June 27, 2012 | Timothy Norman

312 Aquaponics is a Chicago-based startup with its sights set high. The company, founded by four ambitious young entrepreneurs develops proprietary aquaponic systems that it hopes to implement in sustainable, commercial-scale indoor urban farms in cities across the globe. Looking to the visionary business practices of Apple Computer founder Steve Jobs for inspiration and determined to turn profits in the early development years, CFO and co-founder Mario Spatafora believes the company has established a strong foundation on which it can build.

“We’re trying to be the pioneers of this urban aquaponics industry. Companies have tried, companies have failed, and then there’s other companies that are just barely getting by, needing constant reinvestment in order to sustain their growth.”

As background, aquaponic systems combine hydroponics with aquaculture to create a more optimized and sustainable food production system by solving for problems that occur in the individual systems. With hydroponics, a grower often must rely upon commercial fertilizers in order to enrich the water, while in aquaculture the fish farmer must constantly monitor the toxicity levels of the water that results from fish effluents (waste). In aquaponics, the fish effluent in the water provides an organic nutrient source, or natural fertilizer, for the plants being grown in the system. The plants in turn consume the natural fertilizer and in the process filter and purify the water, which is subsequently recirculated back to the fish.

“It’s a more sustainable farming method.  We use less water than conventional farming,” says Spatafora. “We use no petroleum-based products, no pesticides, herbicides, anything like that. We use no hormonal treatment in our fish.”

Starting up

It is the four founders of 312 Aquaponics, and their complementary skill sets, that give Spatafora confidence in the company’s long-term strategy.

All four of the company founders have been friends since childhood. Their collective interest in urban aquaponics grew while attending various universities in the Chicago area. Spatafora was at Depaul studying business, while system engineer Arash Amini, biologist Andrew Fernitz, and system designer Brian Watkins all attended University Of Illinois At Chicago (UIC) together.

The founders first developed an interest in aquaponics when they met Myles Harston, a 20-year veteran of aquaponics farming, at the UIC-hosted Good Food Festival. Harston had been hired by Chicago State University to build an aquaponics system on campus and following their graduation in the summer of 2010, the future founders of 312 Aquaponics quickly offered their assistance. Excited by the future prospects of urban agriculture, they decided to start their own business.

By the end of March 2011, 312 Aquaponics was fully financed through the investment of another UIC student. The founders set up shop at The Plant, a former meat-packing factory in the Back Of The Yards industrial neighborhood of Chicago that has been making headlines of its own as the epicenter of many new sustainable businesses in the city.

By August of 2011, 312 Aquaponics had its system up and running with tilapia swimming in four 250-gallon tanks and micro-greens like arugula, cilantro, and baby carrots growing in three stacked levels of growth beds to maximize the use of floor space.

Aquaponic system design

312 Aquaponics has designed its aquaponic system vertically to allow for as many growth beds to be stacked as there is ceiling space. To Spatafora, this vertical design is key to success in aquaponics. “If you can figure out how it’s profitable at this level, then all you have to do is build the system taller and find a bigger building.”

This is the arms race within the fledgling aquaponics industry: the quest for a perfect design that can easily be scaled up to almost infinitely large proportions.  “Everybody’s after the same thing: a scaleable model so that they can go after the big money and get a big project off the ground to make a big dent in the food market,” says Spatafora.

Presently, 312 has limited its growing space to a mere 600 square feet. Compared to traditional farming, this is agriculture scaled down to a subatomic level. “At 60,000 square feet you can really start a commercial system,” says Spatafora. “But the idea is, even at the scale we are at, we can still farm profitably, it’s just that the distribution model changes. 60,000 square feet is where we think the commercial viability really starts on a regional or national level.”

Challenges

While aquaponics has many benefits over traditional farming, the place where most startups have felt the pinch is in the energy demands, says Spatafora. The Plant currently makes use of the city grid for water and power, but founder, John Edel intends to eventually generate electricity on-site by burning methane collected through the decomposition of plant waste and local restaurant scraps, in a process known as anaerobic digestion. This process could sufficiently reduce the energy costs of 312’s urban farming operation.

Another challenge that 312 Aquaponics continues to encounter manifests itself in the guise of antiquated city laws related to food production that were written before the conception of aquaponics.

Recently, to the delight of city farmers and 312 Aquaponics, Mayor Rahm Emanuel has taken an interest in urban agriculture.  “When Rahm Emanuel came into office, one of the first things that he did was push through a zoning amendment that made it legal for my company to operate.”

While the passage of the zoning amendment has helped, Spatafora still faces hurdles from the Business Affairs Department and other regulatory bodies in the city that will likely keep 312 from selling their micro-greens and fish until the start of 2013. “They’d never heard of aquaponics,” says Spatafora. “No farmer in Chicago had ever tried to obtain a business license.”

Revenue stream diversification

If not for the impediments related to city laws and ordinances, Spatafora says the company’s principals would never have had the requisite drive to diversify their revenue streams. “For a lot of people who get into aquaponics, it’s a one-trick pony,” he says, with company revenue typically dependant entirely upon the sale of food produced. To reduce risk, 312, in addition to selling the food that it produces, has also set up shop as an aquaponics consulting business that builds and designs systems for client companies. “By taking on that consulting role, that’s what has really kept us afloat as we develop the farming side.”

Their first client, Loyola University Chicago, approached 312 to design two separate aquaponics systems: a small aesthetic system growing ornamentals for a building lobby; and a large-scale greenhouse, which will be student-run and produce food for the students’ dining hall.

312 also recently completed a project for Moto Restaurant in downtown Chicago. The head chef’s old basement office has been converted into an aquaponic farm that grows micro-greens, which are notoriously expensive to purchase and ship in bulk.

The company has also worked to supplement their income via tours of their facility at The Plant and by offering aquaponics training classes to local area residents.

When Illinois regulators open the state for commercial-scale aquaponics, 312 intends to sell directly to a list of Chicago restaurants they already have on-deck, including Brunch Restaurant, Lockwood, and Nana Organic. As the company expands, it also intends to take its harvest to farmers’ markets, specialty grocery stores, and eventually wholesale distributors.

While scaling its operation and expanding to other cities is a chief goal, Spatafora says the company has an even more revolutionary design concept in the works. According to Spatafora, when every other aquaponics competitor goes big, 312 intends to branch off in the opposite direction, much in the same way that Steve Jobs revolutionized the concept of the computer. Someday a consumer-model aquaponics system might be found in households across the planet, with the family’s pet goldfish helping to provide a constant stream of fresh vegetables for the kitchen.  “We will not only be able to sell our own food, but also be able to spread our model to wherever it wants to go, whether it’s in Detroit, Michigan, or whether it’s in Dubai.”

Funding

Since 312’s initial financing in March of 2011, it hasn’t needed to find any additional capital to sustain itself. The company is, however, looking to expand and begin testing on new designs and different fish species. “We are now in the process of courting some new investors to try to really expand this thing and get it to a point where it’ll be sustainable for the next 50 years or so,” says Spatafora.

These young entrepreneurs are thinking long-term, and within the burgeoning aquaponics industry this is not a rarity. With high expectations for significant growth in the coming years, aquaponics trade groups have begun to form in anticipation of future competition with the agricultural mainstream. “I wouldn’t be surprised if we start to get pressure from some of the more traditional farming lobbyist groups,” says Spatafora. “Organization is starting among aquaponics farmers.  Now we’re starting to come together and think as an actual industry.”