I am encouraging the green blog readers to submit their views and opinions about what is going on in the green chemical space. Here’s our first one from Sam Nejame, founder of Promotum.
Doris is a great voice for green chemicals and it’s an honor to be able to contribute to her blog. I always like reading about what she thinks is interesting. Here are some of my recent takes on what’s going on (in three little green pieces).
What’s in a name?
A number of things strike me these days as I read the trade press, attend conferences, and pour over the recent spate of S1 filings. For one, the shift in how companies identify themselves is telling. Biofuels used to be cool. Everyone was a biofuels company. No more.
Now, many identify as chemical companies first and biofuels companies second. Startups Gevo and Amyris have made the switch in their literature, while Cobalt Biofuels recently changed its name to Cobalt Technologies and Aurora Biofuels mutated to Aurora Algae. Overall, there’s been a lot of rebranding since we’ve failed to meet those pesky cellulosic ethanol mandates. Are investors getting impatient, is it the start of another industry shakeout or have companies realized higher margins are to be had in chemicals? Stay tuned for more rough weather, it’s probably all of the above.
One thing that hasn’t changed in the last year is the appetite for government grants, loans and loan guarantees. Attend any green conference and there’s bound to be at least one panel that could be titled “How to Squeeze More Money Out of the Feds.”
As someone who has helped companies apply for DOE, ARPA-E, USDA and other grants, I’ve had an interesting seat at this lottery. And lottery it is. While, I’ve helped companies win grant money I’ve done so with mixed feelings. Without a doubt the application process consumes significant time and resources. And I’ve seen more companies than I care to mention applying for grants outside their core competence, either trying to use it for branding or to establish themselves as thought leaders.
Of course it sounds great – hey, who doesn’t like “free” non dilutive capital – Unfortunately, free can quickly become something else when the check arrives and you actually have to execute. If it’s pure R&D that’s one thing, guys clinking test tubes are guys clinking test tubes, but scaling up or building capacity? That’s hard work if you’ve never done it before. Actually, it’s hard work even if you have done it before. Not to mention the reporting requirements. So, note to self, make sure it’s in your critical path and you have a true competitive advantage. More runway is always good, but the odds are not in your favor. Those applying should think carefully.
Tax v. Mandates
While it’s often discussed that there is no RFS equivalent (get out your hockey stick) mandate for the chemical industry and the feds should do more to push for green routes to chemicals, I’d argue that their relative lack of involvement is a good thing. The reality is that giving out money – a few hundred million dollars is a drop in the bucket compared to the size of the chemicals markets. If you really want to get cash to the companies and projects that can best use it, we need a carbon tax. It’s simple, it’s elegant, and while a tax never sounds good, it’s the right thing to do. No one doubts that chemicals made from green (read carbon neutral) routes will have to perform as well or better than their petroleum counterparts and that they’ll have to do it at similar cost. So, doesn’t it make sense to include the true cost to the environment in all materials? Even right leaning University of Chicago economists agree. We need a carbon tax.
Sam Nejame is the Founder of Promotum, a management consulting firm specializing in technology commercialization and business development.