A check-in interview with Neal Spackman, founder & CEO of Regenerative Resources Co, on why it has proven to be quite difficult to get his RSA Regenerative Seawater Agriculture project funded. We also talk about mangrove restoration projects, why investors are not jumping on top of it, what he has learned over the last 6 months of brutal painful pitching and hearing no, and more.
LISTEN TO THE CONVERSATION ON:
This episode is part of the Water Cycles series, supported by The Nest, where we interview the dreamers and doers who are using the latest technology to figure out where to intervene first. They are making or trying to make the investment and return calculations. so what is missing, what is holding us back? Maybe we lack the imagination to back them and try regeneration at scale.
It has been proven by his partners 20 years ago in Eritrea. All the puzzle pieces seem to be there: the shrimp market is ready to be disrupted, the mangroves are being planted, the land is dirt cheap, the genetics are there, solar energy and pump technology has become way cheaper, and the local Mexican communities are on board and invited them to develop the project there.
UPDATE FROM THE FIELD BY NEAL
Since Koen and Neal last talked, they have begun a mangrove restoration project in Earnest, and they are now in the restoration phase. That happened mainly through a grant and what they hope will become a partnership with One Tree Planted, a non-profit that harvests CSR funds from corporations and ploughs them into restoration and reforestation projects.
”Our project manager is a local guy who has been working with mangroves for 15 years in the area. So, he’s kind of the embodiment of indigenous mangrove knowledge. But he’s come up with some really innovative things just in terms of logistics and sorting out the viability of seeds. Initially, we thought we were going to have an 87% success rate in terms of survivability, and instead, because he’s got this new sorting method, it’s up to 97/98%.” – Neal Spackman
”We were honoured to have the trust of a couple of fishing villages in this region, honoured to have them working with us and really happy that that’s ongoing. The carbon piece of that is tricky. Because it’s on federal land and there’s not a clear policy directive on how Mexico treats carbon crediting on federal land. And there’s a high turnover rate amongst some of the officials that we wish we were working with more closely. So, we’ll get there eventually, Mexico has done concessions for carbon crediting on federal land before, that’s likely what we’re going to do. But in the meantime, there’s a multi-year statute of limitations on the carbon, so we’re happily growing trees now. And we’ve done about half a million of them so far this year, just under a million, but almost that much.” – Neal Spackman
THE POTENTIAL OF MANGROVES
RSA (Regenerative Seawater Agriculture) is the first regenerative onshore aquaculture system that integrates intensive aquaculture with mangrove agroforestry and halophilic agricultures.
”We were invited there initially to assess it for RSA. […] Then he said, ‘we’ve got so much barren coastal land, will you come up here and see if you could do it where we are?’ […] But the full programme now is mangrove and seagrass restoration with blue carbon crediting eventually, plus RSA. There’s 10s of 1000s of hectares of applicable land for RSA.” – Neal Spackman
”The folks who are in charge of the environmental ministries have said, ‘well, we get the idea for RSA, but we want to see it somewhere else before we approve it here.’ Because we’ve said it’s a non-polluting system, but they want to see that.” – Neal Spackman
”We’re doing between 4000 and 6000 mangroves per hectare. So, that’s around 100 hectares that we’ve done so far this year. […] The full mango project is over 2000 hectares. And then we’ve got to validate this next number, but we’re estimating 6000 hectares of seagrass restoration. And we have a couple of collaborators who are expert in that who are working with us. But in the end, what we hope to do is: do the restoration, build a big enough RSA system that we can give all the fishermen jobs. […] Then allows us to put the fishery into rest, for the fishery to be rehabilitated. And then, however long that takes, you can implement management of that in a sustainable way.”- Neal Spackman
WHY IT IS SO DIFFICULT TO GET TRULY REGENERATIVE WATER AND ECOSYSTEM RESTORING PROJECTS FUNDED
They have found amazing people, and have identified some sites. However, they ended up in this chicken and egg problem, which is: they can’t get a funder unless they have a project. A project needs permits, land, a business model, a financial model, and a team, and to put all that together requires money.
”My assumption was, if we get all this together, we’re going to be able to fund the project because that’s the missing piece. We’ve got the land, we’ve got the team, we’ve got the business model, we’ve got the financial models, we’ve got off take agreements, we’ve got really amazing markets we’re operating in. And what the last six months has taught me is that that wasn’t true. Even though we put it all together, I’ve had a devil of a time financing these projects. And some of this has been due to the fact that we didn’t have a functioning MVP.”- Neal Spackman
”Another major stumbling block has been fairly typical, where we’ve had a lot of people say, ‘Yeah, I’m really interested, but get back in touch when you’ve got more traction, or we don’t want to be first, but we are very interested.’ And those folks may come along later on, or they may not. I think the complexity of a circular system to someone that isn’t a systems thinker, or someone who is used to investing in incremental changes in a given market… this isn’t an incremental change to a given technology or to a given market. This is an entire system. It is a new regenerative coastal seawater agriculture […] I think the complexity scares people. Because typically, we assume that complexity adds risk, which is true when it comes to operational complexity.” – Neal Spackman
WHY INVESTORS DON’T SEE THAT INTEGRATED TRULY REGENERATIVE SYSTEMS ARE LESS RISKY
After working in the space for 15 years, Neal has internalised a concept: he understands that better profitability comes from lower costs that comes through circular systems that are working with ecosystem function. He argues that’s the bottom line of why regenerative systems is more profitable. However, his potential investors haven’t internalised that, ‘so I’m making mistakes the way I’m communicating this.’
”The whole concept that in circular systems complexity can reduce risk is so counterintuitive […] When I’m pitching people, I’ve learned that it’s too scary, even though, that’s where the comparative advantage is. That’s where we’re going to outcompete the industry. And that’s where the gains and profits are. Shrimp farming is profitable today, as long as you’re vertically integrated enough and capture enough of the value chain. And as long as you’ve got access to good markets, and our people have that. We have a distributor who has already signed an off-take agreement with us. In our financial model, we’ve assumed that we’ll just be buying conventional feed for the first six years. It’s still profitable. But then you dial in our own feed, you dial in, ‘Okay, we don’t have to pay for the antibiotics costs, we don’t have to assume that we’re going to lose the crop every three years, we don’t have to pay for cleansing the system as you do with a recirculating, we don’t have to do any of that stuff.’ Then you take all those costs out, and we’re like, well, we’re gonna blow the industry out of the water with this. And then it sounds too good to be true.” – Neal Spackman
OTHER POINTS DISCUSSED
Koen and Neal also talked about:
- The key to sustainability in nature
- Lessons learned from the early pioneers
- Sea-water ag vs. Aquaculture
- Neal Spackman – From growing trees in the Saudi Arabian desert to restoring degraded coastal lands
- Tony Lovell, how the $ 100M SLM fund handled the six driest years on record
- Tony Lovell, regenerate soils with a 100M fund and many cows
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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.