CO_Capital Invests in Carbonwave to Purchase Assets for its Mexican Waste Management Subsidiary

Carbonwave is a U.S.-based developer of advanced biomaterials derived from Sargassum seaweed. The company operates across the value chain, starting from waste management collection services with resorts in Quintana Roo, and extending to the upcycling of Sargassum with two products currently in the market, biostimulants and emulsifiers. It is actively working in R&D with additional innovations such as leather and 3d-printed items, among others. It has raised a long-term impact-linked loan with CO_Capital to invest in Capex of additional machinery for Sargassum collection and management in Quintana Roo. Achieving specific milestones set by the company and Co Capital reduces the loan's cost, offering a distinct positioning within the industry.

“This investment enables us to scale our operations significantly, strengthening our ability to address the Sargassum crisis sustainably while expanding the impact of our biomaterials globally. We are thrilled to partner with CO Capital, whose support aligns with our mission to turn a harmful environmental challenge into a resource of immense value,” said Ben Ellis, Co-Founder Carbonwave.

Carbonwave, formerly known as C-Combinator, is a Public Benefit Corporation founded in 2020 in Boston, Massachusetts by Geoff Chapin and Ben Ellis, with operations in Mexico and Puerto Rico. Geoff has been an investor and entrepreneur at several companies including a reverse-osmosis desalination startup which led him to discover the Sargassum issue. He has a strong track record in the impact venture space, having made significant contributions to the reduction of methane emissions globally. Ben is the financial and operational lead at the Company. He was Senior VP at Phoenix Revolution where Geoff was an investor and advisor.

The company operates in the collection of naturally-occurring organic ocean waste of Sargassum washed up on the shores of the Mexican Caribbean coast via its subsidiary Grupo Ensol, and then upcycles the processed seaweed into high-value biomaterials. Grupo Ensol has positioned itself as the market leader in waste management in the region, having partnered up with dozens of resorts in Quintana Roo, servicing 6,000 meters of beach regularly and disposing of more than 40,000 tonnes of Sargassum since its launch. Sargassum, a vital seaweed habitat for marine life, supports fish, shrimp, eels, turtles, and birds in the open ocean. However, excessive blooms on coasts harm turtle hatchlings, disrupt ecosystems (releases methane into the atmosphere, ammonia into the subfloors, and devastation to the reefs), clog desalination plants, degrade water clarity, and damage tourism and local economies, which make up ~87% of the region’s GDP. The team’s long-term goal is to transform all waste into sources of value by converting Sargassum from harmful waste into materials and products for local use. Using proprietary processes, the company addresses a major environmental challenge affecting Caribbean communities in a sustainable manner.?

“Carbonwave is inspirationally pushing the boundaries of what’s possible in the circular economy of what is a complicated seaweed, Sargassum, both from collection and biomaterial perspectives. Its integrated model, all the way from waste collection and management through processing, biostimulants and emulsifiers – not to mention other inspirational product pipeline potential – puts it at the avant garde in terms of both competition and product quality. Via supporting the Mexican waste management operation, CO_Capital can liberate funds at the Holding level with the upcoming equity round to invest more in growth and product development, whilst also providing incentives to move downstream into sustainable landfill management which currently does not exist in the region. With the indications from the new Mexican federal government of interest in dealing seriously with the Sargassum issue, we believe there is huge upside potential for the Company and look forward to supporting Geoff and Ben, as well as the rest of the team, as much as we can.” Phillip Price, Investment Director

Background, Challenges & Opportunities

Over-supply of Sargassum, an Ecological Problem with Economic Impact

Since 2011, vast quantities of Sargassum have washed up on Caribbean coastlines coming from the 5,500-mile long seaweed belt stretching from West Africa to the Gulf of Mexico. This belt has intensified in the past decade due to warming oceans and deforestation in the Amazon, a trend that will continue to intensify as climate change worsens. The Yucatan coast, especially in Quintana Roo, is one of the most affected regions by this belt, being responsible for a 35% tourism decline in a region where tourism makes up 87% of the GDP. Tackling the Sargassum overgrowth thus is crucial to restoring marine balance and easing economic damage. Researchers worldwide have explored solutions to remove the large amount of seaweed from shores and have come up with manual beach removals, floating barriers in tourist areas, and better monitoring. However, these methods are costly and difficult to implement and at a local level, stakeholders lack the adequate resources to manage the impacts from the Sargassum to both tourists and communities.

Positive Coastal Ecosystems Impact and Inspirational Bioproduct Upcycling Stories

Carbonwave addresses these challenges by building a vertically-integrated value chain that brings highly holistic impact, creating waste management solutions at a local level and upcycling solutions at a global scale. At one end, Ensol participates directly in the preservation of coastal ecosystems, protecting oceans and beaches with the potential to move downstream into sustainable landfill. At the other end, Carbonwave is in the initial stages of playing a pivotal role in turning waste into resources by transforming Sargassum into innovative products through an internal R&D team based out of Puerto Rico. The inspirational impact story of upcycling from waste both at small (biostimulants, emulsifiers) and large (bionaphtha, bioenergy, 3d printing) can leverage not only Ensol’s volumes, but other players in the industry.

Biostimulants, Emulsifiers and Future Products

Carbonwave’s current two active product lines, biostimulants and emulsifiers, are showing increasing promise in the market. Mainly focused on Mexico, the biostimulant product has been approved by Cofepris, one of the few biologics which has done so. This positions it strongly to grow nationally with increasing deals with Tier 1 and Tier 2 distributors as well as corporates, whilst also growing internationally into the US, Brasil and other markets.?

From an emulsifier perspective, demand and applications in the cosmetics industry are growing quickly. A unique product which has been extensively tested and is now moving into the scaling phase with both distributors and end buyers who are looking for unique ingredients which fit with sustainable brand values increasingly demanded by consumers.?

Working alongside seaweed experts from You Asked and from Kala Institute during due diligence, who validated both product and impact, observing just how advanced in technical expertise and product development compared to the rest of the industry. Particularly, and linked to the landfill expansion, Carbonwave can continue to brand position and with increasing feedstock expand to other product lines and markets, which in turn could unlock higher Sargassum use and impact potential.?

Moving Forward: Addressing the Lack of Full-Cycle Landfill Infrastructure

Currently, much of the Sargassum collected in the region is dumped inland or buried, raising environmental concerns due to its harmful heavy metal content, including lead and arsenic. In Mexico specifically, dumpsites are deep in the jungle, with unclear environmental impacts, and efforts to address this issue face challenges such as lack of investment, consistent supply, and technical expertise. From a Company angle, one of Carbonwave’s current challenges is that a significant portion of collected Sargassum is not being upcycled in their current industrial process. To improve sales, profitability and the impact story, the Fund is working with Carbonwave to expand downstream into the opening of a fully sustainable landfill site, which opens up opportunities to recover Sargassum both internally and from partners, whilst reducing waste streams from the current industrial process by upcycling materials for circular economy projects which require scale, something which over time will strengthen the impact story further still.