In a remarkable turn of events for the aquaculture sector, venture capital investment surged to unprecedented heights in 2023, with over $1 billion flowing into startups focused on sustainable fish and seafood farming. This influx of capital, as reported by PitchBook, highlights the growing interest in aquaculture as a viable solution to global food security challenges. However, the momentum appears to be waning, with projections for 2024 indicating a potential decline in both deal value and deal count, reflecting broader trends in the venture capital market.
As of September 2024, investment in aquaculture has dropped to approximately $0.2 billion, marking a low not seen since 2019. This downturn raises questions about the sustainability of the recent surge and the future landscape of aquaculture investment. PitchBook defines aquaculture broadly, encompassing the farming of fish, crustaceans, mollusks, and aquatic plants. The sector employs a variety of systems, including offshore aquaculture, closed-loop systems, aquaponics, and traditional pond systems. Notably, aquatic plants and algae have emerged as a significant focus area, representing the second-highest segment for VC funding after closed-loop systems.
The report reveals that nearly 200 startups are now active in the aquaculture space, pioneering innovative farming systems and employing cutting-edge technologies to enhance efficiency, automation, and animal welfare. Northern Europe, in particular, stands out as a leader in aquaculture investment, with major corporations like SalMar and Mowi driving the industry forward. These large-scale operations, characterized by complex and capital-intensive systems, create opportunities for startups that provide supporting technologies. As a result, Europe has attracted the bulk of agtech venture capital, positioning itself as the leading market for aquaculture investment.
Despite Europe’s dominance in VC funding, the majority of global aquaculture production remains concentrated in Asia. China alone accounts for a staggering 55% of aquaculture production, followed by India, Indonesia, Vietnam, and Bangladesh. However, the region has not seen a corresponding influx of venture capital. This discrepancy can be attributed to the prevalence of less tech-dependent farming systems, such as freshwater ponds, which limit the opportunities for agtech startups and the investment they attract.
One promising subsegment within aquaculture is plant aquaculture, which has garnered significant attention from investors. Startups in this category raised a record $114 million across 12 deals last year, indicating a growing recognition of the potential for algae and other aquatic plants in various applications, including alternative proteins for animal feed, plant-based meat, and sustainable agriculture inputs. Companies like Sea6 Energy, Brevel, and AlgaeCytes are leading the charge, developing innovative solutions that address sustainability challenges across multiple industries.
The feed and supplements category also presents a substantial opportunity for aquaculture startups. As the reliance on wild fisheries for fish feed contributes to ocean depletion, innovative solutions are emerging to develop sustainable alternatives sourced from insects and plants. The aquaculture feed market has raised $1.1 billion since 2020, outpacing other aquaculture categories. However, challenges remain, as evidenced by the recent struggles of high-profile companies like Ÿnsect, which filed a safeguard plan to stay afloat while seeking additional funding. This situation underscores the cautious sentiment among investors regarding capital-intensive projects with lengthy profitability timelines.
Despite these challenges, the growing demand for aquaculture feed continues to create opportunities for innovative startups. The evolving landscape of aquaculture investment is a testament to the sector’s potential to address pressing food security issues while promoting sustainability. As the industry navigates the complexities of investment trends and market dynamics, the focus on technological advancements and sustainable practices will be crucial in shaping its future trajectory.