Aquacopia Capital Management LLC is the first and only aquaculture venture capital firm. Since 2005, it has uniquely invested in early-stage entrepreneurs in aquaculture: seafood farms; farming technologies; and supply, service, and marketing that add value at the farm or en route to market. Being selective and small, the fund has averaged one investment per year.
Aquacopia's cleantech investments feature approaches that improve operational performance, productivity, or efficiency while reducing costs, inputs, energy consumption, waste, or pollution. In this arena, cleantech also means cleaner oceans and cleaner food.
We interview Aquacopia's co-founder and managing director David Tze to get the scoop:
What inspired you and your partner Jared Polis to start Aquacopia?
In 2003 and 2004, we saw that the world needed ever more seafood, that farming was the only way to provide it in quantity, and that there was a funding gap for early-stage companies up and down the aquaculture value chain. It seemed that we could apply our experiences in the technology sector and it’s financing to this other, very promising realm. At heart, we wanted to be pioneers, enabling entrepreneurs in food production's fastest growing, most innovative, and fundamentally profitable sector.
Aquacopia is one of only a few investment houses strictly focusing on the aquaculture Industry. Why do you think that is?
Some, in retrospect, dubious, aquaculture projects were financed in the US in the 1970s and 1980s. It's taken some time for that odor to fade at the same time those aquaculture technologies and operations have really come of age. Still, most investors know that they don't understand the vagaries of domestication, disease, weather, and seafood product differentiation enough to be comfortable managing the risks inherent in aquaculture. To do that confidently requires sector-specific expertise that takes more than a few years to develop. Also, most private equity investors are focused on areas with established track records of initial public offerings or merger and acquisition activity. While Norwegian aquaculture now has them, its American cousin doesn't, yet. It'll be ten years before there's wide investment attention to aquaculture.
So what is Aquacopia's investment selection criteria?
Going forward, I'll be looking to do growth equity and venture-stage investments in aquaculture and sustainable wild catch companies. We will be willing to support our portfolio companies over one or more rounds, often in the form of purchasing preferred stock. Besides a sustainable seafood focus, ideal companies have defined competitive advantage, excellent management, aggressive growth plans, and a particular need for a sector-specialized investor. We pay special attention to projected timelines for both profitability and potential events to realize shareholder value.
What can companies expect when working with Aquacopia?
When we invest in a company, we almost always take a seat on the board. We are active investors that, in various ways, push and pull our companies towards growth and a successful future. Expectations are high and, sometimes, that requires a little tough love. Informing the next team, I've been recruiting the very smartest people, with judgment and experience to match; they will be the investor-stewards of future portfolio companies.
What is the most pressing issue in the aquaculture industry that's keeping you up at night?
It's not the issues of the month that disturb my rest, but rather the challenges of our generation. I worry about how long humanity will continue to crowd the continents, while we leave the open ocean untapped. We've started using the fringes, the first few miles from land, for aquaculture. However, we have yet to access the potential of the two-thirds of the earth's surface that lies farther out. That's where the massive potential for aquaculture truly resides, beyond fish and shellfish, in seaweed for food, feed, fuel, and fiber. As Jacques Cousteau said, "we must farm the oceans as we farm the land." Offshore aquaculture will lead with livestock, but will then shift to ocean agronomy. In the coming decades, the focus must turn to growing plants in our oceans.
Why and how did you get into the aquaculture industry?
I began my career at a university and spent 6 years in aquaculture research. It became clear there was a real need for full-time expertise in the private sector, so I formed my company, Fisheries Technology Associates in 1982. The rest, as they say, is history.
The US has $9 billion seafood trade deficit.
Why do you think this is?
Engaging in aquaculture in the U.S. is relatively expensive. We have a cumbersome regulatory structure and operating costs tend to be higher than in other nations. While we profess to be pro-agriculture, the reality is somewhat different.
What will it take to change this?
There needs to be more urgency on the part of politicians, regulators, and the financial community relative to food security in this country. We simply assume food will be there when we want it, and we are slow to accept what it actually takes to make that happen.
Why is North America slow to adopt RAS technology?
Once again, the regulatory structure tends to stand in the way. Without getting too detailed, producing small quantities of wastewater is not necessarily viewed, from a regulatory perspective, in a positive light. Second, RAS is very capital-intensive and capital is difficult to acquire these days, particularly for agriculture unless it is highly profitable. More attractive aquaculture investment opportunities can be found elsewhere in the world.
Does the government have a role to play in the future of aquaculture?
Without a doubt! A more coherent and reasonable regulatory structure will go a long way to securing the future of aquaculture both here and in other locations around the world.
What should someone consider before starting a new aquaculture operation?
A comprehensive feasibility analysis and business plan is the only reasonable place to start. It's your road map to success. Without it, you have little or no chance to succeed. Additionally, you should be evaluated by an aquaculture professional for your suitability. You may find that aquaculture is not the right business for you. You need to be asked the right questions.
How would you advise someone looking to expand their aquaculture operation?
Expansion is a function of the market and your financial position. Again, a business plan makes the most sense in this situation.
Are there any species that are underutilized presently?
There are always new species emerging as candidates for aquaculture. The industry has matured to the point where new opportunities are capitalized relatively quickly. However, having said that, species such as cobia, grouper, tuna, and others provide plenty of opportunity for new entrants to the industry.
Bill Manci, president of FTA, Inc., created the company in 1982 after receiving his formal training in zoology and fisheries science at the University of Wisconsin-Madison, and after a six-year career in aquaculture research. Bill has been a consultant since 1980 and has worked on many types of aquaculture and fish farming projects throughout the U.S.A. and other nations. He also has published more than 300 technical and popular articles on the subjects of aquaculture and fish farming, and served as an expert witness in aquaculture and fisheries-related litigation.
Follow Bill on Twitter at @FTAFishNews