🌍Inside the algae industry with Spira Inc.
PLUS: Thai Union has invested in Algama as part of a €13 million Series A fundraising round and an investment firm for biodiversity has launched in Indonesia.
“In the beginning, recognise that you’re in state of learning and have as many conversations as possible. Don’t try to build anything yet. Had I known this at the start, I believe the journey would have been much more enjoyable." — Elliot Roth, Founder of Spira Inc.
Dear algae technologists - hello and welcome to the Paxtier Report!
This week, here’s a little highlight from my recent call with Spira Inc.’s Elliot Roth:
In today’s report:
Markets: 💸 Investment firm for biodiversity launches in Indonesia.
Deals: 🤝 Thai Union has invested in Algama as part of their €13 million Series A fundraising round. 💸🐟
Movers and Shakers: 🌍 Inside the Algae Industry with Spira Inc.
Around the web: 🍲 The sea forests at the end of the world.
Research: 📝 Climate change threatens unique evolutionary diversity in Australian kelp refugia.
Markets and Investing
✂️Algae Market Snippets
Some big moves in recent weeks:
I-Phyc has completed its fundraising round through private equity firm Growthdeck.👏 (Read more HERE).
Algiecel, has raised €1.3m in seed funding from Denmark’s Export and Investment Fund, a UK-based family fund and private individuals. (Read more HERE).
Bill Gates has invested in Rumin8 in a US$12 million (A$17m) second phase of its Seed round. (Read more HERE).
CI Ventures has invested $500,000 USD into SEADLING as part of a $1M round. 🌊 (Read more HERE).
Thai Union has invested in Algama as part of their €13 million Series A fundraising round. 💸🐟 (Read more HERE).
🌊 Great seaweed investment analysis by Steven Hermans at Phyconomy. Investments have largely been funneling into downstream companies processing seaweeds into products (Read more HERE).
Cadman Capital Group recently announced an equity stake in Urchinomics. (Read more HERE).
A project assessing the best cultivation methods for growing seaweed to feed to hens is among four innovative projects being supported by CIEL🌍(Read more HERE).
CH4 Global was one of the 6 winners at the founders games. (Read more HERE).
Norwegian seaweed producer brings in former Mowi exec, raises $4.7m. (Read more HERE).
Skretting to include more insects and algae in their shrimp feeds. (Read more HERE).
Investment firm for biodiversity launches in Indonesia. (Read more HERE).
NewFish can now be found on Air New Zealand business premier flights to Asia alongside existing North American routes. (Read more HERE).
Eranova is raising €1 million. (Read more HERE).
Spira Inc released the pigment Spira Red. (Read more HERE).
Solarvest Bioenergy Inc. granted patent in Brazil. (HERE)
Plant-based seafood startup the ISH Company rides new funding wave toward pipeline commercialisation. (HERE).
Biden administration unveils roadmap for a greener, more equitable transportation sector. (HERE)
In depth with Peter Green
🌍Inside the algae industry with Spira Inc.
Elliot Roth, founder of biotech start-up Spira Inc., is leading the charge in developing sustainable alternatives to petrochemical products.
For several years, Spira has been at the forefront of engineering algae for industrial applications, making strides in the fields of wastewater treatment, carbon capture, cosmetics, and pigments.
And in this in-depth interview, Elliot offers a unique perspective on the growth and evolution of Spira, delves into the challenges facing the algae industry, and provides valuable insights for entrepreneurs looking to make an impact in this ever-evolving field.
How did you get into the algae space?
As a biomedical engineering student, I became captivated by the possibilities of synthetic biology and set up my own laboratory in my garage. Along with my co-founder, we collected over a million dollars worth of equipment and established a nonprofit to help others interested in the field, even teaching inner city kids how to conduct science experiments.
One day, I came across a NASA study exploring spirulina as a protein source for astronauts. I realised I could grow algae to meet my own protein needs at home, so I obtained some aquarium tanks and started producing biomass in my lab.
As I became more obsessed with algae, I applied to IndieBio and was accepted. I discovered that the processing and drying of spirulina often resulted in bad-tasting flavour compounds, so I began experimenting with genetic engineering methods to eliminate these. I realised that the main problem was pigment degradation and found that by removing the pigments, I was left with a protein isolate and a valuable pigment byproduct that could be sold.
Spira Inc. uses algae to undo the damage caused by companies like Monsanto and Standard Oil. We focus on cultivating seed cultures of microalgae and cyanobacteria, and then provide these seed cultures to farmers who have been growing algae for decades. We are leveraging this network of about 70 farms in 14 countries to produce replacements for petrochemical-based precursors and reinvent the supply chain. Pigments have proven to be a good starting point as they are relatively high value and low volume.
Why do some algae companies fail and what business models work?
A few years ago, I received a grant from the National Science Foundation to interview algae companies to understand why some succeed and others fail. I focused specifically on biofuels, and spent over 3 months conducting interviews with 250 individuals to better understand why the sector collapsed.
Despite over a billion dollars of government and venture capital funding going into the sector, most companies failed. Here are some of the key takeaways:
Companies can't survive by creating something that costs more to produce than it can be sold for. The cost per litre of biofuel was astronomical, making it difficult for companies to compete with oil at commodity-level prices.
Another major challenge was contamination, which impacted 30% of all production. This led to expensive failures and even instances of fraud, such as companies faking dense algae growth. Many companies attempted to vertically integrate, leading to large capital expenditures on infrastructure and expensive PhDs who oftentimes ended up just scrubbing ponds.
In addition, photobioreactors, while showing incremental improvements in yield and productivity, also became a source of legal issues and IP challenges within the industry. And another major operational expense was dewatering, which was a major energy cost and challenge for companies.
Cherry-picking data was a big issue, where companies would select the best days of the year to showcase the density of their algae, leading to overly optimistic projections. It is so crucial to be cautious and conservative with estimates in order to create realistic projections and models.
Financing strategies were also problematic, with venture capitalists expecting exits in 7-10 years, when the technology for engineering strains was not developed enough to meet the yields and densities required. For example, companies were picking strains that were not suitable for scaling.
Leaders in this field have highlighted that there will be 5% improvements in the industry year over year, but large companies are adopting algae biofuel projects as marketing ploys to greenwash their image rather than a true commitment to the technology. It is so unfortunate that many dedicated enthusiasts in the algae biofuels industry have been jaded and burned by previous failures. It is important to reclaim the honour and integrity of this space and to work on petrochemical replacements without repeating the same mistakes.
What success stories exist in the algae sector?
Solazyme and Joule Unlimited stand out for their success in raising money and pivoting their business strategies. The alumni from these companies went on to create successful ventures such as Checkerspot and Allbirds, or joined VC funds.
Additional companies that thrived were Algal Scientific and Martek Biosciences. Algal Scientific discovered that a particular species of algae produces beta glucan, which can be used as a feed supplement to prevent diseases in animals. This discovery led to a $400 million acquisition by Kemin.
Martek Biosciences, a spinoff of Martin Marietta, focused on ecological life support systems in the 80s before pivoting to algae research and development in the 90s. Despite facing challenges for years, Martek Biosciences progressed through the help of government research grants. Their most significant development was the creation of a strain of algae that could produce compounds found in mother's milk for use in infant formula. Despite initial challenges, such as the algae being cytotoxic and difficult to grow, Martek Biosciences persisted and eventually merged with a company called Omegatech, which had developed a more efficient strain. This strain was approved by the FDA for use in infant formula and the company successfully lobbied for its mandatory inclusion in a number of products. In the mid 2000s, Martek Biosciences began selling their algae-based infant formula supplement and saw rapid growth, reaching hundreds of millions of dollars in sales. In late 2010, the company was acquired by DSM for $1.1 billion.
What major challenges does the algae industry face?
While algae boast a wide range of potential uses and benefits, it is crucial to focus on the specific areas in which it can be most effective. By highlighting success stories and specific applications, the industry can better demonstrate the value of algae as a targeted solution, rather than an all-encompassing one. The Swiss Army knife is often seen as a symbol of versatility and multifunctionality, but what people mostly want is a tool that serves a specific purpose.
In addition, scaling remains a major bottleneck in the industry. And while many companies rely on fermentation, this method cannot achieve commodity-level volumes.
Overall, the algae industry should focus on three key areas. The first is creating diverse product representations and applications, similar to how George Washington Carver expanded the possibilities of the peanut. This will make algae more approachable to customers. The second area is processing, specifically bio-refineries, which will allow us to extract various compounds from algae and maximise revenue. Lastly, we need to invest in the genetic toolset to improve the efficiency and yield of algae cultivation and increase research and development. The future of the algae industry depends on educating the population and providing new genetic tools to unlock the full potential of these strains.
What’s next for Spira Inc?
We’re about to go after a much larger raise of $3 million to bring on experienced professionals in the field of genetics and refining. Our laboratory in Los Angeles currently specialises in sourcing and refining pigments, and we are experimenting with new strains to make different pigments.
What’s your perspective on this industry over the next few years?
As the algae space evolves, commodity level companies may struggle to stay afloat. Those in packaging, for example, will likely find it challenging to raise funds in Series A or B rounds unless they pivot towards higher value products. Similarly, companies in the food ingredient sector may need to partner with larger firms in order to succeed, and bio-manufacturing companies using fermentation may be limited to producing high-end molecules.
Overall, companies that will thrive in this space are those that focus on high-end services or products, leveraging organisms that can produce them at scale. While competition is stiff, collaboration within the sector could lead to more successful outcomes in the long run, as the industry moves into a steady adoption curve.
We may see a decentralisation of biorefining capacity as more countries invest in downstream processing. In Europe, for example, we could see more bio-refineries set up in places like Scotland and off the coast of Ireland. Additionally, we may see the formation of more OPEC-style arrangements of companies in the macroalgae space, where farmers group together to control pricing.
The cosmetics industry will be a major driver of purchasing power, with luxury brands like LVMH and Estee Lauder looking for specialty compounds. To meet this demand, we will see big players partnering with bio-refineries or creating their own. Onshoring of manufacturing and production is also happening, with companies returning to nationalised production.
Furthermore, South America is an undervalued player in the algae industry, with many old oil companies that invested in algae during the biofuel boom still active and passionate about the technology. They have been relegated to small side projects within these large companies, but given the opportunity, South American production of algae has the potential to be significant.
Finally, three algae service categories I find particularly interesting include CO2 capture, wastewater treatment, and bio-mining. The CO2 capture market is currently difficult to navigate, especially in relation to voluntary markets and no clear business cases. But looking at companies like LanzaTech in the public market can help provide insight into the economics of this area. And I believe bio-mining has the potential to be the fastest growing service category of algae.
What advice and books would you give to someone else starting out on this journey?
My main pieces of advice include:
In the beginning, recognise that you’re in state of learning and have as many conversations as possible. Don’t try to build anything yet. Had I known this at the start, I believe the journey would have been much more enjoyable.
Experiment fast and fail fast, and quickly recognise when things are not working.
Keep going and don't give up - the two main reasons a company fails are running out of money or quitting.
Trust yourself. Early on, I listened to a lot of other people and spent a lot of money on things that people said I should be doing, instead of trusting my own instincts.
Specific books that have influenced my work include "Tribal Leadership", "Maslow's Hierarchy of Needs", and "Man's Search for Meaning" by Viktor Frankl.
I am also a fan of science fiction and recommend Kurt Vonnegut and "The Tao of Pooh" - a short read that teaches Taoism in an interesting way. Another book I would recommend is "Ribo Funk," a book of short stories that delves into the bio-punk genre of science fiction.
"The Mars Trilogy" by Kim Stanley Robinson is another good series, which models the development of society using genetic engineering. And "Ministry for the Future" is a more recent book that deals with climate change in a dark way, and touches on the idea of climate terrorism.
If you’d like to learn more about Spira Inc or join them in their mission, check out the company site here. You can also follow Elliot on LinkedIn here.
🐦Tweet of the week
🔥 What else was hot in algae tech?
Sequencing the Sustainable Secrets of Seaweed 🤩. (Read more HERE).
(Paper) Methane emissions offset atmospheric carbon dioxide uptake in coastal macroalgae, mixed vegetation and sediment ecosystems. (Read more HERE).
Major focus on algae in The 2022 edition of the EU blue bioeconomy report.(Read more HERE).
BettaF!sh among the 20 foodtech startups to watch, according to investors at FoodLabs, Döhler Ventures, Gullspång Re:food, Five Seasons Ventures and PeakBridge VC! (Read more HERE).
See the collaboration between Eric Klrarenbeek and Iris van Herpen; showing the making of algae materials for Iris van Herpen's 15 year brand anniversary; (Read more HERE).
Could insects, algae and agri-food by-products be the future building blocks of aquafeeds? (HERE).
The sea forests at the end of the world. (Read more HERE).
(Paper) Climate change threatens unique evolutionary diversity in Australian kelp refugia. (Read more HERE).
Can these brands make seaweed and algae go mainstream in the U.S? (Read more HERE).
The “No-Excuse” Framework to Accelerate the Path to Net-Zero Manufacturing and Value Chains (Read more HERE).
From pig farmers to supermarket giants – what the Heck? A look at seaweed-based casing for sausages. (Read more HERE).
(Paper) Making marine biotechnology work for people and nature (Read more HERE).
That’s all folks!
Thanks again for joining us this week. Hope you have a great day and stay tuned for more algae tech updates soon!
Peter