[Editor’s Note: Founder Forum, a weekly interview with a startup founder in Maine, is sponsored by the Maine Technology Institute. Read more about MSI’s sponsored-content strategy here.]

Carter Newell

Carter Newell has been at the forefront of innovation in Maine’s aquaculture industry for decades. He co-founded Pemaquid Oyster Co. in 1986, long before the Damariscotta River was crowded with oyster-farming operations. The business last year celebrated its 30th anniversary, and was featured a few years ago in celebrity chef Mario Batali’s cookbook, America Farm to Table. Even before that he had founded Maine Shellfish R&D as a business to house his academic and applied research into aquaculture.

Arguably, though, his biggest impact has been in mussel farming. In 2007, he founded Pemaquid Mussel Farm after Great Eastern Mussel Farms, where Newell had worked, went bankrupt. He was left in a position where he had the farm sites, the rafts, the boat and a group of employees who didn’t want to lose their jobs.

“I had to make a decision. Am I going to let this go under or form a company and try to keep this thing going?” Newell said. “It’s not your typical entrepreneurial thing. It was kind of like being dealt a hand in a poker game and having to use that hand in the best way possible to hopefully win the hand. It’s a different strategy than starting from scratch, like we did with the oyster company.”

To the layperson, it’d be easy to assume farming oysters can’t be too different than farming mussels. But that’s far from the truth. The economies of scale are completely different, with mussel farming requiring initial capital costs ten times that of an oyster farm, Newell explains. Given that and the need to get past break even and into profitability, Newell had to find ways to operate more efficiently. His major innovation was redesigning the rafts traditionally used in rope-grown mussel farming. These new submersible rafts, the result of federally funded research and development, are capable of tripling his yield and prompted him last year to spin off a new company, Undine Marine LLC, to commercialize and sell the rafts to other mussel farms.

I spoke with Newell about the aquaculture business, the challenges of commercializing new technology, and the lessons he’s learned as a serial entrepreneur. This interview has been edited for clarity and length.

Maine Startups Insider: Have you always thought of yourself as an entrepreneur?

Newell: Yeah, I think there’s always been that interest, just in terms of starting stuff. Just like having a paper route and working since being a little kid. I started an environmental organization and initiated recycling at Colby College. Just doing different stuff and always being interested in leading some effort that would make the world better.

How did you get into aquaculture?

Well, it was an indirect path. First, I was a premed major and then I worked in operating rooms as an orderly one summer and decided I didn’t want to go into medicine. Then I got what’s called a Watson Fellowship from Colby and got to travel abroad for a year after college. I studied marine ecology. While I was in Wales, I visited a marine lab that did aquaculture research and I thought aquaculture would be a great opportunity to do marine science, but also have a job. When I asked them where would be a good place to study, they said Maine, where I had come from originally. I didn’t know at the time, but down at the [University of Maine’s] Darling [Marine] Center they had just started an aquaculture program. So I went there and got my masters. It was at that time that I learned shellfish farming was an economic argument for clean water, and so it combined my interests as an environmentalist with the realization that I wanted to live in Maine and so I needed to create my own job.

When you started your first company, Pemaquid Oyster, did you feel prepared?

It was a leap of faith. The interesting things about it was my idea of forming a company was probably a little different than the average person’s in that rather than form a company and take out debt or whatever, I had a bunch of friends from college. We raised a small amount of capital, but we initially just put our time in, kept track of it and paid ourselves off later. I was a diver, boat guy, and a marine biologist; another guy was a carpenter, another guy was a boatbuilder; another guy was a sales person and then we had a bookkeeper. So we built our team based on the talents we needed to run the company.

Give me a few universal lessons about launching a business you learned from first starting Pemaquid Oyster Co. and then Pemaquid Mussel Farm?

Start small and don’t quit your day job until the concept proves itself. Network with others and learn from other people’s mistakes. Don’t have tunnel vision, keep an open mind. Look at what drives success related to the costs of production and the value of your product. Develop a brand name and base your reputation on quality. Build a team with excellence and a variety of talents. Don’t be afraid to innovate.

What does innovation look like in the aquaculture industry?

In the early stages of the industry—in the 70s and 80s—you’d call it trial-and-error aquaculture. Try something; if it doesn’t work, try something else. In order to do that, you have to keep small because if you have a technique that doesn’t work very well and you replicate it in large way then you can have large problems. That’s been the history of the industry. As we’ve figured out what some of the key parameters are there are ways we can now predict results. That has to do with understanding the basic relationships between the growth of the species you’re dealing with and the environmental conditions you put them in. So my research has been to figure out what the variables are to make the animals grow, and then going out in the ocean and finding where the variables are right. It matters a lot in terms of where you try to grow something. For instance, if you grow mussels in cold waters off the Isle au Haut it might take you two and half years to get to market size. And if you grow them in, say, upper Blue Hill Bay or other places you might get the same mussel to market size in a year and a half. So the conditions matter. Generally, as a rule of thumb, if you can get them to market size in two years, you’ve got an operation. If it takes longer than that, it’s probably not going to be very profitable for you.

You’ve also innovated in terms of equipment. Tell me about your new submersible raft.

We were in a situation where we couldn’t grow mussels the way they do around the world using long-line systems because we have sea ducks that will eat them. That’s the biggest reason why the mussel industry hasn’t taken off here. So we started growing them on rafts, like they do in Spain, where they grow 300,000 tons a year. We can put nets around them and the nets keep the ducks from eating the mussels. However, these rafts [float on the surface and] were originally designed for fairly protected waters. In Maine, we have storms where we can get 60 to 70 knot winds coming in, which can make the rafts move around, causing the mussels to fall off the ropes, or actually destroy your rafts. So after doing this for seven years, I realized I had to find ways to eliminate my risk. If I have to worry about a crop loss due to a storm, then I’m just going to continue to struggle and never break through and get to the millions of pounds that the market is demanding. So I sharpened the pencil and looked at seven or eight years of financial data and realized the basic metric that would make this company successful was yield per rope. I realized I’m not going anywhere until I solved that problem. Sometimes you have to step back from your business and say, ‘Ok, I know I like to grow mussels, but if I don’t solve this problem, then I’m not in business anymore.’ I can think of 10 or 12 different challenges we’ve faced where we could have been out of business if we hadn’t solved those problems. But then again that’s what makes it an interesting occupation, as well.

So, I started to think about ways in which you could grow mussels on rafts, but without the risk of losing your raft and your crop, including by submerging them. This had been tried in other places, but no one had been successful at it. I realized there wasn’t the technology available, so I had to develop my own. So, I got my fourth SBIR grant—this one from the Department of Agriculture—and we used it to research and design this new technology.

How has your innovative and proprietary raft design benefited your business?

On the traditional rafts, we were used to 100 pound ropes. When we hauled the first ropes off the submersible raft, they were consistently coming up at 300 to 350 pounds. When you have triple yield like that all your metrics change completely.

What was the R&D process like?

The research part is fun, and almost easy, but then when you get out in the real word and you’re trying to fine tune the technology and actually commercialize it into a business—that’s the hard part.

It has been a learning process because if you’re in an oyster farm, the value of the oyster and the size of the gear you need is fairly low, so you’re profitable at a fairly small size, whereas the economies-of-scale dynamics are such that with mussels they have to be larger, and that makes it more difficult because all your capital needs are expanded, which means you have to make a really strong case. If you want to start an oyster company, your ask might be $50,000. If you want to get involved in a mussel operation, it might be a half a million.

Just to get started?

Yeah. So that’s why it’s a whole other scale of entrepreneurship to be dealing on that level. And also, the amount of engineering and research to justify that kind of investment is higher, too.

Tell me about the decision making behind spinning off Undine Marine to manufacture your proprietary raft systems.

As an aquaculture entrepreneur, you have to be innovating equipment and finding ways to make your operation more efficient. This is a continuation of that process. It was difficult because I had a new technology and I had a company that had to commercialize it. I had to make the decision of whether the company was going to become an equipment manufacturer and a farm or not. And a lot of the work I did with MTI helped me realize it’s two separate companies. I also interviewed several other equipment producers and they said it is much better to separate the businesses because it simplifies bookkeeping, reduces distraction, and each business has different economic drivers and customers. Also, the rafts will continue to need R&D, which shouldn’t have to be subsidized by the farm, which has to focus on growing mussels. I have a R&D agreement between the raft company and the farm. The raft company benefits because the farm provides an environment for testing and technology demonstration, while the farm gets the rafts at cost, so is ahead of its competitors, and can focus on its core business.

I am focusing on the new iteration of the submersible raft going into the water this June and am hoping it will prove itself and result in good mussel farm profits, and eventually demand for 100 rafts, which will make it a new manufacturing industry for Maine.

What do you expect the mussel industry will look like in five years?

What’s going to happen over a period of time—we’ve already seen this with oysters—as sales go up and more and more people get into it, there’s much less risk and you’re seeing traditional lending commuities get involved in it. Whereas before when we first started Pemaquid Oyster and you talk to somebody, they’d say, ‘What? Are you kidding? Growing oysters? What are those?’ Wheras now in the Damariscotta River you see 40 people out there. Everybody’s got trucks, they’ve all got boats and gear. It’s created a multi-million-dollar local economy right here. I’ve seen that happen with the oysters, and I think the mussles are the next thing. But again, as I said, because the scale of it is larger, I think to get more people involved in it we’ll have to be able to develop a smaller-scale business model, where people have miniaturized farms and minaturiazed equipment that is less capital intentsive.

But I also think it if I get the submersible rafts out there and I’m grossing a million and a half a year, people will turn their heads and say, ‘Whoa.’