A new report outlines how aquaculture has transformed from a niche agriculture sector into a global industry.
These may be fluctuating times for venture capital investment in the agtech industry. But aquaculture is one sector going against the tide. Among the agtech subsegments, aquaculture saw the largest increase in deal activity in the third quarter of this year, according to figures from Pitchbook.
The sector boasted 15 deals in Q3 compared to seven in Q2. Portuguese clam farm operator Oceano Fresco secured the largest aquaculture deal, raising $18.4 million in late-stage VC funding.
A new report from the data provider outlines how aquaculture has transformed from a niche agriculture sector into a global industry.
The sector, the report outlines, has grown rapidly over the last 20 years and now represents the largest source of seafood globally, surpassing wild-caught seafood in 2022.
China leads production
While Asia, particularly China, leads in aquaculture production, significant growth has been observed across Africa, South America, and the Middle East. For landlocked countries in these regions, aquaculture represents a new avenue for economic development and reduces dependency on seafood imports.
Europe attracts most investment
VC investment in aquaculture has grown as well, with $1 billion invested across 63 deals in 2023. While Asia dominates aquaculture production, Europe boasts the largest VC market as it is leading the aquaculture industry’s technological revolution, with main innovations focusing on recirculating aquaculture systems (RAS), offshore farming, precision feeding technologies, and genetic improvements for disease resistance and growth optimisation. Start-ups developing aquaculture management software, alternative feed sources, and land-based farming systems are receiving outsized funding, the report notes.
Industry challenges
As the aquaculture sector grows, so do the fears about its environmental and ethical implications.
Concerns about water pollution, habitat destruction, and the use of wild fish for feed persist, and balancing the benefits of aquaculture with environmental protection will be key going forward. In some regions, particularly the US, for example, consumer concerns have held back the industry’s development, the Pitchbook notes.
Other challenges include high capital requirements (new RAS and other closed-loop systems require significant up-front investment and high energy costs), and regulatory constraints. Some governments and communities have resisted or even banned new aquaculture development due to disease and wastewater concerns.
The emerging start-ups aim to tackle these challenges. Pitchbook notes that the VC landscape now includes nearly 200 start-ups who are pioneering sustainable farming systems and deploying cutting-edge technologies to enhance efficiency, automation, and animal welfare in existing operations.
Plant aquaculture is particularly hot
The report also notes that cultivation of aquatic plants and algae has emerged as a significant subsegment of global aquaculture and is experiencing rapid growth and innovation. While the practice is widespread in Asia, where aquatic plants are cultivated for human consumption, new applications have spurred aquatic plant farming globally. Plant aquaculture offers numerous advantages over conventional agriculture, including accelerated growth rates, lower resource requirements, and the ability to cultivate large volumes of algae in bioreactors.
The expanding potential of this field is reflected in rising VC interest, with a record $114.4 million invested across 12 deals in 2023, highlighting the subsegment’s promise in addressing sustainability challenges and creating innovative solutions across multiple industries.
Warnings on the horizon
But while the sector reached a new investment peak last year, Pitchbook’s analysis warns that early indicators for 2024 suggest a potential alignment with the broader VC market slowdown, as both deal value and count are projected to fall short of the previous year’s figures.
“The future growth of the VC aquaculture market is likely to be influenced by the industry’s scaling production, increasing reliance on third-party technologies, and innovations addressing key challenges,” it says. “However, this expansion will heavily depend on improving economic conditions and investors’ willingness to support capital-intensive startups with extended paths to profitability.”
