Unlocking Climate Tech Capital for Blue Economy Ventures

Interviews and surveys from leading fund managers investigate trends and opportunities for accelerating crossover investing by climate and energy VCs into the blue economy.

The blue economy has experienced a surge in investment momentum in recent years. Annual venture capital (VC) funding allocated to this space has grown almost 300% in the last five years – a faster rate than almost any other sector, including climate and deep tech. Additionally, over twenty new ocean-dedicated funds have launched during that time. These are encouraging and timely developments, underpinned by a growing recognition of the ocean’s pivotal role in energy and climate solutions. 

“Shipping, energy, infrastructure, food systems, defense, you name it – the ocean economy plays a big role and needs to decarbonize rapidly. At Propeller, we’re excited about the returns for planet, people and investors in this shift as well as new market opportunities where the ocean has a distinct advantage.”

 – Steven Fox, Propeller VC

However, the blue economy remains undercapitalized relative to its climate impact potential – capturing only 7% of the capital that climate tech more broadly attracts – and faces an estimated $175 Billion annual financing gap to attain the goals of the UN’s Sustainable Development Goal 14: Life Below Water. 

To explore ways to accelerate investment in blue ventures, ARPA-E and Investable Oceans interviewed and/or surveyed over 20 leading climate tech and blue economy fund managers, from ‘blue’ specialists to ‘green’ climate tech generalists to ‘teal’ investors in between, who have invested in both the blue economy and other climate tech sub-sectors. The number of blue economy investments made by these VCs ranged from 0–74. We supplemented these interactions with portfolio analysis and desktop research on climate and blue economy investment trends. 

The discussions validated the need for ecosystem-wide action: funds across the ‘green’ to ‘blue’ spectrum acknowledge the immense potential for financial and impact returns within the blue economy, but also a set of core challenges to fully tapping into the promise of the ocean. 

Findings and Pathways Forward

• Crossover Investing into the blue economy is happening – and likely more often than we think. It’s clear from our research that crossover investing into the blue economy by climate tech funds is already happening. From cell-based seafood to maritime decarbonization, climate-focused VCs that traditionally invest in terrestrial-based solutions are beginning to incorporate ocean-based solutions into their portfolios where there’s alignment in investment mandates. We believe this trend is even more significant than it appears, partially because of differences in taxonomy: what those in the blue economy ecosystem define as an ‘ocean investment’ may not always be labeled as such by others. For example, some ‘green’ and ‘teal’ fund managers didn’t consider their cell-based seafood investments as ‘blue,’ instead categorizing them as ‘sustainable food systems.’ 

• Where is the crossover happening and what is driving it? Understanding where and why crossover investing is happening will be key to unlocking increased flows of green capital. Crossover investing is gaining momentum in sectors where adjacencies exist between ‘blue’ and ‘green’ solutions – particularly in food systems, materials/circularity, and transportation (See Figure 1 below). For example, climate-tech investors focused on regenerative agriculture are increasingly recognizing parallels with sustainable aquaculture, while those addressing alternative materials like bioplastics are exploring ocean-based solutions for packaging, such as seaweed. 

“At CREO, we observe many parallels between the development of regenerative agriculture and regenerative aquaculture. In fact, we see many members concerned with the future of food that have both regen ag and regen aq companies in their portfolios, leading us to a ‘farming is farming’ mentality.”

– Aly Rose, CREO Syndicate

• Increasing numbers of successful blue economy exits will help unlock additional capital. Despite promising signals, the number of blue economy exits remains limited, which is leaving some VCs waiting on the sidelines. The relative lack of exits isn’t altogether surprising, as most blue investment managers are still working on their first funds, and their portfolio companies – often developing technologies and business models in emerging sectors – are still maturing. Even so, these companies have notably begun to generate higher valuations and exits, including the first blue unicorn: Kerecis, an Icelandic company using fish skins for wound treatment.

“While it is true there have not been many exits in the blue economy so far, we are now seeing more companies being funded that have differentiated products, stronger product market fit and are measurably solving a problem of consequence – all things that will attract serious investors.

– Luke Halsey, AiiM Partners

As more blue exits occur over time, showcasing and promoting these success stories will demonstrate to the broad investing community that there are business models that work, and many ‘blue’ opportunities aren’t necessarily niche in nature.

“A unicorn valuation is not the only path to a successful exit. Companies that have proven to be winners in their marketplace without raising large amounts of dilutive capital can achieve exits in the hundreds of millions of dollars. With wise use of capital, and some patience, these exits can deliver venture-level returns to investors.” 

– Justin Manley, Just Innovation Inc.

• Not all blue economy companies are a fit for traditional VCs. Even as exits materialize, the question of suitability for climate VCs that are considering blue investments will remain. Numerous ‘green’ and ‘teal’ investors raised concerns that blue tech companies aren’t often a compelling fit due to perceptions of either large capital expenditures, longer exit timeframes, and/or relatively small markets. 

“In the rush to fund the Blue Economy, many investors have confused important with venture scale. They are two very different things. There are a ton of important and necessary innovations happening in the Blue Economy, but only a small handful of truly venture scale innovations. Those funds that have the experience and industry relationships needed to know the difference are the ones that will thrive.”

– Brock Mansfield, Meliorate Partners

“Sometimes blue economy startups are targeting too niche an opportunity and/or will require significant equity capital to scale, which dilutes returns and makes it difficult for us to invest. That’s why we at Buoyant are excited about capital efficient software companies targeting large/diverse markets.”

– Alex Behar, Buoyant Ventures

This underscores the importance of VCs investing in this space to ensure their growth expectations are aligned with company goals and prospects. With the right capital strategies and tailored support, blue ventures can appeal to a broader range of climate-focused funds.

• Further developing the blue economy ecosystem will facilitate more crossover investing. Compared to climate tech, the blue investment ecosystem is at a relatively early stage, with fewer well-established pathways for commercialization and diversified capital sources. 

Blue economy founders will benefit from the development of robust commercialization strategies that mitigate market risk and allow them to raise capital at both early and growth stages. For example, almost all investors indicated a willingness to accept greater technological risk if the companies can demonstrate market opportunities for dual-use cases in other large and mature markets (e.g., defense or insurance) and/or commonly understood markets (e.g., food security or disaster management). 

“The key to unlocking the potential of blue economy companies lies in aligning technology solutions with urgent needs, and ideally, mature markets with clear profit pools. Having too many sources of uncertainty can make follow-on funding difficult, despite ocean challenges being not just high-impact but also large enough for venture-scale returns.”

– Kike Miralles, Starlight Ventures

Additionally, long and uncertain technology development timelines demand a diversified approach to capital, including government support, foundation grants, and philanthropy. Fixed investment horizons and return expectations often make it difficult for VCs to commit to emerging blue opportunities without the patient capital or blended financing structures that these types of funding provide. 

“To scale new infrastructure, we can’t rely on the venture investment model prevailing for the last 10 years, and must be able to open up a broader toolkit of financing and industrialization strategies to founders to enable scale at the speed needed.”

– Ross Brooks, Katapult VC

Finally, capacity building for blue tech founders can help accelerate the flow of additional capital. Organizations like 1000 Ocean Startups – whose membership includes investors/funders, incubators, and accelerators – can help early-stage companies evaluate commercialization pathways and think critically about their potential to unlock venture-scale returns. If venture-scale returns seem unlikely, enabling organizations can help founders navigate alternative capital options, their strategic implications, and build networks to unlock additional funding. 

Looking ahead, there are two actionable steps that can help accelerate crossover investing. First, focused and strategic education, awareness-building, and taxonomy alignment can bridge the knowledge gaps among these investment ecosystems. By producing targeted market reports, drawing parallels to well-established climate sub-sectors, and linking ocean solutions to widely understood challenges, we can ensure that all investors understand the scale and impact potential of blue ventures. Second, creating deliberate touch points between ‘blues’ and ‘greens’ will foster stronger networks, enabling investors to share insights and resources. Two fund managers recommended scheduling quarterly calls between investor groups and promoting ocean-themed discussions at mainstream climate events.

Efforts like these can support the growth of the blue economy investment landscape while highlighting the tremendous opportunity that lies ahead. As this ecosystem develops, it stands poised to deliver both meaningful solutions and compelling returns, making this an exciting time for ‘blues,’ ‘teals,’ and ‘greens’ alike. 

Article by lead authors: Helena Janulis of Investable Oceans and Rosie Keller of the Department of Energy’s Advanced Research Projects Agency (ARPA-E). And supporting authors: Ted Janulis of Investable Oceans and Dan Rogers of the Department of Energy’s Advanced Research Projects Agency (ARPA-E) 

Biographies: 

Helena Janulis is the Director of Operations & Strategy at Investable Oceans, and the Manager of the Ocean Pavilion at the UNFCCC Climate COPs for Woods Hole Oceanographic Institution. She is a long-term member of The Explorers Club, where she serves as Committee Chair for the Club’s Rising Explorers Grant and is an active member of the World Oceans Week Committee and Sustainability Committee.

Rosie Keller is a second year MBA student at MIT Sloan and spent the summer as a Summer Scholar on ARPA-E’s Tech-to-Market team, focusing on blue tech. Prior to Sloan, she led the strategic initiatives team at Seedstars, a Swiss VC and entrepreneurial capacity builder focused on emerging markets. She is currently excited about building support systems to catalyze the academic spin out process for climate solutions.

Ted Janulis is the Founder & Principal at Investable Oceans, an ocean investment hub that accelerates market-based sustainable ocean investing across all asset classes and sectors of the Blue Economy. Over a 35+ year business career, Ted has served in various executive positions, including CEO, at financial institutions involved in Capital Markets, Banking and Asset Management. 

Dan Rogers currently serves as a Technology-to-Market Advisor at the Advanced Research Projects Agency-Energy (ARPA-E), where he supports commercialization of transformative, high-impact marine technologies to address our society’s most pressing ocean-related energy needs. Dan brings an extensive background in underwater technology operation, engineering, business development, and strategic partnership building in the marine science and technology field.