Beyond Borders: Global biotechnology report 2010

“I’m starting to see non-traditional pools of
capital being attracted to this space. They
may come from traditional parties, such as
sovereign wealth and private equity funds,
or potentially from infrastructure funds,
but they are non-traditional in trying to
mitigate some of the technology risk to the
extent possible.”
you resolve disputes during this process? Hence, all these aspects of
governance and valuation are of paramount importance.
Haywood: I also agree that partnerships are absolutely critical. We
have some great partners; our VC investors, Khosla, Flagship and
Lightspeed and now Procter & Gamble and Chevron, have been
very supportive. These technologies take funding and government
help, just as in the field I worked in for 30 years, oil and gas, where
we got a lot of help from the government — depletion allowances
for risky drilling, etc. The same thing applies here. You are going
to need help from government. Other partners are going to be
corporate partners. But it’s very important to have these partners to
supplement venture capital investors.
In our case, Procter & Gamble is a collaborative partner. It is working
very closely with us, in a partnership, to develop sustainable
chemicals. And that’s really driven by its green agenda. The
company has two reasons for that. One is to reduce carbon from its
feedstock. The other is to smooth out some of the economic bumps
that occur from petroleum prices that you can’t control. If you can
come up with alternative chemicals that are sustainable and cost-
effective, you’re going to stabilize the price of petroleum as well. So
it’s really both an economic and climate change approach.
Forer: What are the adoption accelerators for biofuels? Are they
different in developing markets versus developed ones?
Mace: One thing that comes to mind in responding to this question
is the Brazil example and the way in which ethanol actually became
a mass-market reality in Brazil several decades ago. This happened
to such a point that today, some people joke that the alternative
100 Beyond borders Global biotechnology report 2010
fuel in Brazil is gasoline, not ethanol, since recently the ethanol
consumption surpassed gasoline for the first time in the country.
Now my perspective on it is that, first of all, there was absolutely
impeccable and unerring commitment from the Brazilian
government to make it happen in their pro-alcohol program. Also,
I believe that, at the time, it did strike a chord with the psyche, the
collective aspirations of the Brazilian people in terms of how it was
addressing some of the needs and desires of the nation.
I think that’s an interesting example to look at, and maybe to
compare and contrast with what is happening today both in Europe
and in the United States.
As I mentioned earlier, creating demand, creating a market, is key
in the early years — effectively kick-starting an industry by creating
a market. I don’t think, however, that this should be anything more
than an “accelerator.” In other words, I don’t believe that incentives
or mandates or other regulatory mechanisms to create the market,
to accelerate the adoption of biofuels, should be permanent. I
believe they should be temporary, up to the point where biofuels
are “grown up” in a way and compete on their own merit with the
incumbents, with fossil fuels.
Haywood: I think that one of the biggest issues in making renewable
fuels and sustainable chemicals is that you look at the world
situation — this is a very macro approach — but I think a lot of
people understand it. In many foreign countries, they do not have
domestic crude supply, and their economies run on imported fuels.
Hence, energy security is a critical issue for a lot of places around
the world. The other example is sugar cane. If you look around the
world, there are many locations closer to the equator where cane
grows like a weed, and it is a very energy-dense source, much better
than corn, for instance. Sugar cane is not a food and there is a lot
of acreage to grow additional cane. Hence, you can make new fuels
from agricultural products in the next couple of years and remove
dependence on petroleum.
Brazil is a great example; they are no longer at the end of the whip
on petroleum prices and that’s a great stabilizing effect on any
economy. So I think those are great adoption accelerators. I think the
other important aspect is governments — government subsidies are
very important to help enable these new technologies. They don’t
have to be around forever, but I think it’s very important that they
stay in place for the next five, six years to enable these technologies.
Because as they roll out — as any technologies roll out — you have a
higher cost of production. As that production runs more smoothly
and you gain time with the production and scale, the costs go down.
So I think subsidies are another very important adoption accelerator.