Research.
Danaher claims that S2G has “looked at hundreds and hundreds of deals” over the past nine months.
Promising areas for the firm include sensors and IoT, software to optimize aquaculture feeding systems, and emerging applications for algae. Another field of potential opportunity is seafood transparency and traceability – but a number of challenges remain here.
“There’s this thesis [that] if we can trace through the supply chain where our food is coming from, then consumers can make more informed decisions,” Danaher says. “But the big question is: Who pays for it? Are consumers on the seafood side more willing to pay to know where their food comes from? I’m not sure we’re there yet.”
S2G is also prioritizing potential deals that have a cross-sector appeal. Finding technologies and businesses that span different industries boosts the broader opportunity in this still-nascent space.
“The ocean is a very big part of the global economy, but the individual industries within that are small. [For many] investors, the total addressable market isn’t large enough [to] think through the potential exit and return,” Danaher says.
“Aquaculture is a very fast-growing subsector, but it’s still pretty small relative to other sectors and technologies that can span industries. So, if we can work with technology that has the opportunity to work across markets, you’re going to attract [more] investors because you’ll have the growth that you need to support the change you want to see in your specific sector.”
One example of this approach is the investment in Moleaer. While the startup’s nanobubble tech has primarily been deployed to treat water in aquaculture settings, it also has applications across food and agriculture wastewater management.
As S2G seeks out more deals for its new fund, finding companies with stellar teams will be key, Danaher says.
“I’m not worried about the technologies; that’s not going to be the problem. [What we need is] people who are willing to seriously disrupt large, incumbent supply chain industries if we are going to see any change.”