Executive Cases: Interviews with Senior Executives of Early-Stage Companies:
Green Biologics – UK
Prepared by George Foster
Founded in 2003 and based in Abingdon, United Kingdom, and Columbus, Ohio, USA, Green Biologics (GBL) is a privately-held industrial biotechnology company focused on manufacturing high-value four-carbon chemicals and advanced biofuels with an emphasis on n-butanol from renewable feedstocks. The company is focused predominantly on the US$ 5 billion n-butanol market with a competitively priced renewable alternative. GBL is actively commercializing the company’s technology in Brazil, China, India and the US. GBL has 42 full-time employees including 12 who hold PhDs.
GBL was formed in 2003 in Oxford, United Kingdom, generating its initial revenue from contract research and grants. In 2008, the company attracted £ 1.6 million of venture capital, which allowed it to build laboratory facilities and hire an executive team. On 31 December 2011, GBL merged with butylfuelTM Inc., an Ohio-based biobutanol company, enhancing its North American commercial and technical presence.
There are two key features of GBL’s success. Firstly, it is re-commercializing a microbial fermentation technology that was well established globally up until the 1950s – albeit using life sciences technology to significantly reduce the cost of production. And secondly, since it is able to utilize uneconomic assets around the world and retrofit them to its technology – whether biobutanol plants built in China in 2005 that are uneconomic without GBL technology, or ethanol plants in the US whose economics can be transformed by switching to higher-value butanol chemical production from ethanol production – GBL is able to get to market in a more capital-efficient and low-risk way than many technology start-up companies.
Q1: What was the source of the initial idea, and how did that idea evolve into a viable, growing company? How did it change over time?
Sutcliffe: “The idea to revitalize the biobutanol industry came from the research done by Dr Green as the first person to genetically modify one of the clostridial microbes used. This was combined with recognition in the marketplace that butanol was a potential advanced biofuel. With the commercial team on board, it was quickly apparent that while the fuels market could be large in the future, the chemicals market for butanol was much more attractive given higher prices paid.
“A breakthrough came with the discovery that in China, six or so biobutanol plants had been built to a 1950s design, but were uneconomic without advanced technology. This gave a great opportunity to scale up and test technology without investing GBL capital.
“It’s fair to say the journey in China took much longer than expected, even with the usual scepticism. Partly, this was due to commercial factors of doing business – the need to build trust, act cautiously in releasing technology – and partly because the market deteriorated further post the economic difficulties in 2008, such that GBL’s next generation technology was needed to make the plants economic. This added two years to the timeline of getting a plant up and running again.”
Q2: What were the major growth accelerators for your company in the early years of high growth?
Sutcliffe: “Certainly, having contract revenues was important. It allowed the company to attract good scientists and build up an IP base. Another accelerator was the discovery of the idle commercial-scale plants in China.
“The merger with a smaller US competitor, butylfuel, at the end of 2011 has provided another acceleration. Not just access to the market, but the scale-up facilities and the complementary engineering, technical and commercial skills have allowed the merged company to innovate much faster. The international connections of Green Biologics were just not open to the more domestic-focused butylfuel, so this has opened up new geographies where their skills can be deployed.”
Q3: What role did key aspects of the entrepreneurial ecosystem surrounding your company play in the growth of your company?
Sutcliffe: “The workforce in GBL is extremely multinational and multicultural. This is perhaps a function of the area around Oxford where we are located being a magnet for scientists, and the UK’s historic openness to scientific researchers from overseas. This has been a real advantage in allowing the company to have a culturally positive approach in the countries where it operates. This has been reinforced by early on having a business development person (hired locally) in each country. It has helped that I and other members of the team have had extensive international experience in the target markets and so are able to draw on our previous networks in these areas.”
Q4: What key aspects of the entrepreneurial ecosystem surrounding your company that were absent (or existed only in a weak form) created the greatest challenges for growing your company? Please describe and discuss how you met/were impacted by these gaps in the eco-system and their resultant challenges.
Sutcliffe: “The venture capital funding environment in the UK has always been challenging, meaning that GBL has been much less well funded than US venture-backed competitors. However, by utilizing existing plant assets for scale-up, through commercial and academic relationships, and making the correct choices in directing development resources, GBL has been able to reach a leadership position in this market.”
Q5: At what stage did you invest significant resources seeking to grow your company internationally/beyond your domestic country or region? What factors were pivotal in deciding when to seek growth internationally and where to seek that growth?
Sutcliffe: “The key decision was in 2008 to focus on China. This was because of the plant availability to allow technology deployment at scale. After that, the decision in 2010 to diversify into Brazil and India – based on their accessibility to low-cost feedstocks and existing assets (sugar mills) which could provide capex leverage. And then finally in 2011, recognizing the turn in the US ethanol market giving an opportunity to buy and retrofit ethanol assets to renewable butanol was the spur to the merger with butylfuel.
“In each case, this was driven by access to existing assets and low-cost feedstocks – to drive compelling economics. The UK and Europe simply have none of these attributes, at least until the use of municipal waste is proven technically.”
Q6: What were the biggest challenges in building growth internationally? How did you meet or adapt to those challenges?
Sutcliffe: “The key challenge is working with existing companies for whom investing in a new technology is risky and not a high priority. A range of issues, often not to do with GBL – financial stress of a customer, a troubled sugar mill expansion, or a poor sugar crop – give reasons for a customer not to go forward or to defer a project for a couple of years. The three ways in which we have overcome this are: a) to not burn cash too quickly, dependent on a fast timescale; b) to have a diverse range of options (geography and feedstock) that are not highly correlated; and c) to continue to invest in technology to drive down the cost yet further to improve the economic case year on year.
“The travel and geography is not so much of an issue – as long as staff members are happy and able to travel long-haul economy class week after week and still function well when they get there!”
Q7: What major role, if any, did key aspects of the ecosystem in the country (or countries) you first sought international growth either promote or impede your ability to grow in those international markets?
Sutcliffe: “The ecosystem in China is based on bringing in Western technology and then adapting it. This does not fit GBL’s model of a long-term partnership. It has taken a long period of working together – and for our partners to realize that we are, in fact, necessary in the long term for their success – to overcome this barrier to a realistic commercial partnership.”
Q8: What were the main challenges to the growth of your company and how did you manage them?
Sutcliffe: “One was at the time of the financial crisis in 2008; we recognized that funding was going to be hard to find and investment decisions were going to take much longer. Along with many others in the industry, we acted quickly to trim our costs – in fact, cutting 20% of staff, among other things – to extend our cash-out date and to focus down the number of projects in order to give ourselves the best chance of survival. That worked out fine in giving us the time and opportunity for tangible technology and commercial demonstration by June 2010 for a series B fundraising.
“The second was the time taken in China to get going. Initially, we thought that with a model based on growth in China alone, we could build a profitable business quite quickly. However, it became clear this was unlikely to work, so we invested in the other potential markets in 2010 (Brazil and India) and 2012 (US) to give alternative growth and commercialization routes.”
Q9: Seeking international growth often has both high moments and dark (low) moments. Briefly describe one high moment and one dark (low) moment in seeking international growth.
Sutcliffe: “A low moment was when our potential Indian client, in which I had invested a lot of personal time, decided not to go ahead – perhaps due to internal management reasons as much as anything, even when the economics and market approach were sound.
“A high moment was achieving a breakthrough in technology performance, which is directly attributable to the merger decision, due to highly complementary skills and assets – an example of a strategic choice being absolutely vindicated and exceeded, since the primary driver for the butylfuel merger was a market entry one.”