Market seen as most important indicator for innovation success at CLIB forum on potential of biotech.
Over 100 participants dialled in to our latest CLIB online forum event on 11 May 2023, when we discussed which are the most important indicators when predicting an innovation’s success.
At our CLIB online forum Sustainable – Smart – Scalable: Realising the potential of biotechnology, two innovators and an investment expert were invited to present and discuss which criteria can help us to identify and promote inventions with great potential at an early stage. Jakob Müller from Evonik and Albrecht Läufer from BluCon Biotech showed their road to innovation, while Daniela Arruda Costa of Capricorn Partners presented what they look for when investing in scalable technologies.
Jakob Müller, project manager biosurfactants at Evonik Operations stated that the chemical industry is under pressure to find alternative feedstock, including a move from hydrocarbons to carbohydrates. At the same time, at least in some sectors, there is increasing consumer demand for non-fossil based products. In the personal care industry, these end consumers are also willing to pay an increased price for these new, bio-based products.
At Evonik, the development of biosurfactants goes back well over 10 years. Jakob Müller pointed out that it took dedicated experts along the way who believed in the product. Equally important, he said, are early partnerships with reference customers, who can be essential to understand market demand and develop a successful product. In the overall process of holistic technology development, multiple teams of experts worked on the different aspects of strain development, optimising fermentation parameters , downstream processing and purification, as well as biosurfactant product development. The process at Evonik didn’t stop at the bio-based molecule, but went further to product characterisation and formulation, and application development. The fermentative production of rhamnolipids is currently based on glucose, and does not require the addition of oils to the fermentation broth. By producing a rhamnolipid which exists in nature, Evonik is promising a very mild, non-toxic biosurfactant, which has a perceptible consumer benefit, in addition to being biodegradable and non-fossil based.
Albrecht Läufer, who as CEO of the SME BluCon Biotech is aiming to scale-up a proprietary technology to produce lactic acid in a consolidated bioprocess, emphasised the scale, and the challenges of a transition to biobased products. The aim of BluCon Biotech is to produce lactic acid, the building block for the bioplastic polylactic acid (PLA), from non-food biomass. In the process, a proprietary microbe, optimised by directed evolution, ferments lignocellulosic biomass to lactic acid in one bioreactor. The resulting L-lactic acid of high purity is suitable for polymerisation and could help to replace fossil-based plastics via PLA in those cases where biodegradability is an added value. As an SME, the company does not have quite the resources Evonik presented earlier, but relied on a network of trusted partners and external experts. Interdisciplinarity for Albrecht also means looking at other sectors and using their expertise in downstream processing. He pointed out that the chemical industry has a much different set of expertise than the one required by bioprocesses, and is looking into solutions provided by e.g. pulp and paper or waste water treatment experts. Industries which have long experience in moving sludges, filtration or de-watering. In his opinion, the high costs associated with scaling a biobased technology necessitate a large addressable market, in order to ensure the required return of investment. This also means developing technologies to utilise second generation biomass.
Bringing different expertise together in an integrated pilot facility would greatly facilitate the development of bio-based processes to market maturity – and Albrecht called for publicly funded support of such an installation in the NRW region.
Daniela Arruda Costa, Investment Associate at Capricorn Partners, delved into the questions the fund examines to decide whether to invest in a technology and product. While developing a unique technology with a competitive advantage, addressing a market gap and providing a solution to a problem are already large challenges, surmounting them does not automatically mean a project is worth investing in. Innovators also have to show that their team is ready, knows the sector, and can scale the technology. Some factors are not under the control of innovators, such as the chemistry between the team and the investor. With investors like Capricorn Partners ready to support the company for 5 – 10 years before an exit, this is as important as the alignment of technology development and funding and exit timelines. While innovators can make sure to develop their technology to be robust, and their product a must-have for consumers, external factors such as economic downturns or disruptions of value chains can negatively influence a company’s outlook. Investors who can afford to take a longer view are however able to carry on in spite of such devaluation, if the underlying business case is sound. A good example is oat milk, which was under pressure due to increasing feedstock costs and inflation. However, the consumer demand for plant-based alternatives is considered to stay strong, meaning the value proposition is still valid.
All three speakers agreed that the market is the most important predictor of an innovations chance for success. They pointed out that this would include the product to be sustainable and align with existing regulation. At the same time, the market is a parameter which companies cannot control, as had been pointed out by Daniela in her talk.
We will take the input we received on board to elaborate the Triple-S guidelines and will involve the CLIB community in further co-creation workshops.