Biofuels, Bioplastics Startups Getting Sparse, Lux Says

The grab bag of biofuel and bioplastics startups available for partnership or acquisition by corporate giants is running dry. That’s the gist of Lux Research’s latest report on the sector, which sees Big Oil and consumer products conglomerates quickly winnowing the field of the best technologies for turning non-food feedstocks into useful hydrocarbons.

Report author Andrew Soare interviewed more than 300 executives for the report, and finds that startups in the field have started to distinguish themselves as winners or losers in terms of larger rounds of investment and corporate partnerships. At the same time, startups are changing their game plans to better fit the difficult market, shifting focus to specialty chemicals and postponing plans for mass-producing biofuels that will have to compete against oil on price.

So who’s on top? As with its report last year on the biofuel sector, Lux pulls together data on revenue per employee, patents, performance metrics, production capacity and the like to place contenders in terms of maturity and potential. Winners in both categories included net-generation biofuel stock market bellwether Amyris (s AMRS), cellulosic waste-to-isobutanol startup Gevo, algae-to-fuel startup Solazyme, long-time cellulosic ethanol developers Mascoma and Poet, and two startups making succinic acid and butanol — U.S.-Canadian firm BioAmber (formerly DNP Green Technology) and China’s Cathay Biotechnologies.

As for low-ranking companies, Lux didn’t pull punches, putting some dozen little-known names in its immature, unpromising quadrant, indicating the judgment that they’re “highly risky as investment, licensing, partnership, or merger and acquisition target(s).” Those included two “caution” warnings for U.K.-based ethanol producer TMO Renewables and French biocatalyst developer Proteus.

Many of the top-ranking startups have deep partnerships with established players in the field. Cellulosic ethanol maker Mascoma just got $50 million from oil refining giant Valero (s VLO) to build a plant in Michigan, along with an agreement to buy the fuel from it. Amyris (s AMRS) has backing from French oil giant Total (s TOT) and P&G, Gevo has letters of intent from Total subsidiary Total Petrochemicals and United Air Lines, and Solazyme has investment from Chevron and a partnership with European food and consumer products giant Unilever (s UN).

They’re not alone, of course. Craig Venter’s Synthetic Genomics got $300 million from ExxonMobil (s XOM) for algae biofuel research, LS9 has backing from Chevron (s CVX) and products giant Procter & Gamble (s PG), and Codexis (s CDXS) has pharmaceutical partnerships and a piece of Shell’s (s RDS) massive Brazilian biofuel partnership.

The Lux report breaks down startups according to technologies: fermentation, gasification, synthetic biology, chemical processes, crop enhancement, and algae processes. Some headline-level conclusions include:

  • Fermentation’s digestion is improving. Companies like TetraVitae and Genomatica are engineering organisms that can eat more and more feedstocks and pump out more and more valuable chemicals, like succinic acid and butanol. Companies emerging from the biotechnology sector like Amyris and Verdezyne are also producing interesting new chemicals.
  • Gasification is good for waste. It looks like heat beats bugs for converting trash into useful hydrocarbons. Even though that uses a lot more energy, it could be worth its while if startups can squeeze efficiencies out of the process. And remember that trash doesn’t cost anything — in fact, processors can usually get paid by the ton for taking it off the hands of government and private trash management authorities.
  • Algae hasn’t proven anything yet. Lux says that only a handful of algae-based biofuel startups will survive — the report singles out Solazyme and Algenol — amidst a host of competitors that haven’t solved the key problems of harvesting and processing algae in a cost-effective manner.

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Image courtesy of Argonne National Laboratory via Creative Commons license.