190 James Arthur Smith - Regenerative aquaculture is more healthy for you and the planet than wild caught fish

James Arthur Smith, founder of Seatopia, pioneering regenerative aquaculture for the direct-to-consumer markets, joins us to talk about aquaculture, the challenges with unsustainable feed, concentrated pollution, commodified markets and more.
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How do we farm the oceans regeneratively? We all have heard of the massive issues with fishing and especially the industrial-scale extractive way. We are basically emptying the oceans. It sounds very much like the rest of the agriculture and food industry. So what can be done? Join us today in a deep dive into the world of regenerative aquaculture!

More about this episode on https://investinginregenerativeagriculture.com/james-arthur-smith.

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Transcript

SPEAKER_00 0:00

Regenerative aquaculture. How do we farm the oceans regeneratively? We all heard of the massive issues of fishing and especially the industrial scale extractive way we're basically emptying the oceans. So the solution is very simple. Simply farm the fish, also known as aquaculture. But also there, there are enormous challenges with unsustainable feed, concentrated pollution and commodified markets, just to name a few. It very much sounds like the rest of the agriculture and food industry. So what can be done? Join us today a deep dive, pun intended, into the world of regenerative aquaculture. This is the Investing in Regenerative Agriculture and Food podcast, Investing as if the planet mattered, where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, wear and consume. And it's that we as investors, big and small, and consumers start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community. And so many of you have joined us as a member. Thank you. If our work created value for you, and if you have the means, and only if you have the means, consider joining us. Find out more on gumroad.com slash investing in RegenAg. That is gumroad.com slash investing in RegenAg. Or find the link below. Welcome to another episode. Today, a very special one where we go deep into the blue side of the planet. Today, I'm welcoming James to the show, the founder of Seatopia, a pioneering regenerative aquaculture business for the direct-to-consumer markets. Welcome, James.

SPEAKER_02 1:59

Thank you so much. It's such a pleasure to be here and be part of this conversation.

Why are you doing what you are doing? Why oceans?

SPEAKER_00 2:04

And to start with the question I always start, but with a very subtle but still fundamental difference. So not why soil, but why the oceans? Why farming in the oceans? How do you... end up there as many people in the farming industry can say I grew up on a farm then I went away and I came back etc but the chances you grew up on an ocean farm are very small so I'm going to guess here that wasn't the reason you ended up here like how did you ended up caring so much about the oceans and working in with them so much

SPEAKER_02 2:36

that's funny that you position the question that way because while I didn't grow up on an ocean farm I did grow up practically in the ocean and And I guess that has shaped a lot of my direction in life. My father was a lifeguard. So I grew up just at the beach every single day. My mother worked at SeaWorld at the time. So I was fascinated by the aquariums. And I really wanted to be involved in oceanography, marine biology, and particularly the big mammals. The cetaceans were so interesting to me. So I started volunteering at an aquarium as an adolescent where they had this was a really unique aquarium on a estuary on a wetland that used to have a healthy population of steelhead and so in this aquarium they had a demonstration rehabilitation project where they're actually breeding steelhead and showing how the steelhead would go from fresh water to salt water and back and forth and the principle of breeding fish for rehabilitation first introduced me to the principles of aquaculture. And I guess fast forward many years later, I was able to get more directly involved with aquaculture. So yeah, I got involved with it, I guess, because of a bit of nurture and my fortunate being born. uh in a family that was connected to the ocean and but i think we're all born kind of in that space even if we're as long as we're on the blue planet we should be thinking about you know how how can we efficiently work with the blue planet because whether it's farming the ocean or in, in freshwater, there's a lot of, there's a lot more water on this planet than there is land. So how do we work with that efficiently?

SPEAKER_00 4:46

So you basically were born in the ocean, but then still the step from going there. I mean, there were many different routes you could take. You could become, I don't know, a professional server or an activist really caring about the oceans. You could really focus on plant-based fish food. You could focus fish food, not meal. You could focus on many things on the pollution side of things, but you decided to focus on the food side and take quite a, I would really say neglected route. Like how do we get there? at regenerative aquaculture those two words together we don't hear very often for sure I'm getting emails now but we don't hear it very often well we should like what was that trigger to regenerative aquaculture what triggered you into the food side of things and starting to answer or at least ask many many very complicated questions in the aquaculture sector

SPEAKER_02 5:36

there's I'm in a contrarian space, I would say, because most people believe hook, line, and sinker, this romanticized story of commercial fishing, of going to the ocean and being able to extract seafood. And wild-caught seafood is this beautiful thing. And if done sustainably, it's the most romantic and beautiful way to do it. But when I was studying ecology and marine biology, textbooks are talking early about the potential of aquaculture done right to create healthy seafood in a controlled environment where you control the feed and you control the exposure to toxins. In the same way that we can raise tomatoes or chicken or cattle done right you can produce an absolutely beautiful product that's clean that's nutrient dense that's free of exposure to toxins and the principles of aquaculture have been there from the beginning but um I guess I'm just kind of an optimist, and reading about the principles of aquaculture very early on didn't end up aligning with the reality. So if you, as a consumer, are looking for sustainable farm-raised seafood, it's kind of a murky, confusing place. So I remember at one point... feeling that i didn't want to go to a sushi bar because i didn't want to condone industrial scale commercial fishing knowing the challenges that are being placed on uh our oceans from industrial scale extraction of wild caught fisheries i didn't want to condone that so what was the alternative having a a foundation on the principles of ecology and uh Aquaculture being a methodology for raising fish, where were those good fish farms? And there just wasn't enough information about that. There wasn't enough detailed information. certification processes, transparency. And so I actually went and started visiting farms and wanted to find out which farms were actually producing high quality seafood and doing it in a manner that was in line with my values. And so I actually went to Mexico. So I grew up mostly in Southern California, lived in Hawaii for a while. And funny enough, you mentioned the professional surfing. I actually thought surfing was the most important thing in the world for a number of years. I lived on the North Shore of Oahu and pursued that for a bit. That's part of the reason that I learned as much as I did about commercial fishing from a number of relationships that I built out there. And Wanting to do something that was directly related to the oceans after having sold another consumer product good business that I had at an energy bar company that was a quinoa-based energy bar that we were sourcing from these fair trade farms in Peru and Bolivia. And we had all of the certifications for USD Organic, and we were selling it. in Whole Foods nationwide that was interesting and it was it was on some levels it was uh um of value to me, but I really wanted to be involved with the oceans and I wanted to be involved in food systems because food has always been really important to me and my wife. It's been very important to her. It's been just one of these things that I've cared a lot about, I guess, probably stemming from health.

SPEAKER_00 10:14

And I think the fish part, yeah, the fish part is fascinating, especially the farming part, because that contrarian piece you mentioned at the beginning, I think many people sort of easily click into that thought of fish farming is bad, like you said, and if we just all buy sustainably fished wild caught, we will be fine. And that's probably a bit of a naive or very naive view. So the question is, and at the same time, It's not naive, I think, to think at all that most of or a big chunk of the fish farming space is definitely not run with regenerative principles. Let's say it like that. There's a lot of non-transparency and a lot of chemicals and a lot of input and a lot of... Just like farming is in many cases not done regeneratively, but you're saying I found or I went out to look for and where did you start? I went out to look for the regenerative fish farms. Where are the ones that are taking input seriously, taking feed seriously, taking a high quality sushi grade, uh, um, work seriously. Where do you even start when you, I mean, you said I went to Mexico, but where do you even, I mean, it's not that you Google this stuff. Like, how do you find the first one? Maybe the first one leads to others, but that first one, do you remember how you found it and how it was going there?

SPEAKER_02 11:34

Yeah. Um, Southern California is a nice place for being involved in the food scene. There's a farm-to-table movement of restaurants that is really connected to farms. And on most menus at farm-to-table restaurants, they'll reference where their tomatoes and their chickens come from. But seafood is kind of a missing piece. Sometimes they'll reference that it's wild-caught, or sometimes they'll reference the name of the fisherman, but they're not going into more detail on that. So... I went to Mexico to visit some farms that were raising fish because there are no fish farms in the ocean in California. It's not currently legal. There's no legal fish farming in the oceans in this region. You can do it on land, but just south of the border, there's a tuna ranch that I had become familiar with because it's next to a renowned surf spot, a spot called Salcipuedes, and they have these huge open ocean floating PVC circular pens that hold these giant nets and they put tuna in there. That is not actually a sustainable model. They're essentially ranching a wild species and then feeding it wild caught sardines. But I kept going further because I was familiar with that.

SPEAKER_00 13:17

Yeah, I've heard people mentioning tuna farming as sort of trying to farm a tiger and and that's probably not like as isn't first of all it's not easy and second the feed in the feed feed to food ratio is feed conversion ratio fcr is very very very high but we want to eat tuna so that that's what the market creates but you that was your first exposure news okay let's go further south and and see if there are other models

SPEAKER_02 13:44

Yeah, I was aware of that, but I wanted to see it and just to be in that place to swim in pens like that and to have...

SPEAKER_00 13:52

How is that? Just to give people... I mean, we're on Audi, obviously, but a visual clue or a journey. You go into a pen like that. First of all, how big are the pens? And then how many fishes, more or less, because I don't think there are exact numbers, but how many are there in it? What is the size we need to keep having our mind as we're listening

What is Integrated multi-trophic aquaculture

SPEAKER_02 14:17

to this? 40 meters across and similar depth. One of the most beautiful things about farming the ocean is the potential for three-dimensional space. In terrestrial farming, you're farming on land and you have limited resources. But when you're farming the ocean, you have depth, right? So The volume inside of that pen is actually quite significant. You can have a lot of creatures in there. The biomass is massive. The experience of swimming in that is literally like swimming in the most incredible aquarium that you've ever seen. You could literally be swimming in a circle of 150 to 250 200-pound torpedoes. Nature has evolved these tuna that are warm-blooded creatures that have the ability to swim 30, 40 miles per hour. If they wanted to, they could... they could easily kill you. They could drive them, you know, full speed right into you, but they just stay right at the perimeter of the, of, of, you know, where they feel safe. And they just kind of circle around and they look at you and they're intelligent creatures. They're looking at you. They're thinking about you. I had a lot of mixed emotions being there. It was a very sad and awesome place to be, to see that tuna ranch and to see how it's working. And it's not to say that they're, There is nobody farming tuna. There are people that are farming tuna from eggs. This is a tuna ranch. But still, the problem, as you mentioned, is the FCR, the feed conversion ratio of these high-energy, warm-blooded creatures. They spend so much energy that to feed them, it's not an efficient conversion ratio of energy inputs. It's something like 20 to 1, 20 pounds of feed in to grow one pound of biomass. And they're very finicky about what they eat. In fact, most tuna farms or ranches in the world are still feeding them whole sardines from the ocean. There are some people that have developed a pelletized feed, but it's very difficult to get them to eat it. In some cases, they're actually painting what looks like an eyeball on these little sausages in order to get them to eat it. It's not ideal. If you're looking for a model, if you're looking for a model of what's an efficient fish to raise. It's not tuna. But there are other creatures. If you look at, for example, the feed conversion ratio portion of it, what inputs are the lowest are going to be things like... filter feeders or plants that don't require any inputs from humans. We don't have to go out there and feed them. They're just filtering from the ocean or converting.

SPEAKER_00 17:33

Plus, they don't move so much, so they don't burn so much energy. You don't have to keep them in nets. Filter feeders are the bivalves, the mussels, etc., the oysters as well. And they clean. From an energy perspective, it doesn't get better than And kelp, obviously, on the plant side. The whole plant family in the ocean is fascinating, not only because of speed, but also because of health and because they look spectacular.

SPEAKER_02 18:04

And then there's some unappreciated ones like sea cucumbers that are going to be on the bottom that are going to be cleaning the sand. So you have an integrated... multi-trophic aquaculture system or INTA, which is essentially a permaculture model in the ocean, you have a symbiotic relationship between your filter feeders, your crustaceans, your kelps, your sea vegetables, and your fish. So what are the members of that ecosystem that you want to cohabitate your concession or your farm? So as I kept going further south I was able to find a handful of other farms in Mexico there's actually quite a bit of aquaculture Mexico's in some ways I would say more advanced in aquaculture than the United States primarily because Mexico already sold a lot of its fishing rights to the Chinese and and kind of is on the pendulum swing of trying to figure out how to create a sustainable financial model for fisheries in Mexico because they you know they went from having from having beautiful, healthy fishing culture and economies to selling off a lot of their resources, having it being overfished, and then having local communities now dependent on subsidies. So they're now investing quite a bit in aquaculture, some good, some not so good, but they're definitely evolving, I would say, more rapidly even than parts of the United States.

SPEAKER_00 19:38

And did you find one of those integrated... It sounds perfect on paper. Obviously, you have the 3D space. have the plants, you have the bivalves, the crustaceans that clean, you have the sea cucumber, and you have the fish. But is that being done? I wouldn't say at scale, but has it been done in practice at a commercial scale yet? Because I think for many people, even this word of the multi-species, the integration of multi-species is new. Did you find things there that were like, wow, okay, I didn't know this existed? Sort of the complete opposite to the wrenching wildlife tigers in the tuna farm?

SPEAKER_02 20:51

At commercial scale, there's not anyone doing it with an integrated multi-trophic site in Mexico, but all the components are there. There's people doing kelp, there's algaes, there's mussels, there's scallops, there's oysters, there's striped bass, there's Kampachi. So different species of fin fish are going to have a very different feed conversion ratio. So for example, Kampachi or Seriola rebeliana, which is a type of yellowtail, has a feed conversion ratio closer to one to one or even lower depending on the feed components. So I ended up spending a number of years working with this Kampachi farm in the Sea of Cortez, which is the southern tip of the Baja Peninsula on the eastern side there where they're raising this Kampachi which is essentially an Alma Kojak or Ceriola Raleana that grows at a very efficient rate and can be adapted to eating a feed that is much more sustainable. So an algae-based feed that can be grown regeneratively can be a high feed component for the omega-3 the oils, and the proteins that it needs. Combining that with either land-based proteins, it could be a variety of different sources. It really has the ability to create a... a sustainable feed for a fish that grows very efficiently. And then as long as that, even if it isn't monoculture in this case done at low density in a good, in a well-sighted location, I think is a very important part of creating a healthy food system. So this farm, for example, does low density farming is, uh, cited in an area that is, uh, Thank you. deep water, tons of current. In fact, twice a day, the amount of tide that flushes through this, you have sometimes two to three knots of current flowing through

SPEAKER_00 23:19

this. Which is important to keep things flowing, like the manure, basically, of the fish to keep it flowing out, making sure disease and pathogens don't get a chance. It's better to be diluting it with a lot of seawater twice a day than being in a closed environment unless then you need to start super important and but then do you get to do that that that health piece you mentioned because that's what then everybody says yeah of course you can feed it with a lot of different things you can feed it with plants i mean there are there are fish that eat everything but then it doesn't get to that healthy omega-6 omega-3 ratio fish that we're looking for because we're looking for the omega-3s and and then everybody says yeah but then it's better to go to wild um like what do you say to people i mean you get this question for sure all the time like How do you answer the health question of farmed very, very well versus wilds that we have no clue where it comes from?

SPEAKER_02 24:16

It just depends on the feed, right? So the evolution of feed in aquaculture kind of follow the trajectory of first, let's feed them exactly what they eat in the wild, which is sardines, anchovies, anchovetas, mackerel. But there's a finite resource in the ocean that the underlying issue is there's a finite resource and the gross production of wild caught seafood has plateaued. We're not going to find a new well of fish in the ocean. We've plateaued already, so we can't keep extracting. And

SPEAKER_00 24:54

it probably is going down because in many places it's collapsing and we can wait for the moment we cannot keep throwing sardines into a tuna pen. No, no. And we should probably eat the sardines directly if we end up doing like there's that there's that really weird eat lower on the food chain thing so that that's the first phase and then the second phase is okay we replace it with something else let's replace it with soy etc to to fatten the fish

SPEAKER_02 25:22

exactly so it evolved from okay let's mitigate the the pressure on the bait fish and give them land-based proteins like the soys and the corns um and then that had a direct effect on the omega-3, omega-6 levels because, again, fish don't produce omega-3s, with the rare exception. There is only a handful of fish in the entire world that produce their own omega-3s. It comes from the feed. So, if you're feeding them whole fish, they're getting their omega-3s. In fact, in the early days of farming, there was a lot of studies done that quantified even higher levels of omega-3s in farmed fish than you saw in wild-caught fish because they were just being They're getting such a healthy diet. But you're extracting a lot of these resources in order to feed them. Not that wild fish don't also eat the same amount, if not more, because they're expending more energy. But regardless, if you're going to scale aquaculture to feed the world, how do we do it efficiently? So transitioning from anchovetas or bait fish to land-based resources, but then like soy and corn, but then how do you evolve the protein? omega-3, omega-6, and protein resources. The underlying source, the original source of omega-3s comes from algaes. So an algae-based feed is going to provide the actual omega-3 content that the fish needs. So growing different types of algaes, microalgaes, to be used in feed is something that is currently evolving. There's a lot of investment actually happening in the production, the commercial and industrial scale production of different types of microalgaes for aquaculture and other industries because you can now have feeding a Kampachi, for example, an algae-based diet, get even more omega-3s than a wild-caught fish. So it really just depends on the actual components that are going in the feed. The challenge is the cost because still there's a lot of subsidies in wild-caught fisheries. For

SPEAKER_00 27:41

anybody that doesn't know, there are massive studies. I think Planet Tracker has a great one. I will link it below. The amount of money we burn in industrial scale extractive fishing is just mind-boggling it would never be able to pay for itself if we all i mean collective society including the chinese government and others wouldn't be heavily subsidizing their fuel their boats and everything else like it's it's really really crazy it's a completely bankrupt industry unless it would be subsidized by all of us european union us the whole thing has been and it's yeah not many people know that so that's been subsidized and of course you're competing because you have to grow the feed as well but the wild one just goes out and and get the mackerel that has been eating other fishes that have been eating algae so that's that's a challenge

Why not eat the algae directly?

SPEAKER_02 28:30

yeah yeah it's a challenge it's you know as long as there's still oil in the ground people are going to mine it and and that's still kind of a challenge with with wild caught fisheries um but the price is coming down one of the interesting things that happened over uh the last let's say six months with the price of of petroleum skyrocketing is the affordability and uptake of algae-based feeds became a lot more affordable and has increased. There's been more use of it by more farms and that's really helping scale. So the economies of scale are shifting and that's something that we're really trying to promote is alternative feeds that are based on things like algae, micro-allergies. But there's also single-cell fermentation of various other organisms, bacteria and yeast. There's insects. There's a whole evolution in the feed. To just say that farm fish are not as healthy as wild-caught fish is one of those generalizations that you just can't make. It'd be like saying that farmed tomatoes are not as healthy as wild-caught tomatoes. It really depends on where that wild-caught tomato was planted and what it was exposed to and the same thing with the farm you know how was it farmed

SPEAKER_00 29:58

and then the question of health yeah the nuance is but the nuance in farming is not there either like you continue to see these diagrams of the impact of or the water consumption of a kilo of beef and it's like yeah it sort of depends if that cow was outside in Ireland where it rains like how do you calculate the water but just to leave that for another discussion But then the natural question becomes, okay, if the fish gets their healthy omega-3 from the algae, why don't just eat the algae directly? Or is there a transformation happening in the fish that makes it more accessible, more absorbable, more tasty for sure? But what's the reason to have to sort of introduce that extra step? It could be a cultural thing. It could be we just don't need algae or it will take a while and we are eating fish. So let's use it as almost a vehicle. But what's your answer? I'm asking the very obvious questions. Later we're getting to the investment side of things, but what's the reason to use the fish as a vehicle for the Omega-3?

SPEAKER_02 31:21

I think it's mostly just culture. I mean, I personally put a little bit of spirulina in my water and I take a couple of chlorella tablets, but it's not that delicious. It's going to take quite a lot of work to make that more attractive for consumers to eat. The conversion of that into fish creates ancillary benefits as well. So I think that if we're in this space of trying to create healthy food systems where we're raising, commercially producing algaes to feed fish and shrimp and mussels and the whole myriad of other species that can work together and create healthy ecosystems. It also has the ancillary benefit to the environment, right? So the environmental services provided by a well-sighted, integrated, multi-trophic aquaculture or permaculture in the ocean benefits not just the end consumer that's eating it also benefits the environment because it's cleaning the environment it's creating a habitat for other uh wild uh and natural species and it's creating jobs and economies so i think that there's that multiplier effect when you create healthy food systems

SPEAKER_00 32:46

Because that's, I think, the big piece here, like to regenerate. I think we easily forget how, just as we forget on land, honestly, how degraded the land is and how degraded the oceans are, like how abundant they used to be. If you hear, like not even so long ago, I think 100 plus years, like how many fish there were in the Mediterranean or how many fish there were, like the kelp forest in California, like the stories are there. Maybe they're a bit exaggerated, but even if they're half or 20% of what they wrote, it must have been an X abundance of life. So there's a very strong argument that you just made, like how to restore that while producing an economic outcome or while producing food that is being sold and bought and etc. And so that piece of regeneration, I think, is often forgotten in, okay, well, let's just get some algae pills, because that's just not going to regenerate anything except for maybe part of your body. So after working a couple of years with that fish farm, That word is doing, was doing the right things and pushing on that. Like what made you set up Seatopia? Like why was that a natural next step?

SPEAKER_02 33:57

It was a vision for the scalability of the distribution and transparent communication. Initially, I was bringing these fish to farm-to-table restaurants throughout Southern California.

SPEAKER_00 34:17

How difficult was it to sell it?

SPEAKER_02 34:20

It was very easy because... Why? The quality of the fish was so much better than the current system. So the seafood supply chain is really built on the concept of moving a highly perishable commodity as quickly as possible. And that's generally done through multiple layers of resellers, master importers and distributors and smaller distributors and just moving these commodities through these buckets. And it... It's quite difficult with highly perishable items, especially when you're talking about wild-caught seafood that sometimes is caught in unpredictable quantities. So for example, if a purse-seining boat comes across a breeding aggregation or spawning event and catches a massive breeding aggregation, could be multiple schools coming together and catches, you know, an enormous quantity of Pollock or cod or whatever brings it to market. It kind of floods the market with all this product. This fresh perishable product needs to move efficiently throughout the market. So what tends to happen is, is product doesn't have traceability because it's moving through so many hands and being put into these generalized buckets where there's not a market for this product. They sometimes are just going to rename it something else and just move it. There's a lot of, uh, uh, The fish

SPEAKER_00 35:59

you get on your plate is not the fish that's on the menu. It's a very high number. I think it's in the high 40s or even more. It's quite like one in two or probably more of the fish you order is actually not the fish you order. Yeah, it's... Which is understandable in a commodity-focused market that's just focused on shipping it as fast as possible to plates because you lose the quality. So it was easy to sell because you could very predictably get it to them, obviously, because it's not that far. And you know the slaughter schedule, let's say, because the harvest schedule, because you know when the fish are ready. And I'm imagining the taste and quality was just very stable and off the chart.

SPEAKER_02 36:46

Yeah, the quality was just much better than anything that was available anywhere else, especially on a sort of consistent basis. And then to boot, we were bringing chefs to the farm, bringing a chef to a farm where maybe they've visited a cattle farm or a pig farm and had the experience of following the journey to the their plate on, on those proteins, but to do it with, with fish was something that was out of sight, out of mind for so many people. So we created this, this authentic connection to where their seafood was coming from and gave them the chance to swim in this aquarium, you know, swim with a school of, you know, 5,000 beautiful fish and in crystal clear turquoise water that, that the experience was, was spectacular. And, and, and it was definitely worked and we were able to, developed probably one of the most trusted specialty seafood distribution businesses in Southern California because of this direct relationship with high quality farms. And so over the years, we started working with multiple farms in Mexico and then in Peru and then Chile and just kind of one at a time bringing in these different relationships, trying to identify what are the best farms in the world and bringing them to the best chefs. A that were really stoked to work with the product that allowed their farm-to-table menu to authentically also tell a story on their seafood. But the scalability of that model was actually quite limited because while there are a lot of farm-to-table restaurants, there's very few national distribution channels for farm-to-table products that can really move the needle. So as an example, one of the largest farm-to-table restaurants restaurant groups that we had brought to the farm was a group called Tender Greens, which really cared about where their products was coming from. But as Tender Greens grew, their business model changed. Instead of allowing each chef to make the decisions on their buying, it switched to a national buyer. And then the national buyer was more conscientious of the volume discounts that were going to be applied by choosing slightly different proteins. And then eventually, it changed to being somebody that was probably more of like a a controller or CFO and had less connection to the consumer's demands or concerns or different incentives and motives. And that is one of the best examples of a farm-to-table restaurant group that we were able to bring to the farm. The more middle-of-the-road restaurant groups, the disconnection happened really soon, and there just wasn't the same motive to get the most sustainable product. as opposed to save a million dollars a year by saving 25 cents per unit. That challenge of who actually is the decision maker and who really cares always came back to the consumer seems to care more. So I knew that a direct consumer model was going to get the products to the people who care and create that feedback loop. So Seatopia was this idea that, well, maybe one day consumers will care enough about seafood to be able to pay what it actually costs and get it to them delivered at home in an authentic way that isn't just wrapping it in styrofoam and calling it sustainable seafood. So Seatopia was this idea that kind of was on the back burner and kind of like a business plan that sat in a circle of friends for a number of years until COVID actually created the impetus and the space to justify it. So as restaurants closed during COVID, you have these farms around the world that have been investing in best-in-class feed and handling and low-density farming. It's an expensive way to do it. And you have these living creatures in the water that required to be fed and they no longer had a sales channel because the farm to table system the restaurants were not buying and these fish needed to eat. So what's the future? The crystal ball didn't really have a vision for when those restaurants were going to come back. So I really pushed the Setopia model forward in order to continue to create a supply chain that would continue to support and reward the farms that were really innovating. And the cool thing about it is that we've actually opened up a much better sales channel that creates that feedback loop and is much more scalable. So the vision for Zootopia now is not just to support those handful of farms and continue to keep that going, but is to be a marketplace for farms around the world and eventually be able to create the sort of feedback loop for consumer demand and fostering regenerative aquaculture on a global scale. That's really where Seatopia has evolved to, is creating this platform through this subscription model that gives a long-term investment and commitment to the farms that we're going to keep buying these products and allow them to know for sure that there's a buyer who cares and get that feedback. If a farm makes a change in their feed, how does that affect the taste? If it's It doesn't really affect the taste, but it is better for the planet. Do the end consumers care enough to pay for that? Well, if you're selling in a commodity sales channel where that nuance might not be told, no, the answer is no. But if you can speak to your end consumers and we can put it in the newsletter and you can host an event once a year where your consumers actually get to come to the farm and have a dinner there and tell that story, and be in the newsletter and have that information, yes, that's where the direct-to-consumer model allows a healthy relationship between aquaculture and our relationship to seafood and end consumers. And we've been able to do it actually in a quite authentic way where we deliver carbon neutral, where we're actually partnered with an organization that's doing creating carbon credits through open ocean kelp reforestation projects. We are investing a percentage of all of our profits back into ocean conservation through the support of marine protected areas. We're shipping in totally eco-friendly packaging, no styrofoam. When we first started, we were doing completely no plastic, but we haven't yet been able to come back to that because compostable vacuum sealant bags that we were using just aren't quite up to quality yet. We're continuing to try to... I mean...

SPEAKER_00 44:14

You're dealing with food.

SPEAKER_02 44:15

Yeah, I mean, it is a food-grade product that we were sourcing from a really cool company that was producing it from Kosovo. But the challenge of keeping that plastic in close proximity to dry ice just didn't preserve the product as well as we needed. We were losing the seal on the freezer-safe vacuum seal bags at too high a percentage. We're continuing to invest in R&D on that side. There are some advancements on kelp-based plastics.

SPEAKER_00 44:53

Which would be ideal from the story perspective and also from the Circle perspective. To get to that, you went from restaurant to direct-to-consumer forcefully like how how ready was the consumer are you um you say we open a much bigger market potentially obviously um how has that been has the consumer responded strong enough to keep the fish swimming and also to keep these farms going or did you have to scale down a lot like how has that been how's the response been and and now we're talking the end of the summer 2022 um how are those two years been basically in terms of consumer demand or consumers or phones?

SPEAKER_02 45:36

It's been really great. It's been overwhelmingly good. We haven't done any advertising and it just continued to grow, mostly word of mouth. The biggest challenges are the logistics of product. We all know those challenges, but the model of working scaling a CSA is really what we're doing. Who are the farms that have good relationships with processors, are in close proximity to international supply chains. We can put it onto a container and ship it and getting into a port that's not backlogged. Those are the biggest challenges for us, right? And as long as we're really methodical about which farms that we're supporting and can predictably bring into our warehouse, it seems to be working pretty smoothly. We've had hiccups on the packaging and the vacuum seal bags and things like that, but the farms are really on board. There's not another market out there that is providing the sort of feedback loops. You have the Whole Foods of the Worlds, and I would say that they're pushing the envelope, but we're trying to be the forefront. We're So for example, we take a sample from every lot that we receive and send it to a laboratory that quantifies the parts per billion, the presence of heavy metals. And we publish transparently the certificate of analysis and the, the, uh, mercury levels on our fish. And we're doing that because a, it gives us information about whether there was a change in the feed, uh, It quantifies the health levels, and it holds the farms accountable and gives the assurance to the customers that this is absolutely a cleaner product than what you're going to find anywhere else. And it is what they say it is. Not only does it come from a farm that has been... quantified or certified by a third-party audit for sustainability, but it's also been certified clean per the certificate of analysis. So what we're trying to do is really push a model that drives aquaculture as quickly as we can towards those values that we believe. When I first heard about aquaculture, it was this potential solution to feed the world a clean, healthy, sustainable food system. Well, what were the challenges that prevented that? And a lot of that, surprisingly, was not challenges with the ocean as much as it was challenges with the the supply chain, the ecosystem, the economies and the incentives that were built around it. And so we're trying to address those core issues in order to tell farms that there is a safe and healthy way that you can invest in best practices for advancing the innovations on regenerative aquaculture practices.

SPEAKER_00 49:10

And do you see these multi-species systems the ideal permaculture one you mentioned is that on the horizon is it still very far away is that maybe like that complexifying which we talk often about on farms is that something happening or starting to happen or is it okay we really have to fix feed because that's the biggest by far the biggest lever for change and and then we look at other things

What should smart investors, who want to invest in Reg aquaculture and food look out for?

SPEAKER_02 49:38

There are small scale farms doing it. There's a number of universities doing it. There are individual components being done. So for example, there's kelp farms being sited next to salmon farms. nutrient that can create an unhealthy environment but in nature there's actually no such thing as waste right so in nature there's a symbiotic balance between that nitrogen and something else. And what is that? In the case of citing kelp next to it, the kelp is absorbing a lot of those nutrients. A shellfish farm, a sea cucumber farm, the scallops, all of these organisms have an ability to work with the finfish. But it's a matter of one, changing the model and creating the incentive Yeah, and consumers do. Yeah, exactly. So what we're trying to do is say to that big farm, You have this other concession, you have this site where you could grow a brand that is synonymous with not only a healthy, delicious salmon, but your brand could be synonymous also with your scallops and your seaweed products and your mussels and your sea cucumber. And by having all those products under your brand, we will be able to grow a brand that is synonymous with not only a healthy, delicious salmon, but your brand could be synonymous also with your scallops and your seaweed products. buy everything that you produce. And so that's kind of the Seatopia model. And there are there. So there are a number of farms that are that are experimenting with this and are taking that risk. But a lot of it comes down to just, you know, the risk factors for them, the business model and the incentives.

SPEAKER_00 52:15

And so what would you tell investors that are listening? I mean, it's difficult to say what's the most neglected piece of the regenerative aquaculture place because it seems to be all relatively neglected. But where would you point them? Obviously without giving investment advice, but what would you be, let's say we're doing this on stage at a big ocean conference, like where would you tell them to go and dive or go and dig deeper to understand more? Is it the algae space? Is that these multi-species together? Is it the CPG brands or is it like creating these distribution channels that reward these things? What is your feeling most neglected in this space?

What would you do if you were in charge of a 1B investment fund?

SPEAKER_02 52:56

I think you have to ask the consumer what they want and give that to them. If you're going to put that product under the microscope and look at the mercury levels or the PCBs or the sustainability or the omega-3 levels, can you produce a better product? I think you absolutely can. And there are farms doing it. So I would say that the best place for an investor to be looking is, you know, what are the... What are the products that are meeting the consumer's need or getting closer to it? And how do we produce more of that? And I think that those products are– it's the fin fish, right? So what's limiting fin fish is feed– And not that it's not being done, but the unit economics aren't quite there yet. So how do we bring more scale to that? And education and transparency is one of those things. Getting more awareness to the... benefits of aquaculture and the benefits of a regenerative aquaculture farm. There's a lot of money, unfortunately, spreading misinformation about farms. In some cases, it's well-served because there are a lot of commodity farms out there that suck. They're competing with artisan fisheries of people who have the best intentions to be good stewards of their local uh you know waters but not all but that's it's doing a disservice to the advancement of aquaculture right so i guess i didn't i don't know if i answered your question because i don't have a clear answer other than you know what we've been doing with setopia is really just focused on building that a market that's going to create those incentives for the farms and and components within uh that are that are supporting those farms i believe that that that that you know that's where i've put my energy because I felt like the biggest problem was the delivery, the transparency, the feedback loops.

SPEAKER_00 55:52

To flip the question, because actually you gave a very clear answer, but it is different if you're on that other side. Let's say you are managing a billion dollars and you had to put it to work. I'm assuming it's going to be in regenerative aquaculture. I'm asking this question not because I want to know a dollar amount, but I want to know what would you prioritize? Where would you spend most of your energy, in this case, quite significant resources.

SPEAKER_02 56:17

If I were in charge of a billion-dollar fund with a traditional, let's say, 10-year investment structure, I would look at innovations around aquaculture technologies, monitoring, testing, cleaning. Also look at supply chain logistics like transportation, traceability, enabling software, hardware, packaging that extends shelf life, reduces environmental footprint, and direct consumer supply chains like Seatopia that connect farms directly to consumers and create this direct feedback loop. Perhaps I'd also look at some mid to late stage investment opportunities with established farms or feed manufacturers. But realistically, I'd prefer to manage maybe more like an evergreen fund with a structure that can focus on the long-term capital appreciation without time barriers. One that meshes well with entrepreneurs looking to grow their businesses sustainably and truly foster regenerative aquaculture. In that case, I would look at investments across the supply chain to drive real change in the dynamic of our relationship of the oceans with an investment thesis for creating a true sea-topia on the blue planet. As such, I would be incentivized to invest in innovative feeds, in innovative aquaculture farms, advancing IMTA and RAS aquaponics and urban farming, into retail brands, into processing facilities, into packaging that extends the shelf life, reduces waste, creates a circular economics, into the distribution, a global network of distribution hubs, education. There's a ton of investment that needs to be done in education and And testing and traceability. We need more testing, not only in aquaculture, but in wild-caught products to create those right incentives. And in general management of our resources. So how would that allocation look? Probably putting a lot into those innovative feeds to help bring economies of scale to sustainable feeds produced from microalgaes and bacteria, insects, yeast, and even invasive species. Maybe let's say 15% allocation. just in feed. Farms are really important, though. We need to be developing more innovative farms and really helping bring IMTA, RAS, aquaponics, and urban farming closer to the distribution centers. So probably upwards of 40% of that would go towards shrimp farms and salmon farms. Sablefish would probably be a little bit lower. Seriola, Raviana, Quinteana, Malandi, all of the jacks the yellowtails, sea breams, the snapper, the chemidae, the sea bass, scallops are really important. We need more scallop farms, the lantern basket scallops farms, oyster farms, kelp farms, seaweed farms, sea cucumbers, as we've mentioned, urchins, lobster, crab, lumpfish, barramundi, and other underappreciated herbivores, and even maybe something like sardines. There's a lot of innovation that needs to happen on the farm, so that would probably be a big part of that investment. But retail brands is also super important. Probably, let's say, 15% would be invested into retail brands to bring these products center to the plate to reduce waste. And part of that would also, we would need advancements on processing. I would like to see, I would probably be investing in processing facilities that can make more innovative products from the offal, from the livers, from the hearts, making bone broth, seafood bone broth, I think, would be a really amazing product line, more smoked products, more jerkies, more pet foods, just to reduce waste and to increase profit margins across the supply chain. But then, you know, if we were looking at packaging, that would be probably a minority investment in innovations on compostable bags and compostable insulations. There's some very innovative projects coming up with algae and mushroom and fish scales to produce these sort of products, these insulation It's packaging. But distribution is really important. The cold chain distribution logistics, having a chain of distribution centers across the United States and across the world, innovation on AI-assisted distribution, the last mile cold chain distribution is super important. It hasn't yet been defined who's going to be the Amazon of cold chain distribution. A lot of these, let's say, archaic cold chain warehouses haven't yet embraced innovations. Definitely not to assist the last mile on the direct-to-consumer side. I'd love to see a lot more investment there, and I would probably put a pretty significant investment there, maybe 10% of our allocation. But education is going to drive a lot of this. Not as expensive, but it is exceptionally valuable. I think investments in documentary films, like The Biggest Little Farm was such a powerful farm for education around permaculture and regenerative farming on land. We need The Biggest Little Farm's story for aquaculture. General media and education is going to be really important too in schools, at the farm level, and also policy, environmental lobby. We really need to see changes. The National Oceanic and Atmospheric Organization, NOAA, has really been trying to push aquaculture but has continued to affront this pushback from environmental groups. We need to have more education and lobby to help bring properly sited, properly managed aquaculture closer to the markets. The U.S. is still importing way more seafood than it should. And traceability in testing, I think that's going to help drive change across the industry with heavy metal testing, toxicity testing, nutritional testing, the validation of those omega-3 levels versus omega-6 levels on labeling on every single seafood product. Traceability across the cold chain and fair trade certifications and certified sustainable We need a lot more of that. And I'm not just talking about within a culture. I'd like to see these sort of testings and certifications across wild-caught seafood. I think that'll really help drive change. So, yeah, hopefully that outlines a bit of my vision for how I'd invest that billion dollars because there is an enormous market in seafood and change needs to happen. But we need this sort of long-term vision on how to align our relationship to really create that Seatopia.

SPEAKER_00 1:02:54

I think it's a perfect way to end this conversation. But the potential in terms of space, obviously there's a lot of water, but also the potential simply in terms of biology, simply in terms of feed to food ratios, in terms of the quantity of biomass you can grow in 3D. I mean, the opportunities are truly, truly magnificent. So I want to thank you for putting a spotlight on that today and for all the work you do.

SPEAKER_02 1:03:47

My pleasure. Thank you so much. I hope that I was able to articulate something of value to your audience, I feel like we kind of wandered all over. But at the end of the day, there's just so much nuance and so much story to be told. I appreciate you creating a forum for people to be asking these questions and learn a bit more. And I hope that we can continue this conversation. Thank you.

SPEAKER_00 1:04:17

Thanks again and see you next time.