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RASTECH23: Secrets of getting investors hooked on RAS

There is investment appetite for the recirculating aquaculture industry. Jake Reznick, senior associate at S2G (Seed2Growth) Ventures,  shared some trade secrets on how land-based aquaculture and recirculating aquaculture system (RAS) entrepreneurs can intrigue investors.

Reznick was one of the speakers during the Investors’ Forum at RASTECH 2023. He outlined the ocean and seafood focus of the Chicago-based venture capital firm. He spoke about its US$300 million Special Opportunties Fund. The fund launched this April and has an eye in the climate tech market.

Cutting cost and mitigating risks

The ocean and seafood team seeks investment opportunities in enabling technologies rather than the production side of aquaculture. For instance, S2G placed its bet in the Canadian aquaculture tech company, ReelData AI.  ReelData developed an artificial intelligence (AI) enabled feeding software specifically designed for land-based aquaculture.  S2G also invested in Molear. The American company developed a nanobubble technology for water treatment applications.

Reznick said ReelData and Molear stood out for S2G because the companies both aim to help producers reduce cost. These companies can also help businesses mitigate risk, they demonstrated return of investment, and their solutions are able to scale with production, said Reznick.

Seven strategies to seal the deal

1. Consider who you approach for investment. You company and your investor should be a good match. For example, the scale and timing of your capital needs should match that of your investor. S2G has a 15-year fund life which is longer than most venture funds. If a company’s pathway to exit does not fit this timeline, S2G cannot invest in that company.
2. Build an operational track record as a data point to investment. It’s not a good idea to scale up too quickly.
3. Having a team with a depth of experience in the sector is a must.
4. Solution providers need to make sure they are talking about market opportunity. Demonstrate value, provide proof of concept, make sure the solution is scaleable.
5. What is your differentiating factor. This is a prerequisite. “It’s not just about profitability,” Reznick stressed.
6. “It’s not just about the technology either,” said Reznick. Be sure you are able to pivot to fit the market. For example, Molear had a very good technology but its nanobubble generator was still too expensive for some of its buyers. Molear went back to the drawing board to retrofit the generator and make a model that was more affordable.
7. Lastly, being able to sell your value proporition to a potential investor gives you a leg-up over over your competition, according to Reznick.

“Climate is a humongous opportunity for RAS,” he said. “But climate investors do not understand the potential for aquaculture, especially RAS and land-based aquaculture.”

As a source of sustainable healthy protein, RAS and land-based aquaculture have a low operational environmental impact. “Telling this story can get a lot of investors really excited,” Reznick said.