Over the past year, declining investments, layoffs and uncertainty about the future have plagued tech companies throughout the U.S. And while tech giants such as Google and Amazon.com Inc. have made headlines for mass eliminations, startups haven’t been immune to these downturns, either.
But there’s an exception, observers say: startups focused on “blue” and “green” innovation.
“Compared to their peers in other verticals, blue tech startups are faring better,” said Toby Stapleton, director of the Newport-based Blue Venture Forum, a program to connect existing and emerging blue tech firms, investors and other groups. In other sectors, he said, “we’re seeing VCs [venture capitalists] maybe pull back a bit in light of the current climate and general economy.”
But blue tech startups have benefited from new sources of capital formed specifically for this field, Stapleton says, including funds established for startups “at the nexus of blue and climate tech.”
This uptick is a relief for many startups in Rhode Island, which tends to attract ocean-focused innovation, and has also seen rapid growth in the offshore wind industry in recent years, seemingly sparked by Danish renewable energy company Orsted A/S establishing an innovation hub in Providence in 2020.
Amid this climate, the Blue Venture Forum in January hosted its first Blue Venture Investment Summit, which brought local and international startups and investors to Roger Williams University for a series of panel discussions focused on current and anticipated interest in funding the blue economy, as well as how startups can connect with investors.
Among those local innovators were startups such as Jaia Robotics Inc., which closed on a $2 million seed funding round in November; and Regent Craft Inc., a North Kingstown-headquartered startup developing fully electric “sea glider” technology, which has raised more than $45 million as of February.
National tech trends, meanwhile, largely aren’t signaling the same fundraising success stories. According to tech industry data provider Crunchbase, more than 140,000 workers in U.S.-based private and public tech companies lost their jobs last year amid inflation and stock market shocks. This disruption continues to gain speed, with more than 93,000 tech workers already laid off in 2023 as of mid-February.
Meanwhile, according to KPMG International Ltd.’s 2022 fourth-quarter Venture Pulse report, the number of venture capital deals and overall investment continued to decline throughout the U.S. in late 2022, with investments at less than one-third of the amount raised during the fourth quarter of 2021.
The report does not comment specifically on blue technology, but it notes that environmentally focused, renewable energy companies globally saw strong investments due to an ongoing energy crisis in Europe.
Stapleton sees the comparative success of blue and green technology startups as drawing from a shifting focus toward the ocean’s role in overall environmental well-being as climate change concerns heighten internationally.
“There’s a general understanding today that oceans impact the climate, and climate impacts the oceans,” Stapleton said. But “we don’t really understand the ocean, so we need to make investments on understanding the ocean’s impact. … We’re seeing a lot of investors use that as a fund thesis.”
That’s in contrast to less than a decade ago, Stapleton says, when most investment in the country’s blue economy came from the defense sector.
“The institutional investors were almost completely absent from investing in blue tech companies seven years ago,” Stapleton said. “And it’s really because those blue tech companies were focused on one customer – the U.S. Department of Defense, or more specifically, the U.S. Navy – so it was really hard to get those VCs excited about an investment opportunity” with a limited customer and sales base.
“Growing and attracting companies here that are focused on our oceans and are developing solutions for these big climactic challenges … helps to diversify and bring a fresh perspective you wouldn’t see if they were being solved only by big corporations,” Stapleton said.
Representatives from some of these specialized funding groups, such as the Norway-based Katapult and Boston-based Propeller, were present on some of the panels at the Blue Venture Investment Forum, as were regional angel fund sources, such as investor David Ford from the Blue Angels Investment Group in Boston.
In Rhode Island, blue tech startups have relied largely on these angel investors for funding, Stapleton says, though he’s noticed more venture capital firms are beginning to look to the Ocean State for investments.
And as KPMG forecasts that U.S. venture capital will “remain subdued, except in high priority sectors, including energy and B2B solutions” throughout the first quarter of 2023, Stapleton expects the blue tech sector will continue to attract investors.
“I’m optimistic for the sector because we’re seeing an increase in activity that I think will continue, will buck the trend we’re seeing in other tech sectors where investors are pulling back a bit or being more cautious.”
