As someone who works with both seafood entrepreneurs and investors, this is a question I get often. There are many exciting technological advancements that would allow us to track seafood through the supply chain. Fishery managers, retailers, and restaurants want detailed information about where, when, and how fish were caught. So why is so little capital investment going into the sector by either industry insiders or investors?
Some might argue that seafood supply chains are too complex and the technology to monitor every step isn’t there yet. But sitting at the recent Ocean Agenda@ Google meeting, it was clear this isn’t the case. We have electronic tags the size of a pencil tip, bar codes that carry pages of information, mapping systems that translate all this complex data into usable images, and that’s just the tip of the iceberg.
As one company owner, Trackwell, explained at the meeting, we have all of the pieces needed to track seafood from fishing boat to consumers’ plates – but most companies are reluctant to do it. Some businesses have applied tracking to small-scale seafood enterprises or to niche portions of their product lines. Few have brought the pieces together at scale for commodity products, which make up the bulk of seafood trades. Typically, entrepreneurs developing new ideas in this space struggle to find large-scale investment.
Why is this? As I presented at Google Oceans, I believe the missing piece is policy.
Typically we think of policy in the oceans as limiting harmful fishing or protecting important animals and places. But policy also plays an important role in creating a more certain future that businesses and investors can plan around – making it worth it for them to invest their time, money, and energy in developing business ideas. For technology ventures, the standards and timelines set by policy makers are critical to business development and investment.
For example, despite the fact that traceability benefits players throughout the supply chain, it’s not clear who should pay for tracking information in the long run – especially if they don’t have to or if someone else will ultimately be required to cover it. In competitive commodity markets like seafood, companies that invest in these technologies too early could find themselves at a disadvantage in negotiations with buyers and lose critical market share. This makes it hard for companies developing traceability technologies to clearly identify their customers or to gauge market size.
Without a clear customer identified for their traceability technologies, entrepreneurs cannot establish strong value propositions for their products and services, or develop products targeted at a specific user. Investment value is based on these types of market assessments. As we learned during the finals of the 2013 Fish 2.0 competition, if an entrepreneur cannot convince investors that there is a large, reliable market for their products and that they know their customer well, they are unlikely to attract large-scale investment.
Uncertainty around the timing and standards supported by related policies proposed at the state, national, and international level creates additional problems. What if new regulations require a piece of information that could be captured by a competitor’s product, but not yours? What if you’ve designed a business proposition around proprietary data and suddenly new policies require that all of this information be publically available? These questions make putting money into the sector too risky for many business developers and investors. The following diagram shows how policy, market infrastructure, and technology development must be aligned to drive business development and investment in a sector.
We have two of the three elements needed for large-scale investment and business growth of technology companies focused on seafood traceability. The technology exists. The market infrastructure, including retailer demand, internet connectivity and mapping services, is in place to connect the technology to users. What we are missing are government policies that would clarify the standards required, the data rules that apply, and the groups who must meet these requirements.
It may be counter-intuitive, but to see more business-driven innovation in seafood traceability, we must first see stronger policy guidelines. Without this clarity, traceability technologies are likely to get stuck in trial developments that never reach the right scale for industry-wide adoption, or become another government funded service without the benefit of the full creativity and technology advances of the private sector.