Ocean Intelligence: Where Climate and Security Converge

Thanks, guys, for joining.

Sanjeev Krishnan: Excited to be here. I’m really here on the coattails of Kate’s good work the last six years.

Tonya Bakritzes: That’s great. Well, let’s start with that, actually. Kate, you’ve spent six years at S2G building an oceans portfolio around climate and ocean health, but now most of your time has shifted to really focusing on NATO and national security. So take us through how that shift happened and how your impact work led you here.

Kate Danaher: Yeah, thank you. I’m actually excited to have this conversation because we get these questions all the time as national security increasingly converges with our world. On the one hand, nothing has changed in the past six years, and on the other hand, everything has changed.

What hasn’t changed is that our ocean thesis has always been the same, which is essentially that the ocean is the planet’s regulator, and it’s also the least observed system. So if we care about monitoring fisheries, if we care about better weather prediction, if we care about how capital markets think about the 80 to 90 percent of goods that travel the ocean, if we care about any of those things, then understanding what is happening in the ocean is an imperative, frankly.

And so our thesis has always been that unlocking ocean data through low-cost sensing at scale is a prerequisite for managing the ocean. We built a portfolio around this over the past six years. Sofar Ocean Technologies is a distributed ocean sensor network delivering real-time marine weather, ocean data, and maritime wayfinding. Unseenlabs, through its radio frequency geolocation from space, helps to track vessels on the water, even when they turn off their tracking systems. Apeiron Labs, which you’ll hear from next week, has a low-cost, mass-producible underwater sensing vehicle.

I think what has really changed is that the world changed around it. Governments have always been a critical player in commercializing ocean technology development. For every company we’ve invested in and for the entire sector, it has long been the anchor customer across multiple missions at once: science for research, defense and security for undersea awareness and maritime security, and a lot of commercial applications.

So the same capability that serves all the commercial applications also serves a lot of government applications. And the government, regardless of the use, was always or often the anchor customer that enabled the R&D to be paid for and enabled the scale to happen, so that science and research and commercial applications could hopefully have lower costs for more accessible and reliable sensing platforms. So the government’s always been a part of this.

Again, what’s changed is the world around it. Cable incidents in the Baltic, Red Sea shipping attacks, chokepoints in Hormuz: every contested environment that we anticipate over the next 10, 15 years will start in or involve a body of water. And so the capability we’ve been backing for impact reasons has become strategically urgent to the world.

So we haven’t migrated from climate to security. We just know that the problems we’ve always backed have dual purposes, and one of those purposes, which is around security, has a very urgent need, and we have commercial technologies ready to meet that need.

Sanjeev Krishnan: I think what’s interesting about ocean security is that it is a public good. It moves most of the logistics of trade. It’s both the lagging and leading indicator of weather, and obviously everyone trades the weather, whether you do agriculture or energy, et cetera.

So ocean security is a bit of a difficult one because it is a public good, relative to, say, food and soils or energy and feedstock in their various forms. Although clearly here, I think sovereigns play a greater role.

And then, to Kate’s point, I think what’s interesting, because of this desire for security across food, energy, and oceans, is that it borrows from a legacy. Mainly the Air Force has done this, but perhaps other parts too. GPS came out of a lot of the Air Force. Actually, the first semiconductor demand was the Air Force and Apollo. Clearly, DARPA and the internet,. But even before then, there’s a broader legacy of anchor customers for problems that create new innovation. Synthetic rubber was not an industry until security was the anchor customer.

And so I’m really excited about ocean intelligence, and the anchor customer in many cases is security. We’re investing in a lot of these companies, Apeiron being one of them, where it can go beyond this anchor customer into weather forecasting, into analytics for reinsurance, into even niche applications like whale monitoring for offshore wind, and many, many others. But I think this is just more of a pattern through history of the anchor customer really catapulting an innovation, like semiconductors, like GPS, like synthetic rubber.

Tonya Bakritzes: I think we’re seeing more and more conversation about the oceans, and a desire to understand the oceans. Kate, you mentioned that in your ecosystem conversations you get this question a lot about ocean intelligence. But could you both frame the moment we’re in with respect to ocean intelligence?

Kate Danaher: I’d say that at the moment there are three things converging at once around ocean intelligence. Sanjeev, I’d love to hear if you’d add or take away any of these.

The first is unrelated to some of the tailwinds we’ll talk about but the gap around ocean sensing, the way it has traditionally been done at least, is actually growing. Despite all the low-cost sensors we’re talking about, I think the way the ocean has historically been monitored is frankly eroding. If you think about the Argo system, which right now is a global scientific float network, it delivered about 15% less data than it did in 2022. And if you keep up with any of the news, a lot of that is being defunded by the federal government. Only 28.7% of the seafloor has actually been mapped to modern standards.

A lot of the sensing systems we historically relied upon have been funded by governments, some satellite constellations as well, and they are being decommissioned or their funding is being cut. So that is actually eroding, and those systems therefore just can’t scale. They are expensive and costly to stand up and manage, but there also aren’t a lot of public funds that want to continue going to support them. And that has a lot of consequences for weather systems and underwater cables and all kinds of infrastructure that we rely upon for the public good. So that’s one.

The second is a tailwind. Sensing has just gotten inexpensive. If you think of what’s happened in the space industry over the past 10 years, the cost of putting a satellite in space, and the payloads to monitor fires or illicit activity at sea, has come down tremendously thanks to the unlock of primarily SpaceX, which, again, government was their first investor or contractor, government-funded…

Sanjeev Krishnan: Customer.

Kate Danaher: So the cost of sensing has gotten a lot cheaper. And then the third is also a tailwind, which is that the threat environment has escalated. The geopolitics that have been dominating our headlines for the past four or five years now are creating this urgent need to understand what’s happening and to monitor our oceans. So that’s the moment ocean intelligence is having right now.

Sanjeev Krishnan: I think there’s an even more fundamental point, I would argue, which is that what’s happening with climate is that there are several Hiroshima bombs a second of excess heat going into the ocean. And it’s creating nonlinear feedback loops that impact industries, countries, markets, like the insurance market, et cetera. As you have excess heat and warming, even things like sonar and acoustics don’t work as effectively as they used to.

I don’t know, Kate, but that is causing entropy, and that entropy is causing a desire for ocean sensing.

Kate Danaher: Yeah, I would add on to that, because the geopolitical things that are happening, those are human-driven moments in time, big escalations. What Sanjeev is describing is the stress on the system that nobody notices until it creates catastrophic events for the insurance industry. It’s the low-grade, pressure-building system that is evolving through climate change that is forcing everything to change.

Tonya Bakritzes: As government entities start to fund more of this technology, and hopefully help them see commercialization for other use cases along the way, are there any hard questions we need to wrestle with as these worlds converge? Could you lay some of those out for us?

Kate Danaher: I think it’s our responsibility to interrogate every side of this. Working in the sectors that we work in, with the outcomes we ideally want to see, it’s part of our job, because we’re investing in things that you have to play forward, not just during the investment cycle of three, five, or seven years. You need to play it forward if these are technologies or innovations that you hope change the course of some outcome. We have to ask: what are the intended and unintended consequences of proliferating and scaling these types of businesses?

So I think there’s no very clear answer to the things we wrestle with. I think you just have to have these honest conversations and do the best you can. But of course, when you think about dual-use technologies, government contracts are famously lumpy and unpredictable. Whether you get into an appropriations bill, or there’s a continuing resolution or a new administration, things can really get derailed when you’re getting government contracts, but they’re big. And for earlier-stage companies, even ones that are scaling, getting a really large contract from any customer is going to take a lot of your attention.

Sanjeev Krishnan: I think, one, from an investment committee perspective, if government is your anchor customer, and that’s a land-and-expand into commercial applications, whether it’s insurance or shipping or a milieu of analytics and use cases, that’s one thing we look for.

I think, two, we’d also look for guardrails, and not just on kinetic work, but even things like deep-sea exploration. We’ve successfully been able to guardrail some of that as well. On the intended and unintended, the unintended always have patterns, in my opinion, and those patterns have to be something we codify or get clear on from an underwriting perspective, so that the management team and we are not surprised when we have certain perspectives on it.

And then third is, if the data and the sensing proliferated, what are the positive and negative outcomes that occur? With sensing in and of itself, I don’t see a ton of downside, because it’s literally dark right now and people are stabbing in the dark, and those stabs in the dark are expensive, short-lived missions and expeditions. So to me it’s really a win-win-win. But obviously you need to have the guardrails in place, and you need to see what the market is beyond your anchor customer market.

Tonya Bakritzes: And how does the data collected from the sensors deployed by the government make it to the public good? Is that something you’re thinking through with your companies?

Kate Danaher: That’s actually what I wanted to follow on with. I’d say it’s not necessarily making it to the public good yet, but I think one of the most interesting questions to ask, and maybe there’s a way for us to influence this, is we set out six years ago to make sensing in the ocean cheap and pervasive and constant. And because of the proliferation of geopolitics and defense spending and the urgency for this type of data, there is more data being collected on the ocean than we’ve ever seen in our lifetimes. Hopefully it continues, but we may not see it again in the future.

So how do we seize that opportunity to redirect? A lot of the missions this data is being collected for are classified missions, or the government wants to keep a certain lock and key on how it can be released. Now, there are ways the government has historically made classified information public information. But I feel like there is an opportunity. We don’t want to look back in 10 years and say, ​“Man, I wish we’d gotten ahead of this one.” There’s so much you can do with this much data. How can we find ways and channels for it to find its way into the public good so that we can do more with it?

Sanjeev Krishnan: But I don’t necessarily think the public good is always going to be profitable. We have a whole thesis around the theory of change around satellites and sensors for good. And the good is that it allows a farmer to understand what’s going on in their soil. It allows a grid to understand what’s going on so they can do line monitoring. It gives weather forecasters sensing data so they can plan, and maybe underwrite insurance differently or better.

As you know, IoT in general in our sectors is extremely low. Manufacturing is around 40%. I think ag is less than five. I think the ocean would be, Kate, a rounding error on a rounding error in terms of sensing.

Kate Danaher: Yeah.

Sanjeev Krishnan: But that data should allow you to have some private use cases as well. Obviously, we’ve talked a lot in this podcast about insurance, but even things like offshore wind development, which I think a lot of Europe is going to have to do given what’s happening geopolitically. They want to be very thoughtful about whale monitoring, and you need persistent data to make that work.

For maritime and fuel efficiency this sensing data is going to be helpful as you do route optimization. There are companies already doing that work in our portfolio. Sofar does a lot of that, but could it be enhanced with a trifecta of data? And then the most interesting stuff will be what other risk transfers you can attach if you have this data. You’ve seen that across different verticals in the past, where measuring a physical economy thing allows you to de-risk it.

So to me, this is an extension of the IoT strategy we have in agriculture, in energy, and now in oceans. The aspect here is that you’ve got an anchor customer that allows you to build scale and initial revenue and build the org, and then you can effectively continue to prosecute the market beyond that one anchor customer.

Tonya Bakritzes: Well, thank you so much for sharing all of this. In closing, I’d love to hear any outlook on the next five, ten years that you’re hoping to see as we continue to invest in these technologies and support our portfolio companies.

Sanjeev Krishnan: I think fisheries are on the front lines of this, insurance is on the front lines of this, and navies are going to be on the front line. The ocean is both a lagging and leading indicator of where climate, weather, and planetary systems are going. And right now we are driving in the dark without headlights, and it’s raining, and we don’t have windshield wipers. So it is very bad.

And I think the risk of significant events happening as a result of these several Hiroshima bombs a second is going to be nonlinear. So I really am hopeful that more sensing occurs so we can at least understand this fundamental public good we have that drives a lot of commerce in the world.

Tonya Bakritzes: Kate, any closing thoughts?

Kate Danaher: I agree. If you can’t measure it, you can’t see it. And as Sanjeev said, we can’t see what we’re driving into, and I don’t know that we acknowledge it.

I would really like to see what all this data that’s being collected can unlock beyond the specific use cases right now, because I think it really is exponential.

Tonya Bakritzes: Thank you both so much. I really appreciate your time. It was great to hear your thoughts as we lead up to the next podcast on Apeiron Labs, so stay tuned for that, coming soon.

Kate Danaher: Thanks, Tonya.

Tonya Bakritzes: Thank you.

Sanjeev Krishnan: Thank you.

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