Venture capital venturing into Chile’s aquaculture sector

Südlich Capital, a private investment fund manager in Puerto Varas, Chile, in the country's south, is looking to make a splash in the aquaculture sector.

The group has begun raising up to USD 21 million (EUR 17.6 million) in capital for the Colonos I investment fund, with the goal of financing 10 high-potential aquaculture-focused start-ups.

Südlich partner Anton Felmer told SeafoodSource three primary motivations drove the group to target aquaculture.

“The first has to do with the traditional aquaculture industry here in Chile, where it has been difficult to incorporate internal innovation processes and teams. Today, there is a lot of innovation possible, based on the latest technologies that are not yet being incorporated, so we will be the platform to detect those opportunities and connect them with the industry,” he said. “In addition, we have seen the arrival of many highly trained young professional people who are coming [to the south of Chile] to innovate. That can be seen with the number of projects that are coming to us. In fact, since the news of our launch came out, we have received many new projects that we had not considered yet, from people who are very prepared, who are innovating and are solving very current issues.”

This new talent is generating significant and purposeful local development that, with a financial boost, will be able to advance to further stages of development

“The third factor has to do with impact. the industry requires innovation, but it is also in debt when it comes to positive impact, mainly on the environmental issue. In this area, there are many challenges to solve and the new technology helps to solve that. The industry is interested in solving these problems and being active in that process and not just being an outsider,” Felmer said.

Colonos I is Südlich’s first venture capital fund and will be supported by Corfo, the Chilean government’s investment agency, with two-to-one financing against investor contributions. The company is raising capital from two types of partners: companies in the aquaculture industry in general – both salmon farmers and service providers for salmon farming, including local firms BioMar, Oxxean, Fiordo Austral, and Grupo Wellmann – and from entrepreneurial families living in the south who are interested in supporting aquaculture development, but who are not necessarily involved in the industry.

While Colonos I’s portfolio does not specify a fixed percentage that will be invested in aquaculture, Felmer estimated it will be around 50 to 70 percent. The investment firm will use a set of parameters to evaluate the different start-ups in which it plans to invest, beginning with a thorough evaluation of the leadership group of each potential investment.

“That is essential, taking a look at the preparation, professionalism and complementarity of the founding team,” Felmer said. “Then there are other parameters that are related to the product or service itself, billing, growth, and scalability, that is, how feasible it is for that company to grow at about 20 or 30 percent per year – not only in the first year, but in the next eight years, because that's where we want to get involved. There are a series of traction metrics that measure the sale potential, based on the current level of sales.”

Another area Felmer said was “essential” to any potential investment the firm will make is for the start-up to make a positive environmental and social impact.

The plan developed for Colonos I suggests an initial investment period of four years to finance between eight to 12 start-ups, withholding a limited amount of funding for follow-on capitalization. The idea is to have future Colonos investment tranches once the first phase is completed. Colonos II is expected to have a more enhanced focus, with Südlich looking to capitalize on the specific sector experience and specialization gained in Colonos I.

Founded in 2019, Südlich Capital is a private investment fund administrator that was formed in the south of Chile by its partners – Felmer, experienced in investment, finance, mergers and acquisitions; and Ezequías Alliende Wielandt, the CEO of Naviera Orca Chile, a company involved in live fish transport.

Südlich Capital has four business primary areas: private equity, value creation, real estate, and venture capital.  

Photo courtesy of Alexander Gold/Shutterstock