Tech startups are trying to fill the technology gap

Indonesian tech startups are making big money from seafood farming. This should come as no surprise—the archipelago is home to one of the world’s longest coastlines and more than 18,000 islands and islets.

But there’s another reason: According to investors and startups interviewed by CNBC, a “technology divide” is holding the industry back from realizing its enormous potential.

In the past year, several startups have raised millions of dollars from big-name investors to fill this gap: eFishery ($90 million in Series C), Aruna ($30 million in a subsequent Series A), Delos ($8 million in seed expansion), and FishLog ( $3.5 million in previous Series A).

“Indonesia is the second largest producer of wild catch in the world after China. And in terms of aquaculture production, we rank third after China and India. But when it comes to exports by value, we are only 12th in the world.” – said Farid. Naufal Aslam, co-founder and CEO of Aruna, a fishing e-commerce startup. Aquaculture is the controlled cultivation of aquatic organisms such as fish and shellfish, especially for human consumption.

“A lot of decisions are made based on gut feeling or what ancestors did for the last 60 years,” said Guntur Malarangeng, co-founder and CEO of shrimp farm management company Delos.

And he is not the only one who thinks so.

“There are many old-style players in Indonesia’s fishing industry who pass down conventional business practices from generation to generation,” said Englan Tan, managing partner and CEO of Singapore-based Insignia Ventures Partners, which invested in FishLog.

According to Tan, the Indonesian fishing industry needs more efficient technology and better processes.

“The only way the industry can grow is for farmers to grow. If farmers don’t develop and expand their businesses, we won’t be able to produce more fish,” said Gibran Huzaifa Amsi El-Farizi, founder and CEO of eFishery, an aquatech startup.

eFishery helps farmers optimize their processes with automatic feeders and mobile applications. Automatic feeders detect the hunger level of fish and shrimp by their movements, which prevents a problem more common in the manual process: over- or under-feeding.

Pharisees in 2009, when he was a student, he opened his own catfish breeding pond to supplement his family’s income. By the time he graduated, he was managing 76 ponds and began researching how he could use technology to help farmers.

He then built a prototype automatic feeder in 2012 and launched it in 2013.

“Feeding costs account for 70-90% of total costs [automatic feeding] can increase productivity and reduce costs,” Farisi said. He claimed that automatic feeders can reduce feeding costs by 28%.

Aruna, for its part, helps connect Indonesia’s small-scale aquaculture farmers with buyers. It claims to work with 40,000 fishermen in 170 locations.

According to the ocean policy research journal Marine Policy, small-scale fisheries account for about 90% of the total number of fishers.

“They are still very traditional in terms of performance and efficiency,” Aslam said.

He claimed that farmers who worked with Aruna were able to sell their catch for up to 50% more. And according to a report by the Center for Impact Investing and Practice, Singapore Management University and Accenture, fishermen have achieved a three- to 12-fold increase in income with Aruna.

“Farmers will produce what the market needs. This makes the supply chain more efficient and increases the income of fishermen because they know what fish they should catch and what they can sell at a higher price,” Aslam said.

Although the country uses only 7.38% of its total potential area for aquaculture, it is already among the most productive countries in aquaculture production, according to a 2016 report by market research company Ipsos.

“With the right transfer of knowledge and technology of best aquaculture practices, Indonesia has a very good opportunity to strengthen its position as one of the leading aquaculture countries in the world,” the report said.

Aayush Kapoor, vice president of Sequoia Southeast Asia, which has invested in eFishery, is also bullish on the industry.

“Indonesia is one of the largest exporters of fish and shrimp in the world, perhaps there is an opportunity for higher margins. And the government also supports Indonesia becoming an export economy in many sectors, including aquaculture,” he said.

“Indonesia has the pieces of the puzzle to become a world leader in aquaculture and seafood production. Once we figure out how to harvest them, we will be able to become a global seafood leader,” said Malarangeng of Delos.