Start-ups | Macro Oceans
Start-ups | Macro Oceans
It’s time to yelp for “Kelp!”
Welcome back to our Green Commodities series. In today’s post, we’re looking at Macro Oceans, the kelp-tech (did we just make up a word??) startup led by Matthew Perkins and fresh off a $5m seed fundraise. Let’s dive into the waters of this fascinating startup.
Background and Problem
The world uses a lot of stuff. And between population growth and the internet, overall consumer demand and purchasing power are likely to accelerate along exponential, rather than linear, trend lines. Raw materials demand will increase to support manufacturing and packaging. Macro Oceans is another example of what we’re calling “macro-material” startups; they’re processing a low-carbon base ingredient (Saccharina Latissima / sugar kelp) into a few raw materials that are used to make items from packaging to cosmetics, and theoretically much more.
This approach has inherent benefits; Kelp is a highly sustainable material, effective blue carbon sink, and has a fast growth rate. Carefully designed processing should provide a high degree of permanence in carbon sequestration. And for each pound of kelp-based paper fiber in circulation it is one not made by cutting down trees.
Products and Strategy
Macro Oceans explicitly identifies itself as a middle party, buying kelp en-masse from farms in Alaska, processing and storing the product at their facilities in California, and selling the resulting raw materials to scaled product producers.
There are three existing SKUs today;
Polysaccharide, which serves as a base ingredient for cosmetics and beauty products. Today many cosmetic companies use Saccharina Latissima seaweed in their products including: Ren Skincare in their Kelp and Magnesium Body Wash and Body Cream, Haeckels in their Algae Facial Cleanser, or Algenist in their Advanced Retinol Serum.
Alginate, a polymer that can be made into cloth, film, and yarn. This has other applications in food, agriculture, wastewater treatment, and many more industries.
Pulp, which can be processed into paper and packaging. From our research on mangroves for a previous post, we’re curious if the pulp is suitable for something as refined as printer paper, or only for more rough & tumble materials. It also has other applications in agriculture and biofuel industries.
Secret Sauce
Macro Oceans remain intentionally vague as to their exact processes and supply chain, but the IP appears to be around two particular area of processing:
Storing kelp at room temperature for up to one year, with no loss of function
The extractive technique that allows for zero-waste processing of the plants into the above-mentioned SKUs.
Challenges Ahead
Macro Oceans has one of the most commercially viable approaches to the alternative material / green commodity space that we’ve encountered so far. By focusing on high-margin, low failure-impact items in the beauty and textile spaces, the company sidesteps significant regulatory burdens faced by providers making similar plays with other products; this is also why we won’t see their products in the agriculture, wastewater treatment, or biofuel industries anytime soon.
We’re also reminded of Elon Musk’s best quote around the scaling of bits & atoms businesses; “The factory is the product.” While skilled chemists, chemical engineers and rented lab space are sufficient to produce demo units and enough product for initial sales activity, scaling the business will require… scaling the business, at significant expense. They’ll need to expand their storage, manufacturing, and operations facilities to support their customers.
Current research suggests that sugar kelp populations are shrinking worldwide, with heavy losses off the coast of Norway, and in a few other locations, due to rising ocean temperatures. While Alaska does not appear to have suffered a similar situation to date, sea temperatures are rising worldwide and any large-scale commercial due diligence will need well-defined answers to these issues.
Coral’s Thoughts
“To sell carbon credits or not to sell carbon credits, that is the question.” -Shakespeare, we think.
Macro Oceans strikes us as an excellent business with a fragile supply chain. The future of Macro Oceans’ business is in enabling their customers to sell green-premium products, with demonstrable success in high-permanence sequestration. This would enable Macro Oceans to scale their business by advance-selling carbon credits and splitting the revenue with their partners.
For an example; If Macro Oceans was able to demonstrate a kelp-derived denim alternative (who doesn’t keep their favorite jeans forever?), would Levi’s be open to a large pre-order of the denim three years in advance, in exchange for a 50% share of the resulting carbon credits? A few of these deals would enable the company to scale profitably and alleviate the need for further funding.
In order to accomplish the above, Macro will need to provide radical transparency around every aspect of their current supply chain, and work to decarbonize as much of it as possible.
What’s the emissions impact of flying kelp from Alaska to California, and is it possible to source product from something closer to the continental US, even if that involves running different varieties of kelp through their production facilities.
Storage. Storing stuff at room temperature in California often means… heavily air conditioned. Macro has fantastic investors that have portfolio companies in renewable energy, batteries, and similar technologies. Partner partner partner!.
Most processing typically involves heating and grinding, which again requires energy. They need to find clean energy sources (or ways to decarbonize) these processes.
Understand the carbon lifecycles for the end-products. Carbon sequestration methods have varying degrees of permanence. For example, if their paper products end up in a landfill in only a few weeks to months it will start to decompose, releasing greenhouse gasses. Macro Oceans may want to explore entering other industries with longer carbon sequestration timeframes. Although your author’s would still prefer paper products made from kelp (or mangroves) over traditional timber products from a sustainability perspective.
If you enjoy this, check out our piece on mangroves.
