Venture investments still strong in 2012

It looks like another great start within the sector as indicated by this news about BASF investing $30m in Renmatix.

As mentioned in previous posts, I had been working on an article for ICIS Chemical Business (subscription required…sorry) about 2011 overview and 2012 outlook in renewable chemicals investments, and this year, it looks like the presence of venture corporations (as compared to venture capital groups) have been increasing in numbers looking for renewable chemicals/feedstock deals.

Here is what Erik Rutten of DSM Venturing USA had to say about his outlook for 2012:

“We expect that in the renewable chemicals space, there will be a further shift from traditional Venture Capital to Corporate (Venture Capital) Investors who tend to come in after a proof of concept phase. Due to a number of factors like (i) the economic uncertainty over the current debt crisis, and (ii) “VC Investment Fatigue” caused by ever-increasing times [now greater than 9 years on the average] that investors have to stay in a particular investment before an exit is possible, there is a general trend to investing in later stage companies. Those two trends will lead to bigger challenges for new start-ups to get funded especially in the early phases.”

Cases in point here is BASF’s investment in Renmatix; Dow Chemical investing in OPXBio; PTT Global Chemical in Myriant; DSM in Novomer and Segetis; Mitsui in BioAmber; Mitsubishi Chemical in Genomatica; Lanxess in Gevo; Rhodia in Cobalt Technologies…who else did I miss?

Here is another insight is from G. Steven Burrill, CEO of Burrill & Company (a global life sciences financial services firm):

“The uncertainty in the financial markets will certainly have an effect on access to capital for renewable chemical plays in 2012. The most impacted will be companies nearing commercialization, requiring large amounts of capital to finance construction of demo- and semi- to full-commercialization scale facilities. If the IPO window closes, these companies will need to scale down plans and look to their current investors to help bridge the financing gap. 

The good news for companies is that significant amounts of venture and growth capital are available for deployment across start-up to commercialization stage. The bad news for those companies’ current investors is that valuations might be depressed as long as the financial uncertainty remains. conversely a positive for investors making new investments.”

Participants in the article also included market research firms Lux Research and Pike Research; venture capital investor Elm Street Ventures; and investment advisory firm Neil A.Burns LLC.

Lux Research published a report in October 2011 about how the venture funding window for bio-based chemicals and materials, which received $3.1bn over the past 7 years, seems to be closing soon.

“The industry no longer offers daredevil innovators grand challenges that attract risk capital and venture finance,” said Mark Bünger, a Lux Research Director and lead author of the report. “Its challenges today lie in day-to-day dilemmas of running a mature, mundane business, and the payoffs are more predictable,” he added. “That doesn’t mean the field is dead; on the contrary, it means it has survived its pre-commercial childhood and is now highly relevant to corporations, regulators, and consumers.”

Pike Research’s senior analyst Mackinnon Lawrence also agreed that accessing financing this year will be a challenge due to persistent economic uncertainty. Still, the renewable chemicals industry remains hot for investors looking to plunk serious money.

“Pike Research expects renewable chemical-related investments to increase over the coming year. This is partly due to attractive near-term revenue opportunities in a number low volume, high value end markets as well as a compelling investment story buttressed by durable long-term demand in high volume (i.e. fuels) markets.”

Here’s what Robert Bettigole, managing partner of Elm Street Ventures, and Neil Burns (who is also the newly appointed CEO of green surfactant company P2 Science) have to say regarding investment outlook for this year:

“The investment landscape for renewable chemicals this year is excellent despite the current economic uncertainty. I’ve only spoken with a handful of venture capitalists at larger clean-tech venture capital funds so far, but I gather that they are looking for alternatives to energy investments that are still within their charter from their own investors (their limited partners). Green chemistry fits in well, and I’ve had a lot of interest in our most recent start-up, P2 Science, which Neil Burns is heading up.” - Robert Bettigole

“The renewables area presents an opportunity that is seen to address problems inherent in many economies and not necessarily correlated with those problems (like for example an investment in a construction chemicals business in the US might be). There is a lot of research activity going on in public or semi-public labs, mainly Universities like the Yale Center for Green Chemistry and Green Engineering. There is also a lot of privately funded research, often assisted by contracts from government activities. This activity is giving rise to host of investable ideas and I am seeing the best ones being courted and competed for by the cleantech oriented investment funds.” – Neil Burns

addthis_pub = ‘greenchicgeek’;

Leave a Reply