Foresight recently hosted a groundbreaking Bioeconomy Reverse Pitch Challenge, an official side event of the World Circular Economy Forum held December 3 & 4, 2020. 

Fueled by a projected C$240 billion bioeconomy opportunity in Canada by 2030, and sponsored by Natural Resources Canada’s Canadian Forest Service (NRCan-CFS), the event focused on providing opportunities and making connections for innovators with circular bioeconomy solutions across the automotive, construction and packaging value chains. 

In the 2nd part of the two-day event, we heard from investors in the sector and made targeted introductions. Here’s what we learned.

Waste is an Asset

While potential business opportunities and solutions abound in the emerging circular economy (for value-added products made from renewable materials, such as bio-chemicals, bio-plastics, bio-materials, and engineered building products), investors are not just looking for good ideas - they are looking for good investable ideas and businesses. 

So to find out more about what investors are looking for, we invited investment professionals from Pangaea Ventures, Silicon Valley Bank, Closed Loop Partners and Fort Capital to share case studies and perspectives on what an investable project and company looks like in the circular bioeconomy. 

Here were some of their perspectives:

• Sourcing: Companies are starting to consider waste as an asset, and there is an opportunity for companies that look to ‘upgrade’ waste into bioproducts.  (For example, one of the largest seafood companies in the world, Trident Seafood, is looking for ways to repurpose 6 - 8 million tons of shellfish waste)
• Improving manufacturing: There are opportunities in fermentation and industrial biotech to convert waste to products. (For example, Calysta uses fermentation to convert methane into high protein feed ingredients).
• Recycling: There are opportunities in recycling - from directly converting post consumer waste into materials, to solutions that benefit the entire value chain (such as enabling technologies like Hazel Technologies that extend the shelf life of products and allow more waste repurposing to happen).

Capital Efficiency & ‘Capital Lite’

Another key theme from the panel was capital efficiency. For up and coming companies seeking venture, debt or project financing for infrastructure, our panelists provided key advice to help navigate financing in this new sector and encourage smart capital strategies: 

• Sustainability is not a compromise on price, performance and convenience. The product needs to be competitive compared to conventional counterparts.
• Circular economy is a huge transformation in how business is done. For a startup or small business, it will be hard to solve for the entire circulatory system - they should focus on the problem they’re solving.
• Have a Minimum Viable Product that customers want before pursuing money for equipment and manufacturing. (Note: training around Minimum Viable Product and how to apply this concept to your cleantech startup is available through Foresight’s Launch program). 

The panel also shared insights on their portfolio companies and how they have a ‘Capital Lite’ approach that focuses on strategic partners and focused markets rather than trying to do everything at once. 

For example, Closed Loop Ventures portfolio company, AlgaeLife, is using algae to create dyes and fibers for the textile industry in a 100% clean process. They’ve structured the company in a way that orchestrates partnerships for ‘lite’ capitalization rather than going the full capital expenditure route.

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Know the Capital You Want

The investor panel re-iterated that while many entrepreneurs believe they need venture capital to scale, this is not always the case. Other options to support scaling up include:

• working capital
• loans
• project finance (for example, through Silicon Valley bank). 

Securing loans and capital can be difficult to navigate, particularly in the manufacturing of bioproducts, as companies pivot to scaling products and introducing new, potentially capital intensive processes. As companies begin to scale, another degree of commercialization sophistication is often required, and cleantech startups were advised to seek out expert advice. 

It was advised to mitigate the finance risk by knowing the capital you need, building the business to that need and identifying what risk the finance covers. It’s also necessary to have the partnership agreements in place (e.g. letters of Intent, feedstock supply agreements and offtake agreements) when seeking financing.

Partnerships is key 

Our investor panel was bullish on collaboration. Financing banks and later stage investors look at how a company is building enterprise value near and long term, and while some of this might be developing IP, they also assess value based on partnerships developed or companies acquired. (The investors on the panel practiced what they preached - both Closed Loop Ventures and Pangaea Ventures have major corporate strategic investors as their Limited Partners.)

It’s a good lesson for startups and entrepreneurs - even with the resources and capital these corporations have, they know they can’t solve this circular bioeconomy challenge alone and work with these funds and others to drive competition and scale the production of bioproducts and the transformation to a circular bioeconomy.

“Hope is not a Strategy” 

More than ever, corporates are looking outside for innovation. One of the event participants, a large company working in biochemicals, told the audience that they spend 40% of their time scouting for innovation and technology compared to 10% five years ago. This is a major shift and an opportunity for corporate strategic capital.

As panelist Graeme Millen, Director, Technology Banking, Silicon Valley Bank Canada said  “Hope is not a strategy - nor is relying on moral imperative, it has to be competitive.” 

This is key when seeking financing for the circular bioeconomy projects and companies. 

What’s Next? Accelerating Investment

In the CORE Cleantech Cluster operational framework, we identified Capital as a key component in program planning, and noted a number of investment gaps in the cleantech sector.

Events such as the Reverse Pitch event, and other investor focused matchmaking events are designed to help fill those gaps. Ensuring capital flows strategically into this emerging sector will be crucial for the transformation to a value-added, circular bioeconomy - smart capital drives technological change and energizes industries. 

Special thanks to our investor panel for sharing their insights on how to get smart capital to work in the cleantech sector. 

(For recordings of the event, please visit our webinar recordings page.)

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You can find copies of Foresight’s CORE BC roadmap reports here. To read the full CORE Cleantech Cluster report visit: corecleantech.com 

Interested in joining the CORE BC Cleantech Cluster? Get involved.