The ScaleUp | Mangrove Reforestation

“Mangroves are the McDonalds of the beach.” - Floridians, probably.

Welcome back to The ScaleUp. Today, we’re reviewing the work of Shanshan Song et. al, whose scientific, sociological, and political analysis in Nature Communications Journal examine carbon sequestration in mangrove reforestation and afforestation. While your friendly neighborhood correspondents aren’t beach people (try finding one that’s warm and rock free near Seattle, we’ll wait), we like to image those that are overlooking the humble Mangrove, dismissing it as an oversized weed, an impediment to shrimp farming, or a place that alligators might jump out from. Little do they understand that they are looking at the world’s most scaled and efficient carbon removal technology. Here’s how we’d build a business around this natural resource. 

Why Mangroves?

Far from being overgrown, waterlogged weeds, mangroves are magnificently efficient carbon sequestration machines; they are eight to ten times more efficient than terrestrial forests per year and can store three to five times more carbon per unit of soil, according to NOAA.  

Over the past thirty years, extensive reforestation efforts throughout Southeast Asia have shown great promise in undoing this damage. Mangroves themselves are capable helpers, as the trees can grow two meters per year, and reach reproductive age within a year of the seedling being planted. Mangroves grow fast when allowed to, and especially so when replanted in areas that have held mangroves within the past few decades. The literature is unclear why reforestation is more successful than afforestation, but studies suggest that specific characteristics of saltwater vs. freshwater balance, soil, and sunlight cause the imbalance. What’s also clear is that reforestation creates a more efficient carbon sink; with as much as a 40% increase in sequestered carbon within the first 40 years. 

Both are good, but habitat restoration is better. 

Downsides & Objections for Mangroves 

There has been an estimated 35% loss in global mangrove area since 1980. This is due to (a) the shrimp industry which has significant crossover in habitat and (b) the world’s demand for waterfront property and subsequent resistance to large, rapidly spreading trees on the same land.   

The world eats a lot of shrimp, with the average American consuming 4.4 pounds last year, and the worldwide market is expected to increase by 3.7% annually for the next decade, per NOAA. Shrimp grow well in similar ecosystems to mangroves, with most factory farming occurring in Southeast Asian countries, and at incredibly low margins. Rather than invest in expensive equipment and artificial ponds, many farmers have simply cut the mangroves down and put shrimp in their place.

The second primary objection to reforestation and afforestation is much simpler. People own waterfront property, enjoy good views and access to fishing / boats, and prefer not to pay for the removal of extensive and fast-growth plants every few years. 

The Business

We know that mangroves are endlessly good for the world, that the WIFM for planting more is effectively impossible to quantify, and that significant business interests oppose the efforts. So how can we build a company here?  

We are selling mangroves-as-a-service, selling farmed installations of various sizes to locally owned farms vulnerable to floodplain activity, towns and cities downstream of major river plains, and to major timber companies. There are a number of possible wedges, and none require new technology development. 

1. Mangrove soil is nutrient rich, with a high carbon content that makes it an excellent fertilizer for other plants. Studies suggest that marine alluvium, when not destroyed by marine current and carefully transported into green carbon ecosystems, can lock carbon sequestration (remember that blue carbon sinks live in soil, while green lives in the plants themselves). 

2. Floodplain management is becoming an increased problem, with recent academic estimates ranging from 1-3bn people affected by these events over the next decade, and 10-24% of all farms likely to suffer from outcomes ranging from soil degradation to outright destruction. Stakeholder groups including local/ state/ federal governments, corporate farms, as well as others are ready to subsidize any potential solution to these losses. 

3. Mangrove wood is a prized sustainable building material in South America and throughout the developing world. This wood can be used by timber companies to replace, or supplement, existing terrestrial sources. 

People & Organization Structure

We see a vertical GM structure for our company, which we’re dubbing Grovi. Each industry will need: 

• GM (1 per vertical) 

• Sales (8 + 1 leader for farm vertical, 4 + 1 for government, 8 +1 for timber)

• Sales support (3 sales engineers, 1 market research, 1 sales operations)

• G&A (Finance, General Counsel, HR)

• Science team (2-3 agricultural scientists, 1-3 engineers)

• Mangrove maintenance crews (Many, franchised, treated as a passthrough cost to government and farm verticals as well as timber if unable to leverage timber’s existing infrastructure)

GTM Design & Commercialization

We at Coral are not fans of the current carbon offsets markets, finding them to lack in scientific rigor, and rife with what is politely termed “grifter bullshit.” Mangroves represent a possible solution. 

Grovi will install Mangrove farms in locations that are found to be hydroponically suitable, with an initial focus on locally owned farms, corporate campuses and cities, and targeted locations where the shielding effect of mangroves can slow storm surges and flooding. Farmers will not be charged for the service, but instead will agree to purchase a quantity of soil, locally sourced on their property, at a pre-negotiated rate for 5-10 years. Corporations and cities will pay both an installation fee and ongoing maintenance to keep mangroves from choking waterways. 

The largest monetization opportunity for the company is in selling to timber, paper, and furniture companies. We see a coming pushback to currently available carbon offsets, with an eventual swing back towards scientific utility. Grovi will market itself as the most useful offset available, in that it can replace the need to harvest old-growth terrestrial forests, and produces a product that industry can transform into sellable, commercializable product. 

While mangrove wood does have pulpier characteristics which make it more difficult to process, combining the budget for base products with the current spend on carbon offsets create enough margin that the mentioned companies will, with economies of scale, be able to turn a profit on their green-upcharged new lines. 

Funding

While Grovi is not a particularly capital-intensive company for the climate sector, given that it depends on minimal new technology development, its long sales cycles and feedback loops (trees need time to grow!) represent an initial challenge in arriving in the market. For this reason, it’s best suited to raise startup capital from global nonprofits and NGOs. We anticipate monetization from the farming vertical beginning in year 3 of the business, government in year 3, and timber in years 5-7. 

Given 40 headcount and 3 years until full monetization, Grovi will need $45m in initial capital before becoming self-sustaining, assuming $250k per employee, fully burdened, and additional 50% for operational overhead. 

Challenges

There are a few scientific optimizations to overcome as the company reaches scale. The first is that, while mangroves are remarkably resistant to various weathers, temperatures, and nutrient balances, they are picky in hydroponics. Grovi will therefore partner with geospatial imagery companies, meteorological predictive platforms,  and on-the-ground experts to identify suitable sites. The second is that while mangroves don’t directly require salt water to grow, and have evolved protective mechanisms to excrete excess salt, there’s little research on what happens when mangroves try to grow extensively in freshwater. If issues are found here, Grovi can use GMO processes similar to those found in corn and wheat production to optimize lifespan. And finally, the upside and downside of mangroves is that they grow fast. Like, really fast. The largest infrastructure challenge facing Grovi is ensuring that the trees stay where they’re wanted.