Today, we have a special Halloween edition with my colleague David Yocom dressed as a dinosaur beside me.
My name is Tom Bunn an associate on the iSelect Ventures team, and I’m excited to walk you through today’s presentation and findings.
For those new to these webinars, iSelect is an early stage venture capital firm in Saint Louis, Missouri focused primarily on early stage companies in healthcare and agriculture. At iSelect, we are privileged to live at the forefront of innovation, seeing emerging problems, solutions, and macro trends, at their beginning before they make their way into popular culture.
We use these deep dive presentations not only as a way for us to better engage with and understand new science and technology but also to engage with the experts and entrepreneurs who are driving change and innovation in their respective fields.
One such macro trend in aquaculture in the feed used to farm healthy fish, which we will be examining today.
As aquaculture continues to grow at breakneck speed, developing new feeds will be critical.
Currently fish meal was used heavily to feed farm raised fish, which creates an unsustainable cycle of killing wild fish to feed farm fish. Industry insiders called to search for fish meal alternatives to one hundred billion dollars feed challenge due to the glaring need and the lucrative potential for new feeds.
As such, aquaculture feed is of increasing interest iSelect.
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We’re giving investment advice in any way whatsoever. This presentation is general industry research based on publicly available information.
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Thank you in advance for your attendance and active participation.
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And one last thing, this presentation is also being recorded and will be available for replay.
And with that, I’ve been using a webinar on aquaculture feed. We have someone just joined.
Sorry. This is Mike Salings. Good morning. Hey, Mike.
It’s Victoria. Demonstrate. Good morning. Good.
Thanks, sir. And guys Hey.
Anytime, you’re welcome. We’re just getting started here.
What we’re going to be covering today is we’re going to lay a foundation of what is aquaculture for those listening today or in the future who don’t have a working understanding.
Why it’s important a little bit of aquaculture versus agriculture the market size and the trends, the one hundred billion dollar feed challenge, which I alluded to earlier, which includes a very in-depth discussion of of fish meal. We’re also gonna touch on soy. We’re gonna look at some nutrition and cost.
And finally, the important stuff for us as far as looking at new companies, we’re looking at alternatives, these include insect companies, bacterial single cell proteins and algae.
We’re gonna look at some of the venture activity that’s been done to date. And then I’m gonna lay out my thoughts and discussion And I would be open to to feedback both from the those in attendance on the call and and those of my colleagues around the room.
So to lay a foundation, what is aquaculture?
Aqua culture is the farming of aquatic organisms under control of their semi controlled conditions in both marine and freshwater environments.
Includes plants, fish or shellfish, oysters, mussels, clams, shrimp, crabs, and crawfish.
The uses are myriad.
They include stocking public waters for sport and commercial fishing, saving endangered species, and the most important use and the one we’re going to be focusing on today is harvesting a commercially viable product. What else is it?
It’s the fastest growing food sector in the world, growing between five percent and eight percent per year. And in simple terms, aquaculture is agriculture.
So very simplistically types of aquaculture that we have.
We have onshore aquaculture No surprises here that this is these are fish raised onshore.
We have offshore aquaculture primarily for or exclusively for Polagic species, marine fish.
We have non fed species, which we’re gonna put to the side today, and then we have fed species, which we’re gonna be focusing primarily on today.
So why is it important?
Well, the simple matter is that protein is why it’s important. There are seven billion people today on planet earth and they’re supposed to be about nine point seven billion by two thousand and fifty, possibly eleven billion by two thousand one hundred. And we will need at least seventy percent more protein.
Of the seven billion people alive today, two point six of them depend on the oceans every day.
And that is in an environment where fisheries are are two and a half times larger than what our oceans can sustainably support.
According to WWF report, in the last forty years, our global marine life has been cut in half. In twenty fourteen, thirty one point four percent of stocks were overfished, and another fifty-eight point one percent were fully fished.
Fish is the last food we still systematically hunt, which is striking in twenty eighteen.
And as Jack, we still said, therefore, we must plant the sea and herd its animals using the sea as farmers instead of hunters. That is what civilization is all about farming replacing honey.
So just some background on aquaculture versus agriculture.
The current amount of fish consumed globally wild cash and farm combined is over 2x the tonnage of the total amount of beef produced on Earth.
About fifty percent more than the total pork produced and about 2x more than the total chicken produced.
Feed conversion ratios, which are basically the amount of feed needed to get a unit of of weight in animal weight, pout are are the following. So for cattle, it’s about eight to one, pork, it’s about three and a half to one, poultry, it’s about two to one and fish is is the most efficient of the bunch at one point two to one to one.
Furthermore, fish fish generate fewer carbon emissions and utilize fresh water and arable land for pound of production and their land based counterparts.
In fact, space isn’t an issue at all. The current total landings of all wild capture fisheries could be produced using less than zero point zero one one five percent of the global ocean area or to put that into, you know, more vivid terms, I’ve read that the state of Rhode Island could supply enough fish to feed the whole world.
Which from a wild capture point of view.
So here we have a graph of the total production of fisheries.
On the top, few rows, we have the total capture fisheries.
The total capture fisheries is about ninety-three point four million metric tons, total aquaculture is about seventy-three point eight million metric tons, But we recently got to the point where we’re aqua we’re fish for human consumption has – from aquaculture has superseded that of wild captured fish.
So looking more into the market size and trends, global supply of fish protein for human assumption has more than doubled since nineteen ninety five due to the rapid growth in aquaculture.
You can see that in the in the graph below.
Acoculture production grew at about six percent CAGR over the twenty fourteen period. While wild catch production remained relatively flat.
From twenty twenty fourteen, also aquaculture increased from twenty six percent of world supply of fish protein to forty four percent, which represents an estimated value of a hundred and sixty billion, broken down that’s about one hundred billion dollars in Finfish, twenty billion dollars in Mollocks, thirty six billion dollars in crustaceans and seven about seven about four four billion in other aquatic animals. In global aquaculture production is projected to expand at a rate of three percent per year from seventy four million metric tons in twenty fourteen to close to a hundred million metric tons in twenty twenty five.
So it’s growing. It has grown, and it’s projected to keep growing.
This gives the visual to what I just said that for human fish for human consumption aquaculture just superseded that of captured fisheries in twenty fourteen and it’s expected to, as I just mentioned, continue to separate from from the pack, separate from wild capture fissures. So the one hundred billion dollar feed challenge, this is as I mentioned, the holy grail, the search for fish meal alternatives.
And basically, the the nucleus of this idea is that ten percent of wild caught fish goes to feed farm fish.
It’s about five million to six million metric tons per year in a market worth seven point two billion dollars There seems to be some sort of irony in that we’re catching wild fish, the feed farm fish.
It’s very expensive. These fish stocks are dwindling.
So finding fish meal alternatives and saving these these fisheries and finding cheaper ways to feed farm fish is really what this is all about.
So the production of feeds for aquaculture worldwide is the most rapidly expanding market in the animal feed sector.
This aquaculture feed industry is growing at about six to eight percent per year.
And fish meal and fish oil are the lifeblood of this growing aquaculture industry. And demand is projected to double by twenty twenty five.
Why you may ask is fish meal so good for fish and fish oil?
Will provides a balanced amount of all essential amino acids, phospholipids, and fatty acids like DHA and EPA, all in in basic basically perfect unity for fish consumption. So this fish meal and fish oil is largely coming from small pelagic fisheries such as anchovies, Min Hayden, Sardines, and from the trimmings of fish processing.
And although production of fish meal and fish oil has has remained relatively constant, the percentage consumed by aquaculture has risen So it’s now accounting for roughly sixty to seventy percent of fish meal and eighty to ninety percent of fish oil.
So looking more at fishing a little bit due to prior over fishing, much of the world has enacted strict regulations to protect global production capacity.
In spite of these efforts, capacity is decreasing at more than one percent annually.
You see the graph here, fish meal production has has remained relatively flat over the over the last twenty years, it’s beginning to dwindle at about one percent a year.
And you see two cases, two future scenarios of of demand for this fish meal going up significantly as as aquaculture continues to grow and as viable feed alternatives have yet to make it very mainstream.
So looking at the fish meal price projections, This is a little bit off based on my next slide, but you see the price now for fish meal.
It depends on what kind of fish meal you get, but it’s around. Twelve hundred to two thousand depending on what fish meal you get. And as we just saw based on demand and dwindling supplies, that price is likely going to skyrocket.
So these are from these are actual prices from the week of October twenty eighth, so this week based on European fish meal prices and peruvian prices.
So you see on the left hand side, that’s the European fish meal prices that ranges from between, you know, about fourteen seventy five to about seventeen seventy per metric ton.
You see the protein content is very high upwards of seventy two percent And then on the right hand side, you see a whole host of offerings from Peru.
You see, you know, h I s t and TVN, no stand for histamine and and total volatile nitrogen.
These are these are thresholds above which fish really is not good to eat. It it’s basically a proxy for freshness.
And safety in some some degree to some degree. So for example, one thousand histamine is is the level above which, you know, the fish doesn’t stay fresh for that long. So you see varying degrees of varying levels of pricing based on what you’re getting, how much protein content you’re getting, what sort of additional compounds are in the feed etcetera.
So this goes back to what I was just saying.
The the fish meal demand gap is projected to be high. Some sources say that by twenty thirty, this market may go up at fifteen billion, and that will be a four billion dollar gap alone by by twenty thirty.
So switching gears a little bit Let’s take a look at soy.
Soybean is composed of about forty percent approved protein. And soybean is the foundation for a growing supply of aquaculture feed.
So a protein concentrate is probably the most concentrated form of protein from soy.
This contains a minimum of sixty five percent crude protein.
It’s produced through the removal of oil and water soluble non protein stituents in the bean. And there are two main types.
There’s food grade for formed from the further processing of white flakes from soybean meal that is primarily used as a binder or an extender in the meat industry. And we have feed grade, which is formed from further processing of soybean meal. Which causes a slightly lower crude protein content.
This is mostly used as a milk replacement for piglets and calves in the livestock industry. And also as a fish meal replacement.
From what I’ve read, soybean soy protein concentrate, is still very expensive.
On par with with some fish meals, Mike, I’d be curious to get your thoughts on that. I know it’s quite a bit more expensive than than soybean meal.
I had a tough time tracking down explicit precise prices for soy protein concentrate.
If you have an opinion on that, feel free to let us know.
I would have to look at the latest as well.
But soy protein concentrate is the fastest growing soy protein segment. There was about one point five million metric tons produced and sold in twenty fifteen. This is forecasted to about three million metric tons in twenty twenty.
And you see feed grade is growing outpacing that of food grade pretty quickly.
Tom, on the soy protein, did you see any studies how beating fish’s soy protein impacts the health benefits and things like the omega-three content of the fish Yeah.
So there are no omega three’s.
The amino acid the essential amino acids for fish are comparable to that at fish meal.
For soy protein concentrate.
For soy soybean meal, it’s much less.
You get a lot more of the amino acids for soy protein concentrate, which is why it’s so expensive. But as far as omega three, that’s where you really get into fish oil.
That’s why fish meal really is superior. It’s very important because you get the DHA, the EPA’s and the omega-3s. Okay.
And so it impacts the content of that inefficient Exactly.
So soy as a substitute. Fish meal can be substituted with soybean concentrated plant based proteins with varying degrees of efficacy.
Omnivorous fish such as catfish, shrimp, and tilapia.
They’re fairly accepting at plant based substitutes. Carnivorous fish on the other hand salmon and trout have tighter dietary standards and thus it’s harder.
So tilapia, for instance, basically I think you can substitute.
I think a common threshold for fish meal in dilapia is about three percent So you can basically all but eliminate fish meal and not lose any of the benefits for something like tilapia. For carnivorous fish like salmon and trout, that’s a little bit harder, but it’s still possible to to use less fish meal.
And it’s possible, and it’s been done.
So if you look at this graph here, this is a a composition of typical norwegian farmed fish.
The blue box here in nineteen ninety is marine protein. Take that as fish meal. Marine oil and the lighter blue as fish oil.
Then we have, you know, a collection of plant proteins, plant oils, starches, and micro ingredients.
You will get the the blue box. It’s obviously gotten smaller over time.
The amount of fish protein, fish meal in twenty thirteen as drastically less than it was in nineteen ninety.
So progress has been made, but from everything I’ve read, we’re hitting it you know, an as in total substitution limit. They cannot do much more without hurting the fish being cultured.
So breaking down the fish meal a little bit more on the right hand side, this gives all the constituent parts of the of the, what is this, the plant protein. So the sixty two percent in the blue is soy pro concentrate, which is most of the plant proteins.
And then it’s augmented by sunflower meal, fava beans, wheat gluten, pea protein, and corn.
So the cost of ingredients, this graph shows a a very different waste of ingredients.
It’s important to point out that, you know, any any given farm will feed slightly differently. And, of course, any different species is gonna feed very differently.
This is not a, you know, one size fits all prescription It’s very different across species and especially across especially across species and and even true across farms.
So in this example, this is another Atlantic salmon example I found. Fish meal protein is is still the highest cost.
That’s about twenty nine percent weight and thirty percent through six percent of cost.
Soybean meal is not as highly used in this example.
And then you have some other additives as well. So clearly, still using fish meal.
You get a lot of you still get a lot of cost.
So the incentive is there to find cheaper alternatives to that thirty six percent cost that you’re seeing. Interesting to point out, astaxanthin at the bottom represents a very, very small percentage of the feed mix, but it’s eighteen percent of the cost.
And we’ve talked to a couple firms that that are have a roadmap to produce astaxanthin and greatly increase the value of their feed.
So this is the spread between fish meal and soybean meal.
Important to point out again, this is not soybean concentrate, this is soybean meal. I think if you were to look at fish meal versus soybean concentrate, the spread would be a little narrower.
But this goes back to the point that fish meal relative to other mildly comparable proteins has a pretty big spread and that spread is probably gonna get there.
So fish meal is needs to be replaced by some good alternatives.
Here’s an amino acid profile for salmon. So this has all the main essential amino acids for salmon.
Again, this is gonna differ across species.
And you see that So with protein concentrate largely hits a lot of the requirements for Atlantic salmon. You see you know, a drop in methionine, which is we’ve talked to a company making synthetic methionine.
But by and large, the essential amino acids are being are being hit by soy protein concentrate.
However, there are some downsides to plant meal and protein concentrates.
It requires agricultural land to produce. I read one quote regarding Colista that one commercial scale feed kind protein plant.
If used to replace soy products or fish feed would free up enough land feet as many as two hundred and fifty thousand people.
And it uses also significant amounts of water.
So the meals, they’re lower protein content.
As I mentioned, soybean protein is in the neighborhood of three hundred dollars to four hundred dollars per metric ton. There are anti nutritional factors as well, you know, compounds that that don’t contribute or contribute to negative growth in the fish.
And they won’t work for all species. Concentrates, as we mentioned, they’re expensive on par with fish meal.
And they lack certain minerals, and they lack the, you know, the most robust amino acid profile of of fish meal, although it’s still relatively high compared to soybean meal.
So when looking at substitutes, what are we looking for? We’re looking for obviously competitive pricing.
We’re looking for comparably high protein, sixty percent plus is that harkening back to those slide on fish meal proteins. That’s pretty standard sixty percent to seventy percent We’re looking for favorable amino acid profiles, high nutrient digestibility, and palatability.
The carnivorous fish needs to like the food they’re they’re they’re eating.
It needs to, you know, remind them of whatever carnivorous diets they they are in ingrained to eat.
They must not have high fiber, high carbohydrates, especially non soluble carbohydrates, and they need to not have anti nutrients.
They need to get rid of the anti nutrient factors that will Stonify growth, including allergies.
So some types of alternatives. They’re krills and mesopologics.
They’re marine worms, farmed fish, which seems pretty silly to feed farm fish to other farm fish. Looking at guar protein, which is a type of legume, yeast based ingredients However, we’re going to be focusing on insects, algal single cell proteins, and bacterial single cell proteins, primarily bacterial and insects Algal single cell proteins.
There’s less venture activities.
That’s more the activity there is more corporate based but still interesting nonetheless especially when you will get, you know, substitutes for fish oil.
So insects, Black soldier fly and mealworms are the primary two sources.
Black soldier fly larvae meal has high protein content, adequate level levels of methionine and lysine.
One hundred percent replacement has been shown to be possible.
You get improved food conversion ratios, And you can use food waste as a feedstock. So you can you can take waste and and you know, turn it into something viable for a growing industry.
As lower environmental impact requires limited land. But on the downside, No industry player yet has really shown the scale needed to compete with fish meal prices.
They may it may require a large waste management business And right now, it’s the the the leading insect companies are are still fairly small scale and and that scale has yet to be proven out. Mike, I’d love to get your opinion on that.
I know ProTix is one of your portfolio companies. What’s your thought on insect?
For aquaculture and scaling that?
Well, we think that it’s going to scale significantly over the next over the next five to ten years. But it’s still early days. I think their global total production of enchignal today is probably around ten twelve thousand tons, which compared to the total global made and going forward is kind of meaningless.
But we and you’re right that there’s a lot of questions around why and how you could scale this, which is why we did a lot of research and took took our time before we made our first investments.
I think we looked at about forty five different companies across the globe for six years.
But we think that insects will scale to a more distributed model where, for example, Protix has developed fully automated plants, and they will run their own plants and own factories and their own but they will also supply to a joint venture with bueller fully automated plants to other insect producers and people that own feedstock.
So it makes total sense for a company like Cardinal, for example, and it already has side streams coming out of their milling operations to bolt on insect plans to upcycle their production.
And if you then can be next week, use the supplier of plans, data services, and especially the genetics and making sure that everybody gets insect strains based on their feedstock.
And you go to a situation like where if you look at plants, for example, if you are going to plant a corn coop, You have to buy seats every single time, and we expect that the impact industry will go to a similar model.
So it won’t be it might be just a few companies in the end, but it won’t be just a few insect plants. It will be many insect plants.
And we think that that would be the key in solving scalability.
And then still at the stats that you gave earlier, our verifiable stats, and we think that opportunity is actually quite a bit larger if you take some other things into account by mid century.
So we are going to need many types of alternatives and that are price competitive that are competitive from an additional standpoint from millions of tons.
So we’re long but it is going to scale in our opinion.
Great. Thank you.
And going on to the next slide, what do you think about black soldier flies versus mealworms?
From what I’ve read mealworms take quite a bit longer to to reproduce.
The the inputs are a little bit higher, oftentimes using, you know, human human flower human wheat flour. Do you have a perspective on the two main species being used and which one has the competitive advantage?
Well, we think that both have value and complimentary, but yes, the difference.
And it’s mostly driven by what kind of feedstock do you have available.
And yes, you’re right. A mealworms take a little longer. You need a higher value feedstock.
And it’s more bad feedstock versus dry feedstock, etcetera, where you see what’s in fact is the most applicable.
If you look at the leading inside companies in the space, Amazon, a few.
And then you see that most are black soldier flies insect in France is mealworms.
And then you also you see that the scale up is starting to happen again, anti protein insects, projects.
All of these companies are raising rounds now that are one hundred million dollars or more.
Have with large corporate investments.
So, that’s a sign that it is going to happen.
Great. Thank you.
Before we go on any further, I know we have a few other people on the call.
It looks like they’re not showing up on the GoToMeeting.
I just wanna make sure We can hear everybody if they have comments. If if you try to speak up now, we’ll let you know if we can hear you or not.
There may be an issue with our side of the GoToMeeting.
I’ll keep going on. I can hear you. I can hear you, Tom.
I I don’t — Okay. — just don’t think anybody has any question. Okay.
Great. So thank you for that, Mike. Very much appreciated.
So Looking at the insect breakdown a little bit more granularly, this isn’t the forty companies that I’m sure Mike had seen across the globe, but gives a good idea of of the offerings out there. You know, based on insects used, you have again, black soldier fly and mealworm as the principal species.
You have the substrate used, whether that’s pre consumer waste, cereal byproducts or or whatever, and then kind of the production model. So another another key point is a production model going into these insects. We’ve seen a couple different ideas around this.
I’ve personally and partial to the the outsourced feeding and kind of the hub and smoke model.
I know a lot of the other I know a lot of insect companies are more you know, focused on centralized production, less hub and spoke. You know, I see there are pros and cons to both but to get to scale, it seems like those mega factories, those centralized big factors are gonna need, you know, forward sales contracts a pretty high volume to get to scale.
And and the hub and spoke might offer a competitive advantage to to be a little bit more nimble at the start Maybe maybe just, ma’am.
Can can I comment on that?
No. And I I agree with you, but a bit more further out and it’s also what I just said about projects. But I think in the short term, because people forget that this is an extremely technical business.
And it’s much harder than people think.
I think in the short term, a lot of it will be tightly controlled close to that just central operations.
And I don’t think right now the product is so scarce that selling the product is not really an issue.
Prices that we didn’t have to expect for now because there’s no volume.
So as it’s – I think it’s a mix of both things.
Thanks for that.
So shifting gears a little bit, talking about single cell proteins, Before we do so, what makes a good single cell protein?
Well, they got to be easy to grow in number, and they got to be cheap.
And they’re, you know, principally from from waste products.
They have high specific growth rate productivity, and yields on given substrates.
They have a very short life cycle.
Genetics, they’re easy to modify, either naturally, or synthetically.
And then after that, they’re stable.
And there was also resistance to change in environmental conditions their power into temperature and and pH.
So looking at algae a little bit, algae is becoming increasingly important due to the presence of DHA, the basis for Omega three fatty acids.
As fish oil becomes less common, farmed fish have lower levels of omega threes, which is a strong driver for consumption.
One of the main reasons fish has been consumed as heavily as it has is because it’s marketed as a very healthy protein option.
Principally because of these omega three fatty acids.
So it’s fish oil becomes less common.
You get lower levels of omega threes.
Obviously, fish producers, fish farmers are unhappy about that. So they’re looking for looking for a needing alternatives to these omega threes.
That’s obviously taken off, like, anywhere.
If I get for over the course of the last, like, eight years, like, so many things about algae being used for a wide variety of factors. Is there where in what areas of value actually being used as, like, a main source or is it always kinda like an achievement, you know, alternative That’s a good question. I think it’s by and large still relatively French on all on all accounts.
There’s some biofuel, there’s some food products. But I I don’t know of any industry that was like algae is.
I think I think it’s a pretty central part part a lot of different biofuel problems. Yes.
The oil is, that’s fairly that’s fairly well developed there.
Yeah. In the oil.
For biofuel production — Yeah.
— that has, like, a lot or even – there’s even – I’ve seen methods of using algae bloom.
So what are the just how to get storing in tanks, letting it grow with sunlight. And then, you know, they can they can essentially burn that too as a final byproduct and and generate electricity from that.
A lot of cool things. No.
Those are, like, cool things. I just don’t know if it’s, like, widespread, like, dominant news in any industry. It always seems like comes up in every sustainability conversation.
It comes up in every I just want to know why it’s if it’s anywhere that’s really strong and acknowledge why it’s And it seems like it would be fairly easy to use gene editing to change the omega three profile Did you see anybody that was exploring that of trying to engineer the perfect algae for food?
On the Algo side, full transparency, I didn’t focus that much on it because seemed to be that there was less startup activity.
It’s based on a lot of corporates, bungee, Carabilla, Cargill, They’re all focusing on, you know, fish oil alternatives.
Didn’t see a lot of startup activity.
On the SYN Bio side for bacterial single cell proteins is where you see the, you know, engineering microbes to get to get whatever you try to get additional content.
So as I mentioned, from my research is primarily been focused on by big corporate players. Fungi and Terra have developed an algae product with twice the levels of DHA.
That can be found in fish oil. Cargill is developing a canola oil comparable to fish oil with omega-3s.
That’s still very early days.
From what I’ve read they’ve been working on since about two thousand trying to perfect it.
And once it is perfected, it will probably face steep regulatory hurdles as well.
Important to point out that no algae’s addressed the absence of EPA, another oil found in fish meal, it’s very important.
So again, these single cell proteins have promised, but they’re not perfect and they’re still early days.
And right now, it’s about two thousand dollars a ton, which is basically cost prohibitive to be used at a at a wide scale.
But again, the protein content is comfortable and a good source of important compounds omega-3s, methionine, three and eight, etcetera.
So shifting gears to bacterial single cell proteins.
At their core, these are single cell proteins that are produced via microbial fermentation.
So you take a a low cost feedstock and you feed it to to you know, architected microbes.
Microbes that you know have certain characteristics.
It goes through some fermentation, and you get a post processing single cell protein. And after dewatering, drying, and sterilizing the texture, it is a potential feed additive in fish meal replacement.
So Import to note, you can use various substrates.
There are folks using c o two. There are folks using you know, methane and methanol, gases and liquids to create these single cell proteins And what you get is a high protein low lipid product that offer high feed food conversion ratios very fast growth, potential prebiotic effects and promotion of gut health that in some cases has been shown to decrease mortality and improve healthy function of fish.
Many of these are non GMO and They’re also sustainable, you know, relative to a lot of other options out there.
They they don’t take very much land.
In some cases, they’re carbon sequesters.
So looking at recent financings in the insect space, You see quite a bit of activity here.
As Mike mentioned, there are some companies going after one hundred dollars plus million rounds. These are some some fundraising that I saw.
It really runs the gamut from, you know, early stage seed rounds to to, you know, high profile, a later stage venture financings.
As far as key investors, we have aqua Spark up here. We have Mike feeling who’s was gracious enough to join us today. They’re a a big player in this space.
Interestingly enough, we have Uber invested in a company called Hipramine.
Apparently, Travis Calenack, the the old CEO set up a competition in France, I believe, and liked the company so much that he decided to invest off of Uber’s balance sheet. So Uber is now invested in insects, which is — Absolutely.
— hard to believe.
And you see other other well known In key vantage accelerators, venture funds up there.
We have Y Combinator.
We have Robobank, civalo ventures, etcetera, ADM.
So looking at recent financing in the biological single cell proteins, You see, relatively fewer here. Very high profile company, Kalista. They raised the series d in May of twenty seventeen.
That was about forty million dollars. They’ve raised about ninety million to date. Again, Aqua Spark is in that one.
Companies we’ve talked to that we like are, you know, nip bio, no nutrients. They’re doing comparable things to to calista, you know, different substrate different feedstock.
But at the end of the day, there there these these guys are all focusing on developing single cell proteins.
Efficiently via microbes.
So going back one slide to just looking at the growth rate in the protein range.
I’ve mentioned this before, but I I found this graph interesting. So on the left side on the left y axis, you see growth doubling time in minutes.
And on the right side, you see the protein range.
So you see soy meal, as a stable source of about fifty percent protein.
It takes a while to double Going up to insects, you see a much higher potential growth rate and protein range. Going all the way up up to the right, you see bacteria with protein potentials very high.
This is saying eighty percent I have yet to see that but certainly above sixty five, seventy percent is viable. And doubling time, you know, exponentially faster than soy meal and and and insects.
So going on to the thoughts, my thoughts and hopefully a platform for discussion.
Obviously, there are supply and demand imbalances in this market. Aqua culture is the fastest growing food production technique and fisheries are in dire straits. So this is creating an economic view that is very favorable to the production of aquaculture.
Fish meal is in decline, but the the demand for healthy seafood is only going up.
Furthermore, aquatic protein is the world’s most efficient source of animal protein.
And if you have better feed, this makes this even more true.
So the search for better feed makes the world’s most efficient source of animal protein that much more efficient. Over as Mike and I discussed on Friday, the future of fish feed is a blend of alternatives.
I think it’s easy to get caught in the mousetrap you know, which one of these single cell proteins will win?
Will it be algae? Will it be insects? Will it be, you know, bacterial single cell proteins?
I think the answer is yes.
All of them, I think, have it placed in the future of fish meal.
The scope of scope of aquaculture production is so large that they’re, frankly, is room enough for a lot of different players and a lot of different types of protein because you have so much variety in species, you have so much geographic variants, and you have so much some of the options for for for great protein that cost will be dependent on where you are and what species and how you’re raising your protein. Tom, on a macro level, did you see anything out there that projects the food demand for livestock and the food demand for aquaculture relative to the projected growth in farm production.
So we can see at what point it’s just simply a fact that that the current systems aren’t gonna be able to keep up with the demand here.
I did not see that.
I would I would guess that you could map that out and start to begin to understand see price inflection points are going to happen here.
So do you mean at what point it becomes more viable to just focus on aquaculture, or at what point what’s going from a fee standpoint or all of these fees that you’re saying are now not priced competitive. I’m going to they become price competitive because the demand, the pressure from livestock and the other new needs for this, we’re gonna force price pressure here.
That’s a good question.
Is there a – is this a market driven by price performance, supply and demand.
Price supply and demand?
Or is there an element of market that that’s driven by performance both.
But with — And so — which is a quote from Bravo Bank.
There’s a report from Robobank.
It has a ten year outlook on what they expect to happen in terms of supply for Motela Vitch and what that will do to pricing. Because at some point, you could argue that the prices won’t go up anymore, but there’s also substantial amount of analytics in the market. And that will go up and down and supply in the month where we are the balance in that cycle a few times, most likely.
And so what’s going to happen to the prices in the next ten years is actually quite interesting. It’s not a long report.
It’s published by Coriam Nicolas, the seafood analysts for Huawei Bank.
And I think it was published about a year and a half ago, you can probably find online, and I’d like you to look it up there.
Thank you, Mike.
So I’m thinking through who the early adopters could be, because what does the restart of main early adopter?
There’s a portion of this that’s going to be – there’s a cheaper cornerstone of protein.
It’s going to be part of this market that’s going to be – we like this protein better than other protein.
My guess is is that the part of the market that’s like we like the price, there are foundry like boom bus, capacity supply demand and balance affecting price in the marketplace.
I built a giant fabric there for the price of silicones coming down.
And then it’s going out because of my capacity. So you’re going to have that dynamic.
And people will or will not enter that market based on the degree of signaling going on. So there’s there’s a question about that. How that markets go evolve and whether scale matters.
And then on the early adopter market, or starting to seeing other parts of innovation of ag, if there’s more verticalization going on.
So I make beef, I have my own cornfields And I produce the beef closer to the slaughterhouse, the cut down transportation costs, even though I pay more for my corn.
So I bring up both of these because depending on which model we’re going down and both may be going down and it’s where are the early adopters.
And as we think about where we’re going to invest, we want to help the early adopters where or we can start to see some some traction.
So Quite like high end of the market. Excuse me. It’s probably like a high end of the market.
It’s real Steve, more of that really dodder behavior.
Right? I mean, in terms of, like, it really came about segmenting out. Pretty, like, fragmented.
So so, like, salmon seems like those are the kinds of plates where people have higher margins on the fish.
And more applicability in terms of being able to try new things, have a higher overall value.
And generally speaking, that industry, is wave – that side of off course is way farther ahead than the rest of them technologically.
So that’s the kind of place where you would start to see more of that behavior. Yes, And I’m not sure, I mean certainly verticalization of new markets. If there’s a real performance advantage, you sort of want to lean on.
Probably those verticalization markets because you’re going to be able to extract value.
I think I think that’s pretty interesting on the feed side is that if you were to look at it from an early adopter and whether that early adopter is actually referenceable to the rest of the market because the needs of off culture in different types of species as real different things. And the different types of feeds that are needed and the different kinds of mixes and technology that are relevant. I mean, to draw, I get a comparison that we’re we were to look at salmon stuff like the Nordic countries and then compare that to what Osmo Systems was focusing on and sort of more like Ecuador and in South America, shrimp and salmon or shrimp and salmon. They’re not not the same, not grown the same way — Yep. — with the same types of needs. So we’d have to decide about early doctor behavior in a high end market and whether or not it would actually end up translating to anywhere else. Well, that’s right.
They may be in no way portable. Yes. So they may be not referenceable.
They may not be referenced with the other market, but maybe you can make a lot of money doing organics because there’s enough of that market to get to it. So I mean, we’re talking about a giant market if you don’t have to own the whole thing. No. No. It’s interesting to get back, if it doesn’t.
And I don’t mind. I mean, the thing that I sort of think about Mag is there’s a high end. I want beautiful product and I want to have the coolest, most recent microgreen But — Yeah. And then for some people, I made or tweeted about somebody’s instagram account yesterday. And then you’ve got the other market, which is We got any calories delivered at a low cost at scale to just feed people so they can lift a sixty. We don’t care if they get diabetes.
So those are two active markets.
And we just got to decide which I guess we look at companies, we may need to think which lane they’re in, we’ll learn something from both lanes. But callistix come out and say, I can build another plant and it can bring about production on all some screw up business case of ten Yes.
I mean, I think there’s business case for across the market if you get to cost parity with fish meal. Right, because almost obviously diets differ across species, but one fundamental thing if you look at fish meal as in most species, a large swath of species need fish meal.
So you can get the cost parity and you it’s just a plug in.
Plug in Nova meal. So that’s another theme. So we could say, systematically, Okay. Let’s go chase down everything that is going to bring.
There’s ten technologies that can break down the cost of fish meal.
Or getting price parity with fresh mail or whatever it is.
But here are the ten things that can be done.
And if we invest in one of those, that’s cool too.
But I want to do it from a standpoint of understanding in what context the thesis is operating.
And we’re not trying to be able to all people, we actually want to be probably more narrow than that.
Right. You know, solve a particular problem, got a clear exit value. Especially when we’re dealing things with anything on the input side.
Because, I mean certainly if your intel is trying to go into a business and you got to you got to start making PCs to get your chips sold.
That’s cumbersome. But if you can clearly drop in and reduce the price – improve price performance of the plug in that’s – and e2xo. Right.
Especially if it’s undemated.
And then let the customer suffer through the boom bus cycle of supply and demand.
But we might want to describe — this is true across all of our ingredients. Companies to start to describe in the early adopter markets in terms of is it a performance oriented market or a price oriented market and then understand for sure who’s got the substitutes, because it closes the substitute.
And so you gotta go reread Porter on that part.
But but the substitute component of somebody could swap out And my guess also is rail lines and transportation systems dramatically increased switching costs.
So there are a lot of those kind of variables we got to — absolutely be sent into too.
Wrapping up here, my personal thoughts are are given the load time and low inputs, relative relatively low inputs needed to propagate bacterial CPs.
They are a good bet.
Obviously, companies like Kalista have a have a pretty big head start.
But, you know, you look at the synbio aspect of this and start architecting microbes that can add really high value compounds to your feed, for instance, astaxanthin. I was speaking with one entrepreneur who reckon that four that adding astaxanthin to you know, a feed mix would increase the cost per ton or the value per ton to upwards of forty thousand dollars.
When you’re looking at a commodity, that’s between the ranges of five hundred thousand dollars to two thousand dollars per metric ton.
Skyrocketing up to forty thousand dollars per metric done with a super high value compound like astaxanthin would be would be very important.
Also important to look at for biological single cell proteins, the cost in the infrastructure around the substrate. For instance, the methanol versus methane, methanol is is a gas company called NIP Bio is — sorry methanol is a liquid NIFios focusing on liquid fermentation, methane’s a gas.
You got to think about the cost of both of those things, the infrastructure around using existing infrastructure, for instance, ethanol plants and, you know, breweries to ferment from, you know, a a liquid liquid input.
So there are a lot of factors around not just the the the end protein, but as Carter, you mentioned, if it’s a cost play looking at the inputs needed to make these proteins.
So with that, unless there are any further questions, I want to thank you all for joining. And again, this webinar will be available for replay. And as a reminder, we do these every Wednesday at nine AM central across a broad range of topics spanning healthcare and agriculture alike.
So every week is something different.
And to add on that, we haven’t discussed, people want us to pursue particular things, we’ll dig in and and move in that direction.