Do you feel ready to bring your biobased products to market? Are you giving your products the best chance of survival?
Research funded by the European Commission (EC) could give you the edge you need. The 2019 report analyses 15 successful biobased products across a range of industries, product types, and company sizes in Europe, identifying what they have in common: the drivers for biobased success. Below, we’ve split these drivers into three categories: financial, managerial, and technical.
Compared to traditional products, biobased products (BBPs) are inherently riskier to take to market. Many fail at the commercialisation stage. Successful companies in the report overcame these barriers using the strengths discussed here. Understanding the risks, embracing your strengths, and addressing your weaknesses will give your product the best odds in the market.
Financial Drivers of Success
Attracting Investment
It’s no secret that attracting investors for BBPs is harder than for more established technologies. Successful companies often overcome this hurdle by devoting their own resources to the product. For smaller companies in the EC report, many owners financed the product using private loans or savings.
Some success stories did manage to attract external investors, using a strong business plan and highly skilled management team to build a convincing investment case. A mix of angel investors, venture capitalists, and industry investors were mobilised to bring finance and expertise while mitigating risk.
Larger companies bringing new BBPs to market often have access to funds from other revenue streams within the company and can use them to finance the new product development. When this approach is successful, it’s often because the company adopted a mindset of ‘investing for the future’, even if their current line-up of products was not biobased.
Partnerships
In addition to finding funding, partnering across a range of sectors can boost BBP success. Partners can span the whole value chain, ranging from providers of feedstock and technology to users and customers. In 2016, Novamont developed their production plant for biobased 1,4-butanediol (BDO) in partnership with Genomatica (https://www.genomatica.com/wp-content/uploads/2017/01/Novamont-opens-world%E2%80%99s-first-commercial-plant-for-bio-production-of-a-major-intermediate-chemical.pdf), a US-based bio-engineering company that owns a technology involved in the production process. The expertise of these companies was complementary, creating a great foundation for a partnership.
Financial partnerships are also beneficial, reducing financing requirements for start-ups and sharing the commercial risk. In many cases, the partnership provides much-needed insight from target industry experts as well as the required finance. A good example of a beneficial financial partnership is between Melodea, which developed a process for extracting cellulose nanocrystals (CNC) from wood pulp, and Holmen, a large forestry company. Holmen’s ∼40% stake in the company was a vital milestone for attracting more private finance.
Price competitiveness
New BBPs are typically not price-competitive with traditional products, but as the production scale comes up, prices come down. With this in mind, newer products on the market should focus on expanding production, though this is easier said than done. Investment and partnerships can help, but companies can also outsource elements of production to increase competitiveness. Repolar Pharmaceuticals outsourced ingredient mixing and packaging production for its successful Abilar® product line, bringing down production costs by eliminating the cost of the machinery required for these processes. It’s a smart tactic that’s worth considering, though finding the right manufacturing partner can be its own challenge.
Managerial Drivers of Success
The management team
A key factor in being able to attract investment as a smaller company is the strength of the owners and management. Their plans, mindset, and skills are often integral in helping investors to understand the feasibility of the product and ultimately invest. Successful BBPs typically have a remarkably dedicated and skilful management team. Sought-after skills include those gained from R&D communities and from previous employment working on products that are similar but not biobased.
Investors are not just looking for solid products but also a management team with a clear vision, a positive attitude, and strong personalities. They need to be convinced by the team that they are making a good decision and that the company can adapt to changing circumstances. Many of the success stories involve difficult decisions during development. These include reacting to external events such as oil price developments, changing or narrowing their scope in response to market signals, or navigating the costs associated with regulation. The success of Lumir’s Lumir® Spray can partly be attributed to the ability to adapt at the management level. They pivoted from using cotton as a feedstock to using wood fibres, reacting to challenges with cotton fibre quality and sustainability.
Having team members with strong technical knowledge, customer knowledge and market knowledge can be pivotal in the early stages of BBP development, but not all team members need to be full-time founders. The EC report found that successful management teams complemented their expertise by building strong collaborative relationships with investors and external specialist assistance. This is a valuable and oft-overlooked way to boost the strength of a small founding team.
The value of investing for the future
Society is changing with regard to how it views green products. Consumer preference for biobased products has been growing over the last few decades, and management teams of successful BBPs are recognising and capitalising on this shift by building their business case around the ‘greening of society’.
Cosun Biobased Products is an example of a company that has benefitted enormously from this trend. Since EU legislation limited the use of phosphorus in detergents, the demand for their antiscalant product Carboxyline® CMI has increased. Furthermore, some of their competitors’ newly formulated products have lower performance than their phosphorus-containing products.
Corporations are becoming more socially accountable and are holding themselves to a higher standard when it comes to their corporate social responsibility. Investors and public funds are also more likely than ever to focus on the sustainable development goals of a product.
Technical Drivers of Success
Interaction with the market
A common driver of success is early interaction with the market, which allows product developers to incorporate market feedback and improve their product when it’s still easy to make changes. Spending too long in the R&D phase of development could lead to a poor understanding of what the market wants, moving the project in the wrong direction. Adaptation to customer needs is the ultimate key to a successful product. A fantastic example of a product that interacted with the market early is Paptic® Bags. It took only one year from the date when R&D began to when it first entered the market. From this interaction, they could determine the product was not price-competitive with standard paper, and are now scaling up their production to bring costs down.
The promise of future growth
While a clear focus on one specific application of a BBP is critical to early-stage success, this must be coupled with the potential for expansion into other applications and markets. The promise of future growth helps to attract more attention and interest from investors. Covestro has utilised this to full effect, producing a coating hardener technology called Desmodur® eco N, mostly used for solvent-based automobile coatings. They then expanded their product range and market share by introducing a version for water-based coatings, Bayhydur® eco, targeting the sustainable furniture market.
Protecting Intellectual Property
Patents are a valuable way to ensure that companies can fully capitalise on their developed product, and are often cited as critically important for innovative start-ups. They serve the obvious purpose of protecting intellectual property from being copied or stolen, while also giving investors confidence that they will see a good return. However, obtaining a patent requires significant resources and capital, which can make it a difficult process for smaller companies. After the patent is filed, more time and resources are required to defend against its infringement on an ongoing basis. Companies such as Trifilon, the producer of BioLite™, have circumvented the patent route and found success by investing resources in other areas. This is a route worth considering, as putting the additional resources towards R&D can help innovators stay ahead of the competition.
Feedstock flexibility
Having a steady supply of feedstock at the right scale is a vital factor in any successful product development and scale-up. It’s sometimes especially challenging for BBPs, where the feedstock can be less consistent than petrochemical alternatives. To add to the challenge, the market for BBPs is very sensitive to sustainability metrics. BBP manufacturers must ensure that all elements of their production process are sustainable, including feedstocks.
Success in this area involves a range of strategies. Partnerships can play a pivotal role here in the form of supplier agreements, which may be helpful in obtaining the right feedstock at any stage of commercialisation. However, flexibility is important – many BBP success stories involve supplier changes, feedstock substitutions, or technological improvements to accept a wider range of feedstocks.
A successful technology exemplifying high feedstock flexibility is BioBTX’s Integrated Cascading Catalytic Pyrolysis (ICCP) process. This technology can produce critical chemical building blocks from any biomass or plastic waste with water content below 30%, allowing entry into a wide range of markets around the world. Importantly, this flexibility allows the company to consider both the sustainability and availability when choosing feedstocks, granting a competitive advantage.
The Key Insights
The factors for biobased success are clearly complex. If we had to sum up, there are four key factors to consider:
- Leadership
Determined, capable leadership team with a clear vision and a combination of technical and commercial skills - Finances
Availability of cash for R&D and scaling, whether from investors, partners, or personal funding - Market awareness
Early market entry and consistent focus on assessing customer needs - Partnerships
Finding the right partners for funding, feedstocks, and commercialisation
Our quick summary here only scrapes the surface of the EU report. There’s a wealth of detailed information in the full 74-page document, including regulatory, technical, and environmental aspects as well as a SWOT analysis for each BBP. And it’s free! If you want to learn more about successful biobased products, we highly recommend reading the full report here.
At Green Rose, our goal is to help biobased products succeed. We can give you advice on how to work towards these drivers, so please feel free to reach out for a free 30-minute consultation today.