Vertical Oceans CEO John Diener: RAS shrimp farms "have reached a turning point"

Farming shrimp intensively in vertical, urban settings is the mission of John Diener, the CEO of Vertical Oceans, one of a range of aquaculture start-ups that have chosen to locate in Singapore, a city-state keen to increase its self-sufficiency in food and to become an innovation hub for the wider region. 

Vertical Oceans, formerly known as Akualogix, has pioneered a form of land-based shrimp aquaculture including modular grow-out units stacked in a vertical system. The company has performed six harvests from its pilot facility and reports robust interest in its products. It has doubled its headcount since January 2022. Diener said he’s keen to tap into huge demand for shrimp in Asia.

Diener is one of several food tech speakers addressing the Asia-Pacific Agri-Food Innovation Summit in Singapore from 26 to 28 October, 2022.

SeafoodSource: Do you expect major shrimp-producing countries to switch from extensive to more space-intensive forms of production and do you see opportunities there for the technology that Vertical Oceans is advancing?

Diener: Some of our technologies could be adapted to traditional pond aquaculture, but our focus is to use our technology to grow shrimp in our vertical oceans. Shrimp producers are increasingly adopting technology to improve their profits. A lot of this is market-making apps, which better align margin across the value chain. That's a good first step in technology adoption in farm, which historically were slow technology adopters. Overall, we do see a shift towards higher stocking densities and that does require better management, where technology can assist. I will give away one bit of free technology to these farms: one of the simplest and most-effective technologies pond aquaculture could adopt is to have a settlement pond for bioremediation of their effluent before releasing it into the ocean. That one step could have a bigger impact than any digital or IOT [internet of things] technology. Grow tilapia and milkfish in those ponds to consume the organics and it becomes economically productive. It baffles me that many farmers still don't do this.

SeafoodSource: What kind of year have you had thus far in terms of reaching your targets?

Diener: We were part of the Indiebio Accelerator in 2021 and that set a fast pace that we've continued ever since. This year, we moved into our new facility in downtown Singapore and stocked our first batch of shrimp a few weeks later. We set three biological milestones and already achieved the first milestone with our first batch. The technology is really coming together and we're transitioning from development and prototyping to production-ready systems. That's a big step for us as we move forward with our first commercial-scale facility we will build next year. Probably the biggest achievements were in our software and automation. Feeding is now controlled by our adaptive algorithms and we will have full automation of our production modules by the end of the year.

Our proprietary "moana" operations management system is now tracking everything in our system and we recently automated back end fulfillment of our direct-to-customer sales platform. My co-founder, Enzo [Acerbi], completed a comprehensive metagenomics study of our system and his bioinformatics algorithm gives us really valuable insights to further optimise the aquatic ecosystem.

SeafoodSource: How have you done in attracting investment into your company?

Diener: Khosla Ventures and SOSV invested in our seed round and they continue to be very supportive. It's great having them on our team, [as] they've given us so much good advice. We continue to receive strong interest from a wide range of investors. When we walk investors through our technology and business model, they get excited about the sophistication of our full-stack approach and how scalable it is. It helps that we had commercial traction early on and have demonstrated consistently since then that our product is really special.

SeafoodSource: How do the current high shrimp prices affect your business model?

Diener: We haven't raised our prices since we started selling in early 2021. We benchmark our price against fresh wild-caught shrimp, which tends to be more stable than frozen commodity shrimp. Both frozen and fresh wild-caught shrimp prices are up considerably this year though and we may raise ours as well to cover increased costs, but so far we have no plan to do so. The premium in the fresh market more than offsets the investments we make in our technology. It is incredibly difficult to consistently produce shrimp of our quality and size, and to do it with no chemicals, antibiotics, or effluents, and to deliver it to customers within a few hours of coming out of the water. A lot of technologies come together to make that happen. But it’s all worth it when customers experience our shrimp. The cost-benefit equation works.

SeafoodSource: Are you having conversations with potential partners or customers in China, where demand for imported shrimp is growing and growing, about buying your technology?

Diener: Our business model is producing seafood using our technology and we're talking to potential partners in Asia, North America, Europe, and the Middle East. We get new inquiries every week. China is an interesting market, and we are working on plans for how to grow there in a smart way. We don't intend to sell or license our technology to third parties, but we are engaging in discussions about franchise-like models whereby we operate vertical oceans capacity dedicated to a franchisee or customer. We are also talking to partners who want a vertical ocean in their city and to participate in the local operating company. These kinds of models make it flexible for us to deploy vertical oceans around the world in a capital-efficient way.

SeafoodSource: What are the main challenges you’re facing from current economic investment?

Diener: The current inflationary environment impacts costs across the board. Nearly all our suppliers informed us of price increases this year. Energy tariffs and salaries are also significantly higher. Our main challenge is availability and lead times for equipment and other inputs. This increases our timelines and forces us to plan even further ahead. If higher interest rates lead to lower costs, the impact would be positive for us, and probably for other tech companies in our space. On the other hand, a high-cost environment can work in our favor. We obsess over every watt of energy, drop of water, and ounce of feed we use. Our extreme efficiency means we're less affected by higher costs than less-efficient producers. This allows us to continue to operate profitably and invest in technology even in challenging economic environments.

SeafoodSource: Do you think your industry globally is now achieving the kind of scale needed to be able to be an alternative to other forms of shrimp grow-out?

Diener: I attended a few conferences over the last six months and there was a common theme that shrimp recirculating systems have reached a turning point. There are several shrimp RAS companies who can produce consistently at a competitive cost. This plays to consumer trends with the increasing focus on quality, health, and sustainability. Production will split, with pond aquaculture competing on cost and RAS competing on quality. It's now plausible that large markets like the U.S. could see a majority of its shrimp locally produced in sustainable recirculating systems like Vertical Oceans'. You couldn't say that five years ago. In fact, I think that is the more likely scenario.

Photo courtesy of Vertical Oceans