Remember the pub bores of circa 2001 who were adamant the internet was a flash in the pan? At the time, with share prices of many internet pioneers in freefall, they may have seemed right. They were not. Facebook, Amazon, LinkedIn and one or two others have done rather well in the intervening years.
The same is true of the clean technology sector today. Headline failures of so-called new-energy companies typically undermined by cheap shale gas and Chinese silicon are obscuring the view of both current and future success, particularly outside the energy sector. In a decade or less we will laugh at the pub bore 2013 vintage who damned clean technology as a failed venture. It has only just begun.
This column will champion the success of corporate and institutional venturing among the unusual suspects of clean technology. Let us start with biopesticides, where the essential ingredients of successful clean-tech venturing are all in place – innovation, acquisition-hungry corporates, strong regulations, seasoned clean-tech venture capital firms (VCs) with corporate backers or corporate venturing backgrounds.
“Biopesticides are a great example of non-energy cleantech succeeding,” says Keith Gillard, general partner at Pangaea Ventures, a Vancouver-based VC focused on advanced materials. Pangaea’s roster of corporate LPs (limited partners – investors) includes Evonik, BASF and Mitsubishi Chemical. “Clean energy may have claimed most of the clean-tech dollars, but the non-energy side of clean-tech is still going strong,” he says.
Gillard, who previously worked in venturing at BASF, has two biopesticide companies in his portfolio – Vestaron and New Leaf. Vestaron’s biopesticides are derived from spider venom. New Leaf’s are derived from naturally occurring bacteria called pink-pigmented facultative methylotrophs (PPFMs). Both companies aim to displace conventional dirty pesticides from the fruit and vegetable industry. If they succeed, that will be clean-tech lettuce in your pub sandwich quite soon.
In 2011, the EU’s Plant Protection Products Regulation made 74% of commercial pesticides illegal. This helped open the door to a flurry of biopesticide deals. In January 2013 Monsanto paid over $100m for the bio library of Agradis, a company created only a year and half earlier. This followed five other deals in 2012 and 2011 – Bayer bought AgraQuest for $500m and Athenix for $420m. Syngenta bought Pasteuria for $100m. BASF bought Becker Underwood for $1bn. Monsanto bought Divergence for $75m and Beeologics for $125m. Some of the investors in the acquired companies enjoyed the “10-times grand slam” return that is the benchmark of successful venturing.
Biopesticides are hot because they fit the proven formula for successful clean-tech venturing – (innovation + regulatory change) x corporate appetite = a damn good clean-tech investment Not surprisingly, Pangaea’s Gillard reports growing corporate interest in biopesticides and in other agricultural technology, or agtech, sectors. In addition to the big six – BASF, Bayer, Dow, Dupont (Pioneer), Monsanto and Syngenta – he reports interest from newcomers.
“We are also seeing engagement from Limagrain, Valent, Novozymes, FMC, Scott’s Miracle Gro, and others… in addition, I have been fielding inquiries from chemical companies who have not previously offered much in the way of bio or ag-products. They are seeing the way the market is developing and looking to see if there is an opportunity for them in this rapidly changing but enormous market.”
There is a simple moral in the growing biopesticides story. Clean-tech can succeed when it is significantly superior to incumbent technologies whose days are numbered because of regulatory change – change driven by consumer and non-government organisation pressure for superior environmental standards.
My next column will look at water innovation in extractive industries, particularly in shale gas and unconventional oil.