Investment in the blue economy has seen significant growth over the past five years, with venture capital (VC) funding increasing by nearly 300%. This surge has outpaced growth in other sectors, including climate and deep tech. Recent insights from a joint investigation by ARPA-E and Investable Oceans reveal the excitement surrounding crossover investing from climate and energy VCs into blue economy ventures. More than twenty new ocean-focused investment funds have been established, signalling a rising awareness of the ocean's importance in addressing climate change and energy challenges.
Steven Fox of Propeller VC articulated this sentiment, stating, "Shipping, energy, infrastructure, food systems, defense, you name it – the ocean economy plays a big role and needs to decarbonize rapidly. At Propeller, we’re excited about the returns for planet, people and investors in this shift as well as new market opportunities where the ocean has a distinct advantage."
Despite this investment momentum, the blue economy remains undercapitalized, attracting only 7% of the total capital going to climate tech, while facing an estimated financing gap of $175 billion annually to meet the United Nations' Sustainable Development Goals for marine life. The collaborative efforts, involving interviews and surveys with over twenty fund managers, underscore the urgent need for ecosystem-wide action to maximize the financial and impact potential within this sector.
The research indicates that crossover investing is indeed occurring more frequently than previously acknowledged. Notably, investments in sustainable food systems, such as cell-based seafood and regenerative aquaculture, exemplify how traditional climate tech VCs are beginning to embrace ocean-based solutions. Aly Rose of CREO noted the parallels in these sectors, sharing, "At CREO, we observe many parallels between the development of regenerative agriculture and regenerative aquaculture."
While the potential for return is appealing, the blue economy has yet to witness a significant number of successful exits, leaving some investors hesitant. Companies within this space are still developing their technologies and business models, which has contributed to a relatively small pool of exits thus far. Luke Halsey from AiiM Partners explained, "While it is true there have not been many exits in the blue economy so far, we are now seeing more companies being funded that have differentiated products, stronger product market fit and are measurably solving a problem of consequence – all things that will attract serious investors."
The landscape of investor expectations poses challenges, as the complexity and lower scalability of some blue ventures can deter traditional VCs. Investors like Brock Mansfield of Meliorate Partners expressed concerns, stating, "In the rush to fund the Blue Economy, many investors have confused important with venture scale. They are two very different things.” Similarly, Alex Behar from Buoyant Ventures noted, "Sometimes blue economy startups are targeting too niche an opportunity… that’s why we at Buoyant are excited about capital efficient software companies targeting large/diverse markets."
The interviews also highlighted the necessity for improved commercialization pathways and collaborative strategies among blue economy startups. Investors demonstrated a willingness to accept higher technological risks if companies could align with mature markets that address high-impact challenges. Kike Miralles from Starlight Ventures emphasised, “The key to unlocking the potential of blue economy companies lies in aligning technology solutions with urgent needs, and ideally, mature markets with clear profit pools.”
To foster greater investment flows, experts suggest that the blue economy ecosystem should further develop its infrastructure and outreach. The influential report advocates for strategic education and awareness initiatives that can help bridge knowledge gaps across investment communities and facilitate collaboration between 'blue' and 'green' investors. Potential actionable steps include targeted market reports and scheduled discussions on ocean solutions within mainstream climate events.
As outlined by the lead authors Helena Janulis and Rosie Keller, as the blue economy continues to evolve, it presents a unique opportunity for innovative approaches to climate solutions and sustainable investments. The narrative underscores that while challenges exist within the investment space, the path forward promises excitement for stakeholders engaged in both the blue and green domains.
Source: Noah Wire Services