A conversation with Mike Velings, co-founder of Aqua-Spark, a global investment fund for sustainable aquaculture, about how an invite he should have never received lead to the creation of the largest aquaculture fund in history, with over $250 million in assets under management (AUM) and ambitious plans to grow to $2 billion or more. This conversation goes beyond the billion dollar question—it’s already been answered. We explore why focusing on long- term investments is essential for transforming an industry and why current venture capital and private equity fund models might cause more harm than good. How can we bring institutional investors into agriculture and food, and what financial mechanisms can facilitate this? We also dive into the key drivers in aquaculture and discover why Mike is so enthusiastic about the future.
This episode is special—it’s not every day we discuss billions and institutional investment strategies with someone who has a real chance to raise the funds and put them to work.
DISCLAIMER: This conversation was recorded on Nov 21st, 2024. A month later Aqua-Spark learned about a fraud in the numbers of eFishery, an Aqua-Tech startup they have invested in. After a thoughtfully evaluation, we decided that- regardless of the news around eFishery and the effect that has had on Aqua-Spark as a fund- the story of Aqua Spark is extremely relevant and interesting to anyone working in food, agriculture, aquaculture, and for that matter, impact investing. It should be shared and heard. Excluding eFishery, Aqua-Spark has a strong portfolio, and their journey towards disrupting a whole industry with an evergreen fund and attracting institutional capital is worth putting a spotlight on.
This episode is part of the Regenerative Aquaculture series, supported by The Nest, a family office dedicated to building a more resilient food system through supporting natural solutions and innovative technologies that change the way we produce food.
WHY AQUACULTURE IS ESSENTIAL
Regen aquaculture represents an opportunity to truly drive something for global change.
”We started to realise that aquaculture, which we didn’t know before, is a sector with 700 different species being farmed. Hundreds of those species have a resource footprint that’s comparable to chicken, all the way to net positive; it has the potential to be our healthiest, most resource-efficient food system. There’s a lot wrong with it today. Again, there’s a lot of stuff that you think, well, we shouldn’t be wanting this, like man-made growth destruction, antibiotics, and ingredients that are not sustainable in the feed; there’s a long list.” Mike Velings
”This sector, it’s been around for 1000s of years, but in terms of volume, it was non-existent. It was tinier than a pink nail. And now it’s one of the biggest protein sectors on the planet.” Mike Velings
WHY SCALE IS NEEDED AND HOW TO REACH IT
Mike shares insights on the growth of the aquaculture industry and the need for a global change in how it is managed and funded.
”We actually came to the conclusion that aquaculture should actually triple by 2050, being bigger than beef today. Triple by 2050 means that two-thirds of this industry doesn’t exist. It’s very capital intensive. It’s typically very long-term. It takes at least 10 years to build a medium-sized farm.” Mike Velings
”We started to realise that this is actually a much bigger story about its environmental impact, its climate impact, its biodiversity, but it’s also food security. It’s a sturdy food system that’s resistant to global climate change. It’s healthy food. It’s food for people. Well, it’s a way to make regions and countries independent from global trade. There’s so much possibility here that we started to think, even though we have nothing with aquaculture. This is a great opportunistic opportunity where we can actually really build something that can last.” Mike Velings
WHY VENTURE CAPITAL AND PRIVATE EQUITY STRUCTURES ARE NOT GOING TO DELIVER THE CHANGE WE NEED
Farmers are afraid of traditional investment models. They know these models could ruin their businesses.
”We started to realise that a lot of these things really take a copious amount of capital and really a long period of time, and that the venture model, private equity, etc., and all the existing investment models are not working for this space. And the people in the space itself, farmers in particular, are incredibly afraid of taking money from investors like that, because they realise the same thing, and they know that it might ruin their business.” Mike Velings
WHY AQUACULTURE NEEDS TO CHANGE
Aquaculture holds the key to meeting future protein demands sustainably. Rethinking its potential could drive global change.
”We started to realise that if you want to do this right, and you look at the increase in protein demand in the future, etc., we think it’s much better to do that with fish that has or shellfish that even has a positive footprint, for example, than to do that with cows. And nothing’s black and white, and everything is a lot greyer. […] And it’s healthy for you. And a lot of countries where we have the biggest population growth are much more into fish. And we started to think bigger. And then we started to think there might be an opportunity for real, global change here.” Mike Velings
LONG-TERM INVESTMENTS ARE KEY TO DRIVING IMPACT FINANCIALLY AND ENVIRONMENTALLY
The discussion highlights the importance of making the impact of these changes visible to drive further investment and support.
”If we really want to do this in a proper way, we should really think about that, and one of the things that stood out for us is that we kind of started over time, a bit automatically, because we are so different; we would walk into a conversation and say, ‘Sorry, we are different’. And then talk to people and basically have an uphill battle from that moment that we would sometimes win and sometimes not. We won it quite a few times. Otherwise, we wouldn’t have gotten here. But still, it was an uphill road where we were thinking that we should stop, and we should really try to create a new category that’s about longevity and concentration and a different investment model than just venture and private equity.” Mike Velings
”You don’t need to be a genius. If you have time and the longevity, you can see what is starting to work in your portfolio, and when you are sure enough about that, instead of the traditional knee-jerk reaction of this is when we start to sell and cash in, we actually double down and embrace the concentration and say we double down. Optimise for financial results, optimise for impact, and optimise for synergies with the portfolio that trails behind, which we can then actually accelerate.” Mike Velings
OTHER POINTS DISCUSSED
Koen and Mike also talked about:
- How we get institutional investors onboard
LINKS:
LINKED INTERVIEWS:
- Regenerative Aquaculture series
- Georg Baunach – More than half of the fish you eat is farmed: basics, potential and risks of investing in aquaculture
- Sowmya Balendiran – How to turn seaweed farming into an industry? Start by farming 1000 football fields of tropical seaweed in Indonesia
- Alf Gøran Knutsen – The good, bad opportunities of the multi million dollar salmon industry, from shooting lasers under water to feed
- Yanik Nyberg – Are saltwater plants grown on tens of millions ha of abandoned, drained salt marshes going to be the livestock feed of the future?
- Aaron Huang – How ranching (and eating) of millions of zombie sea urchins could restore the massive kelp forests of the U.S. Pacific West Coast
- John Holmyard – Lowest carbon protein aka mussels: it’s food, not a high tech unicorn
- Joseph Rehmann – Climate-positive fish is possible and its eggs are delivered by drones
- Sébastien Crépieux – Decentralised insect farming, the perfect livestock for arable farms
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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.