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Aquaculture investment pioneer launches new fund to back aquafeed ingredients

Exec will take a new approach with his latest venture.

David Tze, the investor driving the first aquaculture-focused venture capital fund, Aquacopia Ventures I, has launched a new, as-yet unnamed search fund aimed at the alternative ingredients sector.

Aquacopia, which took formative stakes in offshore aquaculture producer Open Blue, equipment group InnovaSea and ingredients group iCell/Nutrinsic, participated in those companies’ total capitalization of more than $200 million.

With what he dubs “the first and only true venture capital fund for aquaculture” coming to a close in December, 10 years after its founding, Tze began the process of identifying an asset in the aquaculture sector for a new start-up.

“In essence, I’ve been running a venture search fund that uniquely focuses on aquaculture technology,” Tze told IntraFish.

That search has already yielded what he deems “desirable targets” in the alternative ingredients for feed segment.

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Following “significant winnowing,” Tze is now evaluating four alternative protein technologies for aquaculture feeds – two companies, one solo inventor and a distressed patent portfolio. He has not ruled out other candidates, however.

Unlike Aquacopia, Tze now intends to have a laser-like focus with the new project, and zero in on a single company or technology – instead of assembling a broad portfolio.

“I am trying to follow one visible, specific angle of attack that has made itself clear to me,” he said. “Specific investors, technology, and business opportunities are aligning around and within this search fund and the novel aquafeed protein ingredients it targets.”

Tze settled on the alternative ingredients sector because it is “highly scalable, high margin, based on products that can be quantitatively valued, based on their nutritive capabilities, while also being a broad way to play the aquaculture sector without betting on just a few species, countries, or production methods,” he said.

Alternative feed ingredients have increasingly garnered attention. Last month’s Fish-Free Feed Challenge, which attracted an impressive list of feed sector attendees and was hosted in part by Google, is just one more sign that the sector is gaining fast traction.

That said, the space will need experienced investors and large strategic backers to truly develop, Tze noted.

“Innovation in feed ingredients faces a particularly stark challenge crossing the scaling chasm required to prove out technology risk,” Tze said.

That means innovators likely need large partners with patience and the ability to deploy “risk capital." Partnerships, like those developed between Calysta and Cargill and Terravia and Bunge are prime examples, Tze noted.

“[That way] the technology company focuses on tech, not functions outside its core competency, which generally does not extend to plants’ project finance, design, build, or operate,” Tze said.

With his Aquacopia track record, Tze’s drumming up interest among a network of investors.

“Prepared in advance, some of them will act quickly in supporting the search fund,” Tze said. “They are likely to include family offices and sustainability-minded groups, with possible participation by one or two iconoclastic venture funds or farsighted strategic players.”

Initially, funding for the project will be up to $10 million. Tze hopes to close a transaction in 2017.

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In addition to its focus, other key differences between Aquacopia and the new project, Tze said, are that this time around he will develop a single company and take on an operational role.

“I am now changing roles, from entrepreneurial financier to finance-minded entrepreneur, from coach to player,” Tze said.

In identifying lessons learned from Aquacopia, Tze said he had over-prioritized business plans and technologies, now seeing that management skill is paramount for developing companies – and that both his own knowledge and his network of potential, additional managers are key value propositions of the project.

“My priorities have changed, now they are even more aligned with the old venture capital adage, 'if you have to choose, invest in a grade ‘A’ team with a ‘B’ plan instead of the ‘B’ team with an ‘A’ plan,’” he said. “With execution a key consideration, I’ll be choosing a team, from the outside, then building it up, from the inside."

This time around, Tze also wants to focus on commercialization rather than revolution.

“I was selecting for game changers, even if they were sometimes long shots,” he said of Aquacopia.

“It’s still about innovation, for me, but now, I put greater weight on a high probability of success and finding shorter timelines to it.”


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