FoodTech startup Aqua Cultured Foods closes $5.5m seed round to grow its alternative seafood platform

The global demand for seafood has led to overfishing that threatens the world’s oceans and drives species like eels to extinction. As the global demand for seafood continues to rise, it will exacerbate the intensive aquaculture that is already disrupting oceanic ecosystems, raising concerns for the environment and population health.

Sadly, curbing this demand is also impossible. That’s why Chicago-based FoodTech startup Aqua Cultured Foods is on a mission to provide alternative seafood that is nutritionally better and safer than traditional seafood. Aqua seafood products have high in protein and fiber, free from the top 10 allergens, antibiotic-free, vegan, and non-GMO, and have a fraction of the calories of traditional seafood, the company said on its website.

To further scale up production at its new plant in Chicago, Aqua Cultured Foods announced today it has raised $5.5 million in a seed round led by Stray Dog Capital. The new cash infusion will also be used to hire new staff and expand the low-cost production platform of its fungi-based seafood as it prepares to enter the market this year.

Additional backers in this round include H Venture Partners, Aztec Capital Management, and Amplifica Capital, with follow-on investment from current investors Supply Change Capital, Big Idea Ventures, HPA, Aera VC, Kingfisher Family Investments, and Swiss Pampa, and a strategic investment from Korean food giant CJ CheilJedang.

Founded in 2020 by CEO Anne Palermo and Brittany Chibe, Aqua Cultured Foods is developing a range of alt-seafood using a novel new tech from proprietary mycoprotein fermentation processes. The startup uses a unique strain of fungi to transform plant-based ingredients into “seafood” with a realistic taste, texture, and appearance that can be used as a one-to-one replacement for animal seafood. The company also produces fungi-based minced seafood fillings for application such as dumplings, ravioli, and sushi rolls.

“It was really during the development of that product in particular that I got into the alternative protein set scene because it helped me to understand that there are a lot of alternative proteins that are not highly refined and do not come from animals,” Palermo said.

Over the last few years, alternative protein has been one of the fastest-growing segments in the food tech. Between 2016 and 2021, venture capital investment grew 17x to $5.1 billion, according to data from DealRoom.co.

In a statement, Palermo said the capital infusion will help the startup scale up production at its new plant in Chicago and hire new staff. She added that the plan is to launch with scallops and tuna (designed to be eaten raw), and ground shrimp (for cooked dumplings or shrimp cakes) at a small number of restaurants.

Aqua Cultured Foods has discovered a type of fungi that grows into fibrous biomass, which can be harvested entirely without the need for multiple processing steps or expensive equipment. This sets them apart from most seafood alternatives that use extruded plant proteins.

Palermo, an Aqua Cultured Foods representative, explained that their fungi strain is grown on a stack of trays that are inoculated with the strain and fed with liquid feedstock. Unlike costly steel bioreactors that grow fungi strains in liquid suspension, this method allows for a harvest of the biomass in just 10-14 days.

“The facility will allow us to create 5,000-10,000lbs of product a month at full capacity. Our breakeven is selling 5,000lbs of product a month, and we are on track to do that, so we will be EBITDA positive at pilot-scale,” added Palermo.

“We’re not using bioreactors; we’re repurposing equipment that you might see in a mushroom farm that can produce large volumes of product in a small space without much labor. And on top of that, we’re not milling, refining, extruding, or adding flavor maskers.”

To date, Aqua Cultured Foods has raised a little over $8 million in total funding.