In the big picture of ESG-focused, ClimateTech innovation there has been one ‘big idea’ that has been kicking around for ages —planet-friendly chemicals. Finally, all signs are pointing toward ‘go’ on a bio-based chemical revolution.
This is and always has been a highly diversified sector, ripe for disruption. From fuel to perfume, agricultural inputs to laundry detergent, industrial solvents to packaging, the potential for replacing the largely petroleum-based, non-biodegradable products ubiquitous in our daily lives with safer, more sustainable alternatives is massive.
And where there’s opportunity, investment follows. Right? Indeed, the bio-based materials and sustainable chemicals market is not only gaining momentum but has been a recent bright spot in an otherwise bleak VC climate. The sector (including bioenergy) was one of “four agrifoodtech categories that bucked the global venture capital decline in 2022,” according to AgFunder, with a 14% increase in startup funding over 2021.
But recent market successes in alternative chemicals have been a long-time coming. So why now? What’s different? And what can startups under the big umbrella of ClimateTech learn and take-away from the persistence, and now growing success, of bio-based materials startups?
For this month’s blog post I deep-dived into the fascinating world of startup challenges from the lens of alternative chemical innovations with Eric Steen, CEO and co-founder of Berkeley-based Lygos. At the forefront of the sustainable specialty chemicals movement, Lygos benefits from a decade in business with strong partners and a commercially available set of technologies, and is currently moving full steam ahead on bringing their vision to reality in agriculture, home care and clean water.
Chemical Alternatives Must Do Better on All Fronts
Like most innovations in ClimateTech, alternative chemical solutions are coming to fruition in large part thanks to consumers.
Chemicals that are safe for humans and the planet are becoming increasingly important to consumers and regulators and policy makers are following their lead. Meanwhile, rapid price drops in materials, innovation advancements and the adoption of AI to speed up the discovery and development process have converged into the current wave of new possibilities, and demand, for sustainable chemicals.
It’s the perfect storm for startup tech innovation, and Lygos, like most all mission-driven startups in ClimateTech, is working at “the front and center of building high-performance, sustainable solutions to solve really big problems,” Steen says.
In their case, Lygos are innovating fully formulated sustainable solutions to traditional petrochemical, non-biodegradable produced materials that not only use up rapidly disappearing resources (i.e. fossil fuels), but pollute the environment via their manufacturing, use and ultimate disposal. It’s still all ‘chemistry’ based, but coming from much safer, renewable resources using climate-friendly production processes like fermentation to create novel new chemicals. Or, as Steen describes it, “we’re mining from CO2 & plants, instead of fossil fuels.”
But just because the market trends are ripe for Earth-friendly products, doesn’t mean that any ‘friendlier’ alternative will move the needle on market adoption, Steen says.
To commercialize, scale and make change, sustainable chemicals can’t just be better for the environment than their traditional counterparts, they must do better on all fronts important to product success, Steen says. Chemical alternatives must;
1) Be better for the planet.
2) Perform better.
3) Offer better returns.
Take laundry detergent as an example. Doing laundry is something that people do every day, with the same objectives. They want colors to be brilliant and not fade. Their whites to be white. Clean laundry that looks good. There are many companies with products that meet those objectives very well. But their detergents are made with persistent chemicals that don’t fully biodegrade, accumulating in our water supplies, including rivers and oceans .
What successful bio-based tech startups like Lygos are doing is solving the environmental problems of standard, day-to-day products like laundry detergent with sustainable chemical building blocks that companies can’t help but want to adopt. Those products that “outperform the leading brands, eliminate or enable lower cost structures and, ultimately, are biodegradable, eliminating one of the key challenges,” are the types of solutions that are scalable and how companies like Lygos will grow the marketplace, Steen says.
“At Lygos, we want sustainability to be frictionless. We don’t care if you believe in climate change or not, we want to remove that even as an argument or a question. We want sustainable products and solutions that perform better. Then it becomes a no-brainer for adoption,” Steen says.
Collaborations Equals Scale, Scale Equals Success!
But even with better (on all fronts) chemicals, collaboration within the marketplace is key for commercialization. That’s a good lesson to be had for most all tech startups working in climate tech innovation.
Lygos “isn’t just an ingredient company,” Steen says. They identify customer problems and then look for opportunities to collaborate for building new processes to level up the technology to commercial readiness. Scale is a huge deal in the chemical world. A limited supply of superior alternatives isn’t going to make much (if any) headway with an industry looking for large, reliable supplies of key components.
“We as an industry have to deliver at scale, starting with the value proposition that helps solve our customers’ problems. It’s not just the tech. It’s not just the right fermentation. It’s how do you purify? How do you build the solution and the final formulated product that delivers the B2B relationship that we, as a business, have to deliver?” Steen says.
So, instead of going it on their own, Lygos looks for opportunities to partner through their ‘collaborate to accelerate’ strategy. Why “reinvent the wheel” of chemical manufacturing when they can collaborate within the already existing supply chain, Steen asks?
For instance, Lygos has announced partnerships with Ginkgo Bioworks to leverage their deep investments in robotics and automation, CJ CheilJedang for their experience in delivering bio-based organic and amino acids via fermentation, and Dober, a specialty chemical manufacturer, to increase the chemical supply of one of their key product lines, SoltellusTM, a sustainable, biodegradable and water-soluble polymer with applications in home care, agronomy and water treatment.
Look for the Big Win
These collaborations across the value chain speaks to Lygos’ larger goal of not just reinventing better performing, better for the Earth chemicals, but reinvigorating the entire domestic supply chain, Steen says. It’s not just about the end product, but every step along the way — including the people and communities that will be impacted, that makes up the big win.
The obviously emerging demand for bio-based material feedstock biomass for sustainable chemicals (and sustainable fuels) is creating new crop revenue potential for farmers and new economic opportunities for the agriculture sector. Plus, with safer, bio-based alternatives, the building-block chemicals that have been deemed too dangerous in produce in the U.S. can now be brought back into domestic production. That means new domestic manufacturing demand, of course, all the jobs to staff those manufacturing lines.
For instance, Lygo’s brand EcoteriaTM, produced from plants, replaces malonates, chemicals used in the production of fragrances, coatings, pharmaceuticals, agricultural chemicals, adhesives and electronics. Malonates have traditionally been made with acutely toxic petrochemicals such as sodium cyanide, chlorine and hydrochloric acid and malonate. Manufacturing never took hold in the U.S., and was shifted out of the European Union, because of worker safety concerns.
“They said ‘not in our backyard,’ so production was shifted to China. But to me, the answer isn’t to go to China for chemicals we don’t want to manufacture here, but to have technology derived from plants that is safe to produce,” Steen says. “We want to see lower carbon footprint & safer production back in the U.S., or in the EU, and the distribution and manufacturing capabilities that enable robust supply chains that can be operated safely by right.”
At the end of the day, that’s the sort of big win that will really make a difference, Steen says. Not only will the world have safer, more sustainable-produced and planet-friendly products, but new (better) opportunities for good jobs and economic stimulation.
“I believe sustainability, climate tech and climate change together is one of the biggest opportunities from a materials and better processes for the world standpoint of our lifetime,” Steen says. “It’s what motivates me to getting up every day. Do we want to say ‘not in our backyard’ and continue to enable processes and products that could be produced in a better way? And bring more joy and opportunities to our lives? I want to do both.”
Inspired Yet?
So, what are the big take-aways from the alternative chemical revolution relevant to all startups working to innovate new technology for a better planet and human health? From talking with Steen, I’d say there’s some obviously clear themes to take to heart for mission-driven startups across the ClimateTech environment. Specifically;
- “Alternative’ isn’t good enough. Go for BETTER.
- Scale reigns supreme. But don’t try to go it alone. Look for the COLLABORATIONS.
- Where’s the BIG win? And how does your technology enable it?
How about your startup? Do you have similar strategies in place? And the team members to help you execute them?
Here at CS Partners our mission is helping tech leaders changing the world for better achieve their goals with the talent and team they need to put inspiration into action.
Feel free to reach out anytime. Cheers!
Simon Leich
