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Forsaking funding at a $1 billion valuation, Solugen preps a new green chemical product and a big 2021
Late last year, Solugen, a startup using synthetic biology to take hydrocarbons out of the chemicals industry, decided against pursuing a new round of funding that would have valued the company at over $1 billion, TechCrunch has learned.
Instead, the Houston-based bio-manufacturing company raised an internal round of roughly $30 million from existing investors and continued working on its latest project — a new bio-based manufacturing process for a high-value specialty chemical that can act as an anti-corrosive agent.
That work represents a potentially lucrative new product line for the company and charts a course for a host of other businesses that are refashioning the basic building blocks of life in an attempt to supplant chemistry with biology for manufacturing and production.
If Solugen can get its high-value chemical into commercial production, the company can follow the path that sustainable tech companies like Tesla have mastered — moving from a pricy specialty product into the mass market. And rather than over-promise and underdeliver, Solugen wanted to get the product line right first before raising big bucks, according to people familiar with the company’s thinking.
As the world looks to move away from oil and its byproducts to reduce greenhouse gas emissions and slow down or reverse global climate change, the chemicals industry is in the crosshairs as a huge target for disruption. Vehicle electrification solves only one part of the oil problem. The extractive industry doesn’t just produce fuel, but also the chemicals that make up most of the products that defined consumer goods in the twentieth century.
Chemicals are everywhere and they’re a huge business.
Companies like Zymergen raised hundreds of millions of dollars last year to develop industrial applications for synthetic biology, and they’re not alone. Startups including Geltor, Impossible Foods, Ginkgo Bioworks, Lygos, Novomer and Perfect Day have all raised significant amounts of capital to reduce the environmental footprint of food, chemicals, ingredients and plastics through synthetic biology.
Some of these companies are seeing early success in food replacements and ingredients, but the promise of biologically based chemicals have been elusive — until now.
Solugen’s new product will produce glucaric acid, a tough-to-make chemical that can be used in water treatment facilities and as an anti-corrosive agent — and the company can make it with a zero carbon (or potentially carbon negative) manufacturing process, according to Solugen co-founder and chief technology officer, Sean Hunt.
The glucaric acid from Solugen is cheaper to produce and more environmentally friendly than existing phosphonates that are used for water treatment — and the company has the benefit of competing against chemicals manufacturers in China.
Given the continuing tensions between the two countries, the U.S. is looking to make more high-value products — including chemicals — domestically, and Solugen’s technology is a good way forward to have home-grown supplies of critical materials.
Solugen still intends to raise more capital, the company just wanted to wait until its latest production plant for the acid came online, according to Hunt.
It’s also the fruit of years of planning. The two co-founders, Hunt and Gaurab Chakrabarti, first realized they could potentially use the technology they’d developed to make specialty chemicals back in 2017, according to Hunt. But first the company had to make the hydrogen peroxide as a precursor chemical, Hunt said.
“It’s advantageous for us to focus on this,” said Hunt. “As we scale, we can enter more commodity-type markets down the road.”
It’s all part of the notable strides the entire industry is making, said Hunt. “Synthetic biology has really made significant strides,” he said. “We have our commercial plant coming online this summer [and it proves] synthetic biology has gotten to the point where we can compete on price and performance.”
So the capital infusion will come as the company gets closer to the completion of these commercial scale facilities.
“It’s not like we were sitting on a term sheet and we said no,” Hunt said. “We want to make sure that we are hitting the milestones and the goals at a commensurate pace which is this year. I’m extremely bullish and optimistic of 2021.”
Solugen’s co-founder sees the path that his company is on as one that other startups working in the synthetic biology space will pursue to bring profitable products to market at the higher end before competing with more sustainable versions of commodity chemicals.
“How do you start a company that has this level of capital intensity?” Hunt asked. “You can start in the fine chemicals space where everything sells for tens to hundreds of dollars per pound. For us, glucaric acid is that specialty chemical and then we will do commodity.”
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Synthetic biology startups are giving investors an appetite
There’s a growing wave of commercial activity from companies that are creating products using new biological engineering technologies.
Perhaps the most public (and tastiest) example of the promise biomanufacturing holds is Impossible Foods . The meat replacement company whose ground plants (and bioengineered additives) taste like ground beef just raised another $200 million earlier this month, giving the privately held company a $4 billion valuation.
But Impossible is only the most public face for what’s a growing trend in bioengineering — commercialization. Platform companies like Ginkgo Bioworks and Zymergen that have large libraries of metagenomic data that can be applied to products like industrial chemicals, coatings and films, pesticides and new ways to deliver nutrients to consumers.
The new products coming to market
In fact, by 2021 consumer products made with Zymergen’s bioengineered thin films should be appearing at the Consumer Electronics Show (if there is a Consumer Electronics Show). It’s one of several announcements this year from the billion dollar-valued startup.
In August, Zymergen announced that it was working with herbicide and pesticide manufacturer FMC in a partnership that will see the seven-year-old startup be an engine for product development at the nearly 130-year-old chemical company.
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Investments in bioproducts surge as Geltor nabs new money
The manufacturer of a vegan collagen, Geltor, has raised a new round of financing — $90 million, according to people familiar with the company.
It’s another sign of the newfound viability of sustainability and cell-based, vegetarian replacements for animal products.
Sustainable bio-products, whether plant-based, genetically modified or cell-cultured, are having a big year. In the month of July alone, companies developing sustainable alternatives to animal agriculture and the industry’s byproducts have announced or closed on investments totaling $335 million in just three companies. Those companies include Geltor, The Not Company and Perfect Day.
Geltor’s chief executive Alexander Lorestani declined to comment on the new round, and sources did not disclose who the lead investor was.
The company had previously raised capital from SOS Ventures, IndieBio, Fifty Years, Cultivian Sandbox Ventures, Starlight Ventures, New Crop Capital, Baruch Future Ventures and FTW Ventures, according to information in Crunchbase.
In November, TechCrunch reported that the company was in looking for at least $50 million in new financing, but could raise as much as $100 million in the new round.
“Geltor’s production method is vastly more sustainable and eliminates the need for animal cruelty, but the reason companies in the cosmetics and food industries are clamoring for their products is because Geltor allows them to achieve function they simply can’t get from animal-derived gelatin and collagen,” said one person familiar with the company and its technology.
Worldwide, the collagen market is expected to reach $7.5 billion by 2027 according to data from the market research firm, Grand View Research. Another report from Grand View put the size of the gelatin market at another $6.7 billion over the same period.
Geltor’s aim is to make these additives — and other animal-derived proteins — cheaply, efficiently and animal-free.
Much of the cosmetics, skin care and food business is shaped by animal byproducts. Lanolin is made from wool grease, squaline is made from shark liver oil and gelatin is made from the bones, tendons and ligaments of cows and pigs. Geltor replaces all of that with a cell-derived protein brewed in a fermenter like beer.
The company’s founders, Alex Lorestani and chief technology officer Nick Ouzounov, first met as graduate students at Princeton and began working on their company in 2015.
As Lorestani told Forbes in a 2019 article, Ouzounov would always approach him about new ideas for companies. After graduation the two men relocated to Silicon Valley and were accepted into the IndieBio accelerator.
Geltor began as a manufacturer of gelatin, a food additive used in everything from marshmallows to Jell-O, but quickly expanded into collagen for beauty products and dietary supplements. The company is already working with Gelita, one of the world’s largest manufacturers of collagen.
The funding for companies like Geltor and Perfect Day show that industrial biology is having a moment. There are billions of dollars of value to be unlocked in the re-engineering of cell functions, and proteins are just one application.
For investors looking at new bio-products, the future is very much alive.
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After signing a big food additive deal, cell-based protein company Geltor is looking for at least $50M
After inking what sources said was a nine-figure deal with the world’s leading supplier of collagen proteins, Gelita, the cell-based collagen maker Geltor is in the market for at least $50 million in new funding, TechCrunch has learned.
According to people with knowledge of the company’s plans, the new funding could range from $50 million to as much as $100 million.
The money would be used to scale up the company’s collagen manufacturing capacity as it preps for the long-term Gelita contract.
Geltor is one of a slew of companies developing technologies to culture proteins at scale as a way to supplement and ultimately replace animal-based proteins in manufacturing.
While other companies pursue meat replacements using cultured products, Geltor is focused on another aspect of the supply chain: the collagen and gelatin additives that are typically made from the waste materials left over from the meat industry.
Traditionally, gelatin is made by boiling skin, cartilage and bones from animals. The material finds its way into any number of cosmetics and foodstuffs thanks to its ability to act as a thickening agent.
The markets for collagen and gelatin are worth a combined $9 billion dollars, which is a pretty sizable market for Geltor to tackle.
Just as importantly, should the meat replacement industry take off, then replacements will need to be found for the secondary markets that had been supplied by the waste streams for traditional meat processing.
Geltor already sells an animal-free collagen under the “Collume” brand as a marine collagen, and “HumaColl21,” which is a human collagen. Both products are used in the skincare market.
The agreement with Gelita marks the company’s first move into food and beverage additives.
“Gelita’s decision to invest in biodesign technologies is a prime example of our commitment to innovation and satisfying market needs,” said Hans-Ulrich Frech, Gelita’s global vice president of Business Unit Collagen Peptides in a statement last month. “This addition to GELITA’s collagen portfolio will complement the already robust portfolio of scientifically substantiated Bioactive Collagen Peptides®, which are key ingredients in foods and nutritional supplements for their protein content and physiological benefits.”
Meanwhile, for Geltor, the deal further proves out the company’s thesis that protein manufacturing can be a big business outside of the meat market that attracted players like Memphis Meats, Future Meat Technologies and other companies developing cell culture replacements for traditional animal husbandry.
“This pact further solidifies our view that we have entered a new era in how proteins are being utilized to improve products that consumers around the world use every day,” said Alexander Lorestani, the chief executive of Geltor in a statement. “Today, the market is ready and eager for premium offerings of protein ingredients, and this is the need that Geltor is serving.”
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