Rural-focused fund helps Maine companies take advantage of technology used in Europe

The first two investments of a fledgling fund focused on accelerating rural economic development in the U.S. are Maine-based companies that use technology that is well-established in Europe but unknown here. How likely is it?

This is the story behind RuralWorks Partners’ first impact investment. American Unagi, which produces and processes sushi-grade American eel, and TimberHP, a manufacturer of architectural insulation made from waste wood fibers.

Eel from Maine

Sarah Rademaker, who has had a longtime interest in aquaculture, founded Waldeboro, Maine-based American Eel in the basement of her Maine home about 10 years ago. Her mission is to revitalize the growth of the country’s water industry. After doing some research, she realized that eel was the best fish to target. “When I was young, I never thought of myself as an eel farmer,” says Rademaker. “But this seemed like the perfect place to start helping the U.S. industry grow.”

Why eel? What Rademaker learned was that despite rapidly growing consumer demand for sushi, the process of catching, growing, processing and selling eel in the United States is strangely complex. By law, fishermen are allowed to harvest juvenile glass eels in only a few U.S. states, with most of the activity occurring in Maine. (Eels originate near the Bermuda Islands and migrate to freshwater rivers in Maine to grow and mate). However, it takes anywhere from 5 to 20 years or more for these eels to start producing babies. Fishermen then sell and ship the fish to Chinese fish farmers, who raise the eels in tanks for about two years until they reach maturity. Those adults are then sold and sent back to U.S. restaurants and grocery stores, a highly inefficient and carbon-intensive process. “It just didn’t make any sense,” Rademaker said.

However, Rademaker also discovered that already proven technology exists in Europe to mature baby eels using recirculating aquaculture systems (RAS). In 2016, she began working with a Dutch aquaculture company to bring the system to the United States.

The business started with a few tanks in Rademaker’s basement. A few years later, she moved to space at the University of Maine and began commercial sales in 2016. Then, in 2022, she built her $12 million 27,000-square-foot facility to harvest eels. Once mature, they are processed into fillets and smoked, or sold live to a wide range of customers, from three-star Michelin restaurants to takeout shops. As Rademaker expands her business, she plans to increase her eel production from about 15,000 pounds a year to her 500,000 pounds.

A significant portion of the state’s eel fry are caught by members of the Passamaquoddy Tribe, who acquired 10% of the business in 2021. The family is also in the process of securing land for its own 30,000 square foot production and processing facility. The company will employ about 30 tribal and community members, according to Stan Meader, CEO of Indian Township Enterprises (Princeton, Maine), the economic development arm of the Indian Township tribe. It’s planned.

Initially, Rademaker raised about $10 million in debt and equity from angels and others. Skip Wyer, RuralWorks’ chief investment officer, said RuralWorks invested $1.5 million last year and has an additional $1.5 million available if needed to pay down debt.

Climate and cost friendly insulation

TimberHP (HP stands for High Performance, Healthy People, Healthy Planet) is built from an abandoned paper mill and is an alternative to fiberglass and foam, which are not only non-recyclable but also provide high levels of insulation. , which manufactures architectural insulation materials from waste wood fibers. Carbon materialized.

Co-founders Joshua Henry, a chemistry professor and materials scientist at the University of Maine, and Matthew O’Malia, an architect who builds certified passive homes, met in 2015. Henry, a self-described energy geek and environmental activist, says wood fiber insulation can reduce carbon emissions while potentially reducing energy consumption from heating and cooling systems by 90%. “Who wouldn’t want to reduce their heating and cooling costs that much?” he says.

The two began working together and soon discovered the technology of producing loose fill, board and batt insulation using wood fibers, which has been used in Europe for at least 20 years. But “even though North American wood raw materials were at least as good as Europe’s, no one was manufacturing products here,” Henry says. It was a low-density, low-value product that was prohibitively expensive to ship here.

Henry speculates that one of the main reasons for the lack of widespread adoption in the U.S. was the 2008 housing crisis, which prevented potential building material manufacturers from entering the market. The other thing is that the wood product manufacturers didn’t understand the insulation market, and the insulation manufacturers didn’t understand the wood product market.

Both Henry and O’Malia had previously worked in Germany and spoke German. In 2017, they decided to visit the manufacturer over there. And in 2018, a producer who was about to close its facility sold its equipment to two partners who agreed to help finance the €2.5 million cost. It took him six months and $4 million to dismantle the eight-story, 500-foot-long device and transport it in 150 shipping containers.

Meanwhile, Henry and O’Malia searched for an abandoned paper mill that could house equipment and use as a production facility. In 2019, they discovered a 600,000-square-foot factory in Madison that was used to make newspapers. Additionally, many of the engineers who worked there were still in the area.

It took another two years for the financing to be completed. However, in 2021, Citibank underwrote and completed the raising of $85 million in tax-exempt bonds, bringing the total amount raised to approximately $150 million. Part of the debt’s capital stack was raised from a $13.5 million seed round and a $27 million Series A round raised from approximately 100 investors between 2018 and 2021. Most recently, we raised approximately $18 million through a SAFE offering. This includes $3 million from RuralWorks. The company also raised approximately $5 million in grants from 2018 to 2023.

Late last year, TimberHP began producing loose-fill products and selling them through several major building materials distributors. His second line of bat products began operations earlier this month. Henry said the board product is expected to be available in late Q2 or early Q3.

Founded in 2022 by Community Development Financial Institution (CDFI) Community Reinvestment Fund and U.S. Conduit Capital, RuralWorks invests in growth-stage businesses with the potential to expand, increasing the wealth, economy, and It aims to increase resilience to climate change and employment.