WORKWEEK

In a bright spot for climate tech funding, several firms focused on using macroalgae to make more sustainable end products and reduce emissions announced new fundraising rounds this week: 

• Carbonwave raised a $5M Series A to use seaweed to make advanced biomaterials. 
• Macro Oceans raised a $5M seed round to use seaweed to make more sustainable chemicals for cosmetics and plastics.
• Alga Biosciences raised a $4M seed round to make kelp-based feed additives that reduce methane emissions in ruminants.

As wrote Steven Hermans in his newsletter Phyconomy during a 2022 year in review: 

In the past 3 years, half of the $365M investment tracked went into just 2 sectors: livestock methane reduction with Asparagopsis and biorefinery approaches. (source here)

There are a few noteworthy pieces of info in the above. For one, $365M in investment over three years is small; venture-backed businesses focused on using or growing macroalgae are a niche climate tech and food subsector. 

The concentration is also noteworthy and continues to characterize the space in 2023. Still, the end applications of macroalgae are pretty diverse. Both Carbonwave and Macro Oceans want to use seaweed to make chemicals or base materials that could ultimately serve many industries, from plastics to cosmetics and packaging.

While all three firms we introduced are early-stage and will now shift focus from proof-of-concept to greater manufacturing capacity, another big question underpins their businesses: If and as they flourish, can seaweed production flourish alongside them?

Stimulating a seaweed supply chain 

There’s a lot of positive climate impact inherent to cultivating seaweed. Growing more could be a great way to counteract emissions elsewhere. As we’ve written about with respect to firms like Running Tide, growing photosynthetic algae is a solid way to remove carbon (like most carbon removal approaches, it’s not without its complexities, though).

But while seaweed cultivation is the fastest-growing aquaculture industry in the U.S., it’s a small industry as of yet. The U.S. imports more than 16M pounds of seaweed annually (mainly for food). It only produces 100,000 pounds or so in organized domestic aquaculture. Macroalgae production is a much larger industry in Asia, where there’s a richer history of using seaweed.

Whether, like Carbonwave and Macro Oceans, you want to use algal ingredients to make inputs for other products, or, like Alga Biosciences, you want to create a feed-additive that reduces ruminant methane emissions, your potential impact is constrained by how much you can source and how much it costs.

This all introduces a key macro question. Will demand from firms like Carbonwave and Macro Oceans sufficiently stimulate the front end of the seaweed supply chain? There’s little doubt it could help. In a piece from Climate Tech VC that profiled Macro Ocean’s CEO, Matthew Perkins, he noted:

The primary challenge for seaweed farmers today is that they don’t have committed long-term buyers who will pay them reasonable prices for their product.

There are a few nested dependencies here. First, firms like Carbonwave and Macro Oceans need demand for the materials they produce from major plastics or packaging, or cosmetics producers. While multinational firms are motivated to give more sustainable approaches a shot, even if they’re a bit more expensive to start, they ultimately require scale and consistency given their size and the relative reliability of the supply chains they’re used to interfacing with.

And that scale presupposes that demand flows through smoothly to seaweed farmers. Bit of a chicken vs. egg situation!

The net-net

Whenever these chicken vs. egg situations arise, in which demand requires scale and scale requires demand, the tried and true catalytic answer is public sector support. Reminds me of other nascent climate tech industries, e.g., carbon removal, an industry in which firms developing solutions require buyers’ trust and patience to build capacity. 

Carbon removal has galvanized strong coalitions of corporate buyers, partly because bodies like the IPCC directly call for the industry’s development and because it’s a bit futuristic and sexy and has captured entrepreneurs, venture capitalists, and governments, too.  

We don’t see anywhere the same level of attention yet for seaweed. That could change. Carbon removal was only on a few folks’ radars three years ago.

If it doesn’t change, can the seaweed industry scale absent serious support across the public and private sectors? I’m not sure. 

Does this question itself underscore the importance of injecting a much broader purview of potential climate solutions into public policymaking? I’d say so.