Exploring Material Science Startups with SOSV
Susan Schofer
On this episode of My Climate Journey, we have two guests: Susan Schofer and Po Bronson.
Susan is partner at SOSV and Chief Science Officer at Hax, which is SOSV's initiative around hard tech. She has a PhD in chemistry from Caltech, and most recently spent eight years at Modern Meadow, a growth stage startup in the bio leather space.
Po Bronson
Po is general partner at SOSV, and managing director of IndieBio, which is SOSV's initiative around biotech. Po has written seven New York Times bestsellers, and has won nine national awards for science journalism.
Cody and our guests cover Susan and Po's backgrounds, the challenges in evaluating material science startups, their journeys from academia and the food industry, and early-stage deep tech investment models. They also discuss business economics in material science startups, scaling challenges, sustainable sourcing, and the potential and limitations of synthetic biology in the context of material science startups.
Episode recorded on Jan 16, 2024 (Published on Feb 20, 2024)
In this episode, we cover:
[02:01]: Susan and Po’s roles at SOSV
[03:08]: The complexity of evaluating material science startups
[04:49]: Susan's journey from chemistry academia to industry
[07:13]: Po's transition from the food industry and writing to IndieBio
[09:12]: Comparing Hax's and IndieBio's methodologies within SOSV
[11:54]: SOSV's early-stage deep tech investment model
[14:46]: Business economics in material science startups
[17:11]: Unmet needs and sustainable sourcing in materials
[19:48]: The critical role of performance in bio-based materials
[22:22]: Scaling challenges in sustainable startups
[24:08]: “Pure” vs. blended materials
[30:54]: Scaling issues faced by bioleather companies
[34:35]: Trends in the plastics space and circularity
[37:15]: Challenges in the cosmetics and skincare industry
[41:47]: Defining terms “biomanufacturing,” “bioeconomy,” and “synthetic biology”
[45:07]: Challenges in biology vs. chemistry
[51:35]: Susan and Po’s advice for founders
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Cody Simms (00:00):
Today on My Climate Journey, our guests are Susan Schofer and Po Bronson, and our topic is Building Startups in the World of Material Science. Susan is partner at SOSV and Chief Science Officer at Hax, which is SOSV's initiative around hard tech. She has a PhD in chemistry from Caltech, and most recently spent eight years at Modern Meadow, a growth stage startup in the bio leather space.
(00:30):
Po is general partner at SOSV, and managing director of IndieBio, which is SOSV's initiative around biotech. Po has written seven New York Times bestsellers, and has won nine national awards for science journalism.
(00:47):
Susan and I had the idea for this episode when we were chatting during New York Climate Week, in the summer of 2023. I've been talking with a material science startup and I shared with them that, candidly, I personally really struggled to assess companies in this space. Of the 80 plus investments that MCJ Collective has made via our venture funds, we have very few in this area, and it's an important area. I asked Susan if she'd be willing to come on the pod and share more about how she assesses material science companies and she said, "Yes, and we should have Po join us too, so he can bring the IndieBio perspective." So here we are.
(01:29):
But, before we start, I'm Cody Simms.
Yin Lu (01:32):
I'm Yin Lu.
Jason Jacobs (01:33):
And I'm Jason Jacobs, and welcome to My Climate Journey.
Yin Lu (01:40):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:45):
In this podcast, we traverse disciplines, industries, and opinions, to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. Susan, Po, welcome to the show.
Po Bronson (02:01):
Thanks, Cody.
Susan Schofer (02:01):
Thank you, Cody. Great to [inaudible 00:02:03].
Po Bronson (02:02):
Great to be on.
Cody Simms (02:03):
That rhymed, and I didn't even mean for it to, I love it. So I am really excited for this. This episode came about, I think Susan and I were chatting at Climate Week NYC last summer, 2023, and I was, I don't know if grilling you was the right term Susan. But was really trying to understand more about the broad space of material science startups. Because quite frankly, we see a lot of companies, startups, in that space coming through both our deal flow pipeline and our podcast pipeline at MCJ. And I have to admit, I struggle to understand. Other than, "Hey, I can clearly see how this founder has some background that makes them incredibly relevant to go build this business." Other than that, I struggle at early stage to understand how one startup solution is better than the other. And this is the meat and heart of a lot of deep science, deep tech investing, which you two are both world experts at. And so that was the impetus for having you both on, and I'm really excited to learn from you today about it.
Po Bronson (03:08):
That's great. Cody, do you want to describe these categories of what you were bumping into, that you were sort of saying... I totally get what you're saying. "I couldn't quite tell whether this was a great company, or just another one." Do you want to just mention some of the categories you're talking about?
Cody Simms (03:22):
Yeah, sure. So I tried to build a little bit of my own rubric coming into this conversation, but I expect wholly, that you will come at it... As adventure investors, we all like to create little boxes of things. I'm going to expect your definition of boxes are better than mine, but what I see are companies in the recycled material space, I see companies that I would call loosely bio-based, meaning they have some kind of plant, fungus, microbe, based starting point. And then I see things that I would kind of loosely call lab grown, meaning they are some form of synthetic creation that maybe uses a bio-based input, but that ultimately are built in a lab.
(04:04):
And then when I think of the sectors, it's so broad. Things in textiles, things in plastics, things in cosmetics and beauty products, things in food. A big one, that I think is frankly underappreciated, are just what I would call feedstock or chemical companies that are generating a better or more sustainable version of a chemical. So I appreciate you asking me, this is kind of the orientation I come in, and would love to try to cover as much of this as we can today.
(04:33):
Maybe before we dive right into it, let's at least let each of you give a minute to share a bit about your backgrounds, share a bit about the work you do, describe the work you do, Po, at IndieBio, Susan at Hax, and then also just more broadly across the SOSV footprint.
Susan Schofer (04:49):
So hi, I'm Susan Schofer, I'm a partner at SOSV and also, Chief Science Officer at Hax. So Hax is our hard tech, maybe I would say physical sciences piece and startup development program, within SOSV. So at SOSV, we invest in very early stage deep tech companies that are focused on human and planetary health, and we always initially invest in them through our programs. So that means that early on, we work really closely with them, we take them through the program. Our two programs, Hax and IndieBio are a little bit different. What's most unique about us at Hax, I would say, is that we have our own engineering team that really works closely with these teams that are building hard technology, building prototypes, have to do some engineering to really help accelerate them, and partner with them in a very hands-on way to do that.
(05:33):
But I think on both sides of our firm, we work closely with these teams, and we really have a unique perspective, being able to take them oftentimes straight out of a university and into those early stages of commercialization and help them through that journey. Which of course involves a ton of pieces around storytelling, thinking about customers, and really flipping your frame of reference from just technology focused, but really product focused and customer focused.
(05:57):
I'll give my background quickly. My original background is that I have a PhD in chemistry. I was raised by academics, so I didn't really know what else you do in this world, other than go pursue a PhD. So I went to Caltech, got a PhD. That was a lot of fun, but I wasn't sure I wanted to pursue academia as a career, so I was very lucky early on to find myself in industry where I realized, first of all, that it's so much more fun to try to apply innovation through science and technology to real world problems.
(06:24):
And second of all, it was very clear to me right away, that technology and true innovation through technology and science is so critical to meaningful innovation in this world and to solve so many problems, but the best technology does not automatically win. So there's just so many more pieces to really bringing innovation to market. And so I've spent my career progressively moving from R&D roles into more product facing roles, into commercial roles, at a range of startups. And most recently before joining SOSV I was at Modern Meadow, where we were focused on new biomaterials to replace leather without any animals.
Cody Simms (06:57):
Awesome, Susan. Well, thanks for sharing that, and I probably have some questions just for our listeners who are building startups in this space and want to understand the difference between Hax and IndieBio and all of that. We can maybe spend a brief moment on that, but before we do that, Po, why don't you talk us through the work you're doing today?
Po Bronson (07:13):
Yeah, so I'm Managing Director of IndieBio, San Francisco. I would say when my best friend Arvind Gupta and Shauna Sullivan turned on the apply button in 2014, for IndieBio, they thought they would be doing a lot of therapeutics and MedTech startups. Which they did, but three quarters of what they ended up doing was all these postdocs wanting to explore every market in the universe, rather than just like, health. And we began doing food, we began doing material science, did MycoWorks back then. And have kind of continued that legacy.
(07:46):
Personally, I spent a lot of my life in a synthetic, or the world of ideas, the world of ones and zeros. I grew up in the food industry, running restaurants, commissaries, food distribution businesses. After a period of finance, which is just like a billion dollars of ones and zeros a day, and then writing books, which is just a world of ideas, I kind of got back into the material world. Prior to IndieBio, as a consultant, I had Adidas and Reebok as a customer for four or five years, and worked very closely with their innovation teams. And I just loved making a physical thing. Oh, that was great. It was so exciting. A beautiful product that told a story. I just loved it.
(08:27):
And I've been at IndieBio for six years, and kind continued Arvind's work here. I'm not a scientist by background, my background is in finance, but because I work with the teams so closely, IndieBio is model is similar to Hax. We have a lab, and we work with them very, very closely. I have picked up a lot of science along the way.
Cody Simms (08:46):
And if I understand, again, just hitting on the high level of the two programs. IndieBio, by name and definition, tends to focus on a lot of biotech across sectors as you mentioned, maybe starting thinking it would be healthcare, but looking at it across lots of solutions. And then Hax, my understanding Susan, is that it is more focused on the manufacturing side of building a business. Is that an accurate assumption on my part?
Susan Schofer (09:12):
I mean, we like to think about ourselves as really focused on more like the picks and shovels and enabling technologies for industries. So I mean, we do a ton of work that's focused on climate tech, and a lot of that is focused on industrial, shifting industrial processes, and really helping people build devices and support processes that will change how we can make things.
Cody Simms (09:32):
And you guys are both part of the broader SOSV umbrella. We had Sean O'Sullivan on the pod, probably a year, year and a half ago. My partner Jason interviewed Sean. So folks can go back and listen to that in the archives, but maybe one of you just tackle very quickly, what SOSV is and how it relates to these two programs that you all spend a lot of time working on.
Po Bronson (09:52):
So everyone at Hax, and everyone at IndieBio is an employee of SOSV and we run, collectively, SOSV together. Hax and IndieBio, from a legal perspective, are just brands. But we are decentralized programs. If we had to run a decision past 30 people, we would never make a decision. So by focusing on pockets of teams of seven or eight people, you're able to develop edge, and point of view, and learnings, that we share as much as possible, but on some level we would come to a different decision. Susan could be looking at a company that we would also equally love, or possibly not love. And even IndieBio New York versus in IndieBio San Francisco will make different decisions and have different ideas.
(10:35):
At the very, very early stage, that's important. At later stage, when you have financial metrics around a company and you can just judge a company on its finances, great, that's easy. Suddenly, you're a company now. But at the idea stage, it's really important that we have these sort of separate discreet teams to enable us. So overall, our fund has been one of the most active investors in climate tech for over a decade. We have a long history of doing it, a lot of new funds in the market, which is awesome. But we have a billion and a half of assets under management, and we're investing out of a fund, 300 million in size, and we have some side funds and stuff like that. So we've been in it for a long time. Our founder, Sean O'Sullivan, has been in this venture business since the mid '90s.
Susan Schofer (11:23):
I would just add, I feel lucky having the career that I've had, to be able to be a part of it, because it's really a lot of the things that I think are so important is translating technology to market, and helping these companies do that for an impact.
Cody Simms (11:36):
Within SOSV, how do the individual programs relate to a straight venture capital investment? Is there an accelerator program, like components, to SOSV today? I know there was in the past, for sure. I'm curious how that ties to direct venture investing, today.
Po Bronson (11:54):
We don't use that word anymore, Cody. I think what you're really describing is, there's some sort of batch process, where the startups are doing group activities and group events. Hax has done very little of that, for quite some time. We do a small amount of that. I mean, primarily our focus is on helping this startup succeed, and we have only one business model which is, our investment in them grows, the founder gets rich and we get rich. That's the business model.
(12:24):
When you start using that A word, accelerator, there's sponsors, that's also the money washing around. You get confusing business models, it's completely impure, and it's not true venture. So we are true venture, as our only business model. It's just we're doing it, starting at the pre-seed stage. In that sense, we also differentiate in this most important way. Accelerators don't continue to invest in a company over a long term. MycoWorks, in Matt's round last year, we're still investing in Series C. So we want to put 15 to 20 million into every company, as it succeeds and grows over time, like a traditional venture capital firm does. We just start at pre-seed.
Cody Simms (13:07):
And the pockets of team commonality, whether it's IndieBio, whether it's Hax, whether it's other programs or packages of resource that you have, are really focused on leaning into the startups in that area of expertise. Is that the right way to think about it, then?
Po Bronson (13:23):
We're not forbidden from doing stuff outside of our expertise, let's put it that way. That's the idea. It varies.
Susan Schofer (13:32):
I mean, I'll say on our end, we definitely have a lens of how we can really help teams in this more physical way, which I was alluding to and talking about before. Not because we couldn't help other teams, but that is something that's important, because that's really a big way that we define the value of our program. I mean, at the same time, like IndieBio, we have a lab, we're building a chemistry lab in Newark, New Jersey. We do help coach teams and we take them through not formalized programming so much, but we do help coach them, and help work with them on these specific types of modules that I think are relevant to, of course any startup, but we do that in a very bespoke, targeted way to each company.
Cody Simms (14:11):
Super. All right, well thanks for setting the baseline here for folks, just to understand what it is you guys do, and who you work with, and what kind of founders might be a fit to work with you, for example.
(14:20):
All right. Let's go back to the context, Po, that you had set up, which was my terrible attempt at creating classic boxes of stuff, in terms of different technologies, different sector challenges. And I'd love it if each of you have a crack at that. When you think of, in particular, material science startups. Maybe, let's constrain it to climate tech.
Po Bronson (14:46):
Material science and sustainability, right. Okay.
Cody Simms (14:48):
Yeah. How do you view the world?
Po Bronson (14:51):
Yeah, so you kind of described it a bit of this technological approach difference, so I'll give you something different. Which is, one really important lens of this is really just, for these companies to succeed and make an impact, they need to be great businesses. So low OpEx and low CapEx, and high margin.
(15:14):
Now, better economics as a company, what are some things that contribute to that? A significant one would be, do you have to invent your own machines to do this, or can you use existing machines? Are there facilities that you can rent, or get time on, where those machines exist? Such that you don't have this massive CapEx. Across climate, loads of startups, now mature startups, mid-stage startups have been running into almost a cliff, where they need to raise 50, 100, $200 million. And they thought project finance debt was going to come in there, and it's not there yet, because they need to see that be done a few times before they're willing to finance it. The fundraise is really hard in this market.
(16:05):
So we've been looking at it through the lens, primarily, say for the last four or five years, of low CapEx systems that aren't going to have huge fundraisers required for them, and ideally they can work on a lot of existing equipment. Maybe even run in an existing factory, i.e., be kind of a drop in. That can produce much better economics. We've got one right now out of New York called Bloom Labs. It can run on melt spun. It's a fiber company that can make silk and polyester-like materials. It can run on existing melt spun equipment, which is most of the say apparel type materials, have been running on wet spinning, which is not as economical as melt spun. And those factories are not that busy, they can just get time on them anytime they want. So we don't have to raise much money to make tens of millions of dollars of product. That's going to help us, that's a very important lens, that we split a company.
(17:07):
So I've got a lot, but I'll let Susan talk. She's got a lot, too.
Susan Schofer (17:11):
Yeah, I mean I think one thing that's important to think about is... Well, at least when I categorize materials, we have two main buckets. One is areas of unmet need, where we don't have materials to solve this problem, so we need something new that has new performance, we can define that performance, and then we can think about what that unmet need is.
(17:29):
The other one is things that we have today, that we need to source more sustainably. Whether that's through a bio-based alternative, whether that's just through being more thoughtful on how you think about the supply chain. Maybe you need it to be more distributed so that it doesn't have to travel so far. The other one is just replacing things we have today, and in that particular case, thinking about how you compare it. And I think we have a lot of things that have become kind of sexy, like bio-based, or derived through these bioprocesses, but I think that is a little bit too limiting, because you really need to think holistically about, is this actually better?
(18:05):
And then maybe the third element of that replacing something would be, depending on the use case, what is the end of use, end of life scenario for this? Because one thing we're becoming acutely aware of is just how much waste we're creating, and how we think about that, and I think it really varies by the use case. If it's single use plastic, that's one scenario, where we really do need to think carefully about end of life, end of use. Other things, of course, that matters a lot less.
Cody Simms (18:31):
I want to dig into the second one that you mentioned, Susan, which was bio-based alternatives. To me this one feels like the category that has so many different gotchas, because it's a category where if you're starting from the motivation of, "I want an alternative to," maybe something that's fossil fuel produced or derived, "and I want to replace it with something that is not," you're starting with a replacement mindset. Which may motivate you to do things that, to take Po's example, are more expensive at least initially to get done. And there's often a big question on your customer demand side, how much are they willing to buy, to use the Bill Gates phrase, "the green premium"? Which may go away over time, as you get to scale, but you have this early stage adoption period where it is more expensive until you've gotten to scale.
(19:26):
And I think the other big gotcha I see in this space, of bio-based alternatives, is often is there a steady, consistent, reliable feed stock that you can use, and have access to, to build your product off of? How do you think about those two challenges, and any other challenges that you may identify, as well?
Po Bronson (19:48):
They're real challenges. We can go through some examples. I want to give you a third pillar, probably a little more important, which is performance. So classically, a bio-based material would not be molecularly identical to a petrochemistry derived material. And that's because it's partly being engineered, it can be, but it's often being engineered to have a different end of life. And because of that, you're often compromising in performance. And I remember this Beckett, with the Adidas future team, they invented a whole new way to make a shoe, just because the bio fibers were gummy and couldn't work in a knitting machine. So we had to make a new way to make a shoe, to use these bio fibers, for example.
Cody Simms (20:30):
Let me interrupt quickly, and just push on what you said. "Identifying a potential different end of life," kind of obvious, I think. But the goal is for a lot of petrochemical plastics, the goal is that they're durable, and they last forever. That's what they're made to be. Whereas, with a lot of bioproducts, the goal is actually that they biodegrade, or are more easily recyclable, et cetera. Is that a right assumption?
Po Bronson (20:53):
Yeah, so I'm going to use a portfolio company that had just announced today their Series A, Zymachem. And one of the things that we're looking at was the problem that all these diapers end up in landfills. Now they're green diapers, they're eco labeled, all this stuff, but basically if a diaper works, meaning it holds all this urine, it's got the super absorbent polymer inside. And that takes 400 years to decompose in a landfill, it's unrecyclable, so it goes to the landfill. Zymachem not just created a bioprocess for doing an SAP, a super important product, but they had to reinvent the SAP itself, so that it was made from a protein. Then it would biodegrade. But function better, not worse, than state-of-the-art.
Cody Simms (21:43):
Yeah, I was going to say, nobody wants a leaky diaper.
Po Bronson (21:45):
Nobody wants a leaky diaper.
Cody Simms (21:46):
That's for sure.
Po Bronson (21:47):
So it has to function better, not worse, and to your point, be more economical at scale, not even just the same. So they kind of delivered on the economics at scale, but as you say, not until it scales, out-compete on performance, and then have a different end of life. And that's driving the company's success. So that's a really clear example.
Cody Simms (22:10):
To use your original criteria, are they using existing CapEx somewhere, and leveraging some existing production methodology to build their product?
Po Bronson (22:22):
Well, we're going to go into kind of a rabbit hole up here, but first of all, the diapers. Everybody in the world wants this super absorbent polymer. They need them to be making at super scale, for it to be affordable. We're talking about a nickel per diaper, right? In the meantime, they'll be selling diapers. They use the world's largest OEM for diaper manufacturing, Ontex, to make their diapers for them. So that's drop-in. And then, they can use partners' biomanufacturing tanks, the large steel tanks where we do precision fermentation, to do that.
(22:51):
Now when you use somebody else's tanks, you're paying them. Eventually you need to get to using your own tanks, to have the best economics. That's the conventional logic, and we do have partners who want to do that, for us. We can get there without having to own our own tanks is kind of the most important part, for that particular company. But that company doesn't solve that inherent problem, that you're going to have to get $500 million to build a huge factory for yourself. It's just that their product is valuable enough that they can avoid doing it, and that gets us from point A to point B to scale up.
Susan Schofer (23:27):
Well, you're talking about the step-wise, right? So that they can sort of approach it in, we validate that performance is there with a roadmap to price being at parity or below, and then we can build it on top of other people's existing infrastructure, and then we earn the right to build it ourselves, which I think is an important concept here. You don't want to build new to the world processes, if you can avoid it. And I think when you're talking about materials, that's just super important around what processes exist, how do we take the building blocks, rather than building something new? How do we make a fiber or a yarn, or something that's going through a melt process that exists in the world, and we can use that.
(24:08):
But I do think performance is just a very important lens to start with. If I'm thinking about reinventing a material, I could reinvent a drop-in that's exactly the same, but made through a different process. That's kind of nice, but then all I'm competing on is cost. But how do I really understand that use case, do something new and better in performance, and then I can ultimately work my way towards a cost that's competitive.
Cody Simms (24:32):
Everyone uses the Tesla example in this regard. It's just a better car. Can you think of any examples in the material space where something that actually wasn't quite as performant as the incumbent product did end up working, did end up hitting enough market penetration to become a substantial business?
Po Bronson (24:54):
Good question. I'm sure they're there. Good enough product. There is a lot of experimentation on that when it comes to say bulk, where just to understand, you're still buttressed or supported by something premium. Like you mentioned packaging materials, just for example, and stuff. It's a very tough market for venture, because packaging is just so cheap. It's tough.
(25:19):
But understand that clear packaging we look at, or that white plastic-y bag, they're all composites, and layered up sandwiches of materials. And so you can bulk something with a sustainable thing, and then it maybe needs adipic acid or nylon 6-6 to support it. You're seeing this in a lot of the bioleathers. They've got backing material, the classic backing materials, unsustainable and are used. So there's a story and a feature of something that looks beautiful, that's not tough enough, and then it's the backing material is where essentially the emissions, more of the cost, and the unsustainability is. So blending towards a solution is better than what we used to have, but is often not the end answer in itself.
(26:13):
That creates real confusion for investors. Because if it was pure, if it was all compostable, and durable, you'd know how to invest in it. It's when it's going to be in a sandwich, you're like, "Hmm," and yet some good investors can have really good companies that are essentially making an ingredient, not an end product.
Yin Lu (26:36):
Hey everyone, I'm Yin, a partner at MCJ Collective, here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019, and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn, and a bias to action, around ways to accelerate solutions to climate change.
(27:03):
Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made, as well as ongoing events and programming, like monthly Women In Climate Meetups, idea jam sessions for early stage founders, Climate Book Club, art workshops and more.
(27:22):
Whether you've been in the climate space for a while, or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com, and click on the members tab at the top. Thanks, and enjoy the rest of the show.
Cody Simms (27:37):
It's interesting, I saw a startup recently that is not in materials, it's in food, but they're doing a combination of plant-based meat and real meat together. With the idea that, "Hey, at least it's more sustainable than pure beef, but it has all the texture and all the stuff that you expect of real beef." So it's interesting to hear the blending philosophy, and how that can create challenges for folks.
(27:59):
I want to pull on the bio-based leather comment that you made because Susan, you spent a good chunk of your career working in bio-based leather. I'm curious what you think ultimately, the quote, unquote, "special sauce," was of Modern Meadow in particular, where you worked. And what else you see in bioleather today that either gives you real pause, or gets you excited when you see things in that space.
Susan Schofer (28:22):
Yeah, I mean, it's a very interesting space because there's been so much hype and interest in the space for such a long time. I think at Modern Meadow what we were especially good at was sort of thinking, really, about reinventing it. I mean we had someone on our team, Suzanne Lee, who's very creative and was really at that intersection of fashion and kind of being creative, and thinking about how we put bio-based materials into these spaces. So that, on the product side and on the reinvention side, that really drove us to think creatively about new use cases and stuff like that. The challenge was always how we segue that creative thinking, these unmet needs, that got honestly some of the brand partners we had super excited, and backing that into technology that was feasible and how we put those pieces together.
(29:07):
I think what has worked well in the space, that I've seen, is a couple of things. I think telling a very clear story, because to Po's point, it's so complicated. I don't think that brands necessarily know what they want, versus some of the other spaces we look at. Energy, the regulatory landscape is much more complicated, so there's not a clear driver to one specific answer. I think being able to tell a clear story, let's say, "It's fully natural, it's all bio-based, there's zero plastic in this," has worked really well, and you see some examples of companies who are doing that. But the fundamentals are really going to matter.
(29:43):
One thing we learned at Modern Meadow was A, just putting together pieces of a process that would be based off of existing unit operations, like Po was talking about, I think was really important. When we were doing this in our own totally novel way, that was cool, it was a good story, but it wasn't necessarily scalable, and it wasn't necessarily getting people's attention for something meaningful.
(30:02):
I think what we really learned is, the last mile in delivering these materials to what is needed for consumers and for brands to accept them, is a real challenge. And so, at the end of the day, we got very far in actually scaling up our operations and meeting performance, but we still couldn't get to real brand adoption until we partnered with an Italian textile manufacturer who had that capability, we could drop into their process, and they could really do a lot of that last mile tuning.
(30:29):
So I think one thing that's really challenging, especially to me about materials in general, is that the fundamental tech that they're based on is very early on in the process, and there's so many sort of tricks both in the polymer space, both in the textile space, that happen to formulate at the end that give you the performance. That it's important to have someone with that know-how kind of engaged in delivering that final product, otherwise, it's very hard to really get there.
Po Bronson (30:54):
I want to make sure we can try to double down on what Susan was talking about, last mile. So I have two very, very strong bioleather companies, MycoWorks, which has a factory run with lots of robots in it, in South Carolina, and a big deal. They announced a furniture deal at Biofabricate last week, and they have the General Motors deal.
(31:15):
And also at Biofabricate, my new company Gozen, they made me this little present, with this bioleather stool kind of thing. Their signature thing is being able to make something insanely high tensile strength. So rather than being not as strong as leather, being five times stronger than leather, and insanely thin, 0.2 millimeters thick, called LUNAFORM, and Balenciaga had launched it last month. But what Susan's describing is, when you work with the brands, they're used to working with hide leather, or tanned leather, but they want to turn it into something really special. That you can look at that leather, and you know that that goes with that brand.
(31:57):
And my wife has these gold shoes, and when she walks into a certain luxury store, everybody in the store notices. "Oh." She may be wearing flip-flops, or she may not even be carrying a purse, or wearing jeans. But they see her shoes, and they know she's a customer. Brand. So everything needs to be turned into something that really defines a brand that they've worked on.
(32:21):
So like Gozen has its own studio kind of program to help work with brands to create finishing looks that become distinctive looks, and the brands have their own kind of studios as well, to create looks. It's absolutely essential. And if you just try to push a lot of product out in the world that kind of looks the same, it does not actually fit the industry. That's not what they want. They want to do finishing.
Susan Schofer (32:50):
Well, and I think even to go further on that, one challenge we encountered is, although brands are very creative in a certain way on product, and that's their signature. To make their brand unique. Where they're less so creative is redesigning material. So you go into a room and like, "Hey, do you want a new material? What do you want that new material to look like?" You kind of get a lot of blank stares. I don't think they can get super engaged in that process, and I've seen that in numerous places actually, in my career. Because we were doing the same with polymers, when I was at Amyris, which is one of the pioneers of syn bio. And thinking about, "Hey, if you could have a new monomer, what would that look like?" I mean, talk about zero response. Nobody can answer that question at a polymer company or at a brand.
(33:33):
So I think it's really important to find ways to engage with them, and the Gozen example is a great one. "How do I find a performance that I can meet, that I can start talking about, and then build off of that?" And I imagine luxury brands ultimately play a role, but maybe some of the performance brands like the Adidases, really can start to attach themselves to that, make something out of that, and that's where some magic can happen is really... They know the use case, and now I have something of performance that we can really get engaged on.
Cody Simms (34:03):
So I'm hearing, in these examples, that companies are truly looking for a platform solution that is moldable to their own in-product use. I'm curious, I mean, we were specifically talking about textiles and bioleathers, in that use case. If you go into other categories, and maybe, let's talk plastics. Are you seeing similar demand, or are you seeing people looking for more like whole commodity solutions? That, "This is truly just a complete replacement for the thing we already do"?
Po Bronson (34:35):
I'm definitely seeing the same phenomenon, a little less as distinctive to the consumer, but they want a unique offering. If I go to, say the big Japanese trading houses with chemical divisions, and they're making this for Patagonia or this for so-and-so. They want to be able to offer something that other people can't offer, in addition to what's more sustainable. Again, there is a lot of layering and composite work in the space, so it can highly vary, and be little less clear to say, a consumer, quite what's different about the material, versus say the garment or something like that.
(35:12):
But definitely seeing it in plastic space, as well. "We want to do a little something-something here." It may be not as distinctive, but we want to be able to bring some performance. They've tried a lot, and it ended up not performing, or not scaling. So they sort of like, "But if we could do that again, and actually succeed, we would really have something."
Cody Simms (35:33):
Susan, I see you nodding. Anything to add, there?
Susan Schofer (35:35):
What I would add is that, one of the biggest focuses I think for these plastics and polymer companies, is circularity and end of life. That's a huge problem that's challenging the whole industry, and I think they're really looking for solutions that are both economical and practical. Part of the problem is technology, actual solutions that take a polymer at its end of life and again, it might be a composite, and find a way to, without huge amount of energy input, without a huge amount of cost, turn it back into a usable material that meets a specification. That is hard.
(36:06):
But the second piece is also logistics. We have these things, they're spread out all over, they're all different mixes of things. How do we logistically bring that back together? So I think that's a big area that is a huge challenge, I'd say, for the big plastic companies. And I don't know that they have incredibly meaningful solutions there, yet. That's probably where a lot of their focus is though, even less so than new materials.
Cody Simms (36:29):
That would, to me, mean that many of them are thinking about significant investments on their end in terms of redefining their own operational processes. Is that accurate?
Po Bronson (36:40):
They would love to just find it. They don't want to have to pay a whole bunch of money for an R&D project. We have these conversations all the time. They're thinking about it. Some have done it, it hasn't necessarily resulted in something, but that is the challenge. The fundamental economics of packaging make it so hard to even have the margins to generate the value of creating it. But a simple thing like lining a paper coffee cup, I don't know what's inside. Someone handed me this a few minutes ago. And that liner for a paper cup, which only has to last for a couple of hours, that's a tough solution in and of itself.
Cody Simms (37:15):
Let's talk about another category. I see a lot of startups in cosmetics that are bringing some kind of bio-based approach. Nobody wants to be rubbing, essentially, fossil fuels on their face.
Po Bronson (37:28):
We are.
Cody Simms (37:28):
And yet, we are, today. So this feels like a big category, where I see quite a few startups coming in. What are the things you look for when you're diligencing a company in this space?
Po Bronson (37:40):
It's tough, because you're still just an ingredient that's going to go into L'Oreal, or Sephora, or something. What you're looking at is, "This is great. How are we ever going to execute to make a lot of money in this space?"
Cody Simms (37:56):
Because you ultimately are selling against other commodity chemicals at that point.
Po Bronson (38:00):
Not just that, I mean just again, because Susan's description of last mile. People still want to last mile it. And they want it to be distinctive, and have its own little brand, as an ingredient. And especially as skincare gets towards SPF factors, like we were doing this project last week, let's try to find anything that's sort of sun protecting at all. One product that doesn't have a whole bunch of chemicals in it. Couldn't find one. I imagine they exist, and there's all these brands saying they do that, but then you look on the ingredients list and it's like, "Oh no, I'm counting 15 chemicals there."
(38:35):
So it is very hard. We do it, we invest significantly into cosmetics, and it's everything from a longevity molecule that's become a very successful brand, that's running at 30 million revenue and doubling in revenues every year. There's a D2C brand to B2B companies that have created very high value ingredients. Our general feeling is it has to be a high value hero ingredient, not just like another way to do the ethanol that's used in cosmetics, or just another solvent. It can't be a hidden feature, because people won't pay for it.
Cody Simms (39:13):
So this would be, in that use case, the company you believe is best in the world at growing x microbe, or synthetically altering X thing, and they can lock down their access to that input into the process.
Susan Schofer (39:30):
Well, functional ingredients, I think, is what you're alluding to. And actually delivering, again, performance that's unique, that meets people's needs, that we can't do any other way or that hasn't been done, in a different way.
Po Bronson (39:43):
Or ingestible beauty. That's an example. We have a big B2B deal happening right now for something that you drink, and it has tremendous effects on your beauty. So that's a new form factor that's both tough, because it's a new market, and yet also, at least it's original. So it has that original factor, and you're trying to balance that.
Cody Simms (40:07):
This is getting to some of what I find especially challenging, which is, you're not just trying to decide, "Can this company piggyback on someone else's CapEx to do the thing they need to do?" You're having to actually get down into the science and saying, "Is this solution going to work? Does this science actually work? Can it pass FDA," for example.
Po Bronson (40:29):
Not just does it work, but is it best in class? The FDA's regulation on cosmetics is pretty soft, but China's has gotten very hard. And everyone doing business in China had to go through claims validation the last three, four years. And if you want to sell into a global market, and have global size returns, you need to be able to sell in China. And a lot of people want to be able to make it in China, so Chinese regulations are tougher on cosmetics right now than say, FDA is. So you have to understand not just that it works, but really in investing, it's like, "And no one else will find an equal solution." It's more than just, "It works." It has to also sort of be best.
Susan Schofer (41:07):
Well, I think that's where you think about... Because, I mean, in an ideal world you can invest in things that are platform technologies, right? So something that can be applied, maybe it's hero, first application, beach head market is personal care or cosmetics. But ultimately, is a platform for proteins or something like that, that I can take and do a lot of things with, because the tech itself is valuable. I mean, I don't think any of us at this stage don't want to necessarily invest in something that's purely a platform, we need to start understanding what those use cases are, but ideally there's a use case, there's a performance. But then it maps to some technology that you can really say is advantaged, and can be used and applied in different ways.
Cody Simms (41:47):
Susan, I want to ask you, I'll ask you both. You pick which one you want to go with first. But two words that I hear thrown around a lot in this space, and I'm just curious how you define them, and how you think about them. One is synthetic biology, and the other is biomanufacturing. Take your pick.
Susan Schofer (42:04):
I'll start with biomanufacturing, and it's an interesting one, because I want to throw another one out there, which is bioeconomy, right? This is such a hot word. People are putting numbers on how big the bioeconomy is, or is going to be, and it's just an interesting one. Because how do we really define that? Does that include plant-based? Does that just include things made via synthetic biology, or something made through a organism? I think biomanufacturing is a super interesting space. I like to think about it around where there are unmet needs, and being specific on why I want to biomanufacture something, not just that it's better sexy or because people like what-
Cody Simms (42:39):
What is it? How do you define it?
Susan Schofer (42:41):
I think the way I would define that is, again, what can biology do that's unique? And a lot of that, I think, is in the space of let's say proteins. So proteins are so valuable because they're a key ingredient into nutrition, because they do interesting things in skincare, because they can potentially make some therapeutics. So those are really interesting spaces, now, that as a platform I think to talk about where there's an unmet need. We have all these needs for protein, how are we going to solve them? And that's where biomanufacturing, I think, can start to be interesting.
Cody Simms (43:11):
All right, synthetic biology?
Po Bronson (43:13):
So it seems great. Inside a cell are these gene encoded enzymatic machines, that do little lab experiments one at a time, tucked away to different organelles of the cell to sequester them and do one step, then do another step. And you can get 13, 19 different enzymatic steps inside a cell, all to turn one waste product into something higher of value. At the same time, magically, the cell is dividing and multiplying, and sort of biologically scalable.
(43:47):
If I had a broad rule of thumb, I'd try to say that working inside of a cell works, and can win, when you have a lot of steps. When you need fewer steps, you're going to want to go outside the cell, and just work with those enzymes. Or move into other forms of transformation of matter, doing the same scale of molecular transformation as is happening inside a cell, like one little molecule being built at a time.
(44:15):
Electrochemistry, plasmas. Like there's a lot of technology that is transformation of matter. If you need fewer steps, those are likely to win. And I would say investors sort of are not in love with biology anymore, despite that premise, because they're kind of discovering that, "If you only need a few steps, we could do all this stuff without biology, and be as efficient as biology is." A cell runs on one pikawatt of power, and the best thing in the world that's ever been invented to take carbon out of the air is RuBisCO, and on one pikawatt, which it'll generate the pikawatt for you, and it will run it, and it'll take the carbon out of the air. Or nitrogenase will take the nitrogen, break the dinitrogen bond. Synthetic biology is at the very least a way to study what to do, but it doesn't necessarily mean, "Keep the cell."
Cody Simms (45:07):
I see there being some, almost just inherent challenge, with the phrase synthetic biology. Susan, I'm going to come at you because you're a chemist. Chemistry has laws and rules. Biology exists because of exceptions, because of mutations, because of things you don't expect to happen. And so if you're building a business saying, "We're going to engineer this cell," it seems like you're playing with fire a little bit, because things presumably are going to change outside of your expectation.
Susan Schofer (45:39):
Yeah, well, I mean I think we can mostly agree that chemistry is a much more well understood science at this stage, and biology, we're at an earlier stage of just understanding everything that can happen inside of these living organisms. So that's complicated, there aren't as many, like you're saying, rules of thumb. We've begun to start to engineer that, and that's sort of how we got to synthetic biology, because we combined engineering with biology. So we actually tune organisms in a meaningful way, and we can understand that.
(46:07):
But there's a few things about chemistry that I think we're much better at, right? In terms of theoretical yield. Chemical catalyst can get you to very high yield, so that means, "What I put in, I get 99 plus percent of it out." Biology because, again, it's a living organism. Some of the energy you're putting into it, what you're feeding it, is going to keep it alive, so that creates a different amount of challenge. Biology is much more sensitive, in some cases, and in less well understood ways. Chemistry can be sensitive, we need to eliminate air and water, because a lot of chemical catalysts are sensitive to those things, but we're quite good at that. We operate that at massive scale, and we have capital on the ground and we know how to do that.
(46:44):
So yeah, I just think that the two sciences are at different stages, and I think what we should really be asking biology at this point is, "Where can biology uniquely win?" I think back in the early 2000s as we really started to get excited about syn bio, that was cool, but we didn't think carefully enough about where it makes sense to apply it, so we're left with a lot of very cool technology that hasn't really scaled in exactly the way that we want it to.
Cody Simms (47:09):
Such a good point. And so, Po, obviously bio is in the name IndieBio. And you said when the program got started originally, the assumption was it was going to be a lot of therapeutics and healthcare. The way I see most of those companies being built is, they're heavily IP focused, they spend a lot of time in the lab. They get some kind of approval, or find their distributor in the pharmaceutical realm, and then next thing you know they've gone from, this is like a lab thing no one's ever heard of, to having an IPO. It's like this crazy, no such thing as an overnight success story, but there are a lot of very long overnight success stories in healthcare therapeutics. Climate doesn't feel like the same. It feels like these companies are following a more traditional sort of startup growth path in the bio space.
Po Bronson (47:59):
They have to. The glory years of being treated like a therapeutics company, which is what a lot of our companies back in 2015, 2016 did. They were like, "We got all this money, let's hire a bunch of scientists, let's study the heck out of it." And really, that didn't work. We're today looking for companies that we can get into market on a pre-seed check, and at least a seed check. If you're not in market before your Series A plan, you're dead. You're not going to raise money now. It's a different world. So we are looking for stuff.
(48:32):
Now, again, a big factor there is not just like what's going on in the lab, it's what's going on with the CapEx? So there has been a lot of very good technologies that just needed too much CapEx, and figuring out how to do it in a plastic bag rather than a big bioreactor is like, "How it is going to work in the real world, if it does work at all?" Because that's what actually provides the margins, and the fundraisable path, where CapEx essentially becomes part of the OpEx and almost disappears. And that is, to me, the only method where Biomanufacturing can compete with all the other ways of manufacturing.
Cody Simms (49:14):
Curious, for either of you, where you spend your time today? Are there geographic hotbeds in your areas that are particularly exciting? Are they university adjacent? Where are the pockets of innovation?
Po Bronson (49:26):
Well, I'm going to answer the question differently. I found some great companies in Korea recently, and I've been in Korea, but what I'm doing a lot of is actually sending companies to Europe. And I'm specifically sending them to Ireland because I've got a direct flight from here, everyone there speaks English, and basically are copying Apple and Google and Facebook who used Ireland as his gateway to Europe.
(49:50):
So in my mind, Europe and Brussels is 10 years ahead of the Americas, all the way down through Brazil, and the Asias, with climate regulation. So if I wanted a future simulator of, "Birth a startup in a world where the regulatory environment is sort of like what we'll have in the US in the future," which we don't have today. I can get that in Europe today. So I'm using Europe as a future simulator for what American startup will go through seven, 10 years from now.
(50:21):
There's incentives here, they're coming, they're really soft. Corporates here are excited to do work together. They're very committed, very, very committed, and in most rounds and even leading rounds. But in Europe I can get pressure, I can get laws. I can get people rioting in the streets over what Brussels has just required them to do. And that creates change, so I'm moving startups there.
Susan Schofer (50:47):
I mean, I'll take the other end of that, which is really just doubling down on our relationships with the universities and research groups. I mean, one thing we spend a lot of time doing is sourcing companies, but we like to think about sourcing them even before they become companies. So understanding some key areas of interest for us, around things such as critical minerals, or waste to value type technologies, and then trying to build relationships with universities.
(51:13):
And I would say for us, a little bit of focus on the Northeast, just because geographically that's where we are, so we really ultimately are looking to work with people in person and bring them to our site. But any top research groups that fit into categories of those kind of interests, we're really just trying to build those relationships, and understand the technology landscape and hopefully play a role in drawing those companies out of those schools.
Cody Simms (51:35):
All right, last question for both of you. Is there any specific advice you have for the founders who are listening?
Susan Schofer (51:43):
I mean, look, if you're a founder, Po has alluded to it a number of times. You got to think quickly about how you get to commercialization. Gone are the days when you can spend a lot of time with cool technology and IP. I mean, you need to have a tech, I think at least in our world, you need to have some technology that's enabling, and that's key.
(52:00):
But really thinking, "Who's my customer?" Doing a lot of customer discovery, getting out there, trying to get market traction, understanding what the product is, defining that, hitting those barriers where you're like, "They need this for this to work, but my tech can't actually deliver that," sooner. Market traction is so key, I think, for really advancing the business. And especially for these scientific founders, really being focused on the market, and the customer, and what is my product, is so key. And finding ways to get traction early.
Po Bronson (52:28):
I was going to answer the same thing, which is, because I'm not a scientist, I get to say, "I'm just a dumb VC. Don't make me think. I don't want to try to predict whether the world's going to need your product. Show me the LOIs, and show me the traction. Show me there's product market fit. And what those economics are can determine how much the world can carry you through some rounds, before you prove it."
(52:54):
But everybody needs to raise money. The companies that are raising money are the companies with traction. Susan said it. Get that validation. If it's jet fuel, get that validation. If it's forever chemicals, get that validation. If it's sequestration, something, get that validation.
Cody Simms (53:15):
That is the perfect note to end on. Easier said than done, for sure, but a good reminder that at the end of the day, if you're building a startup, you're building a business. And the faster the thing you're doing can start to look like a business, the more likely it is to attract talent, the more likely it is to attract capital, the more likely it is to be a business.
(53:35):
I so appreciate you, Susan and Po, for joining us and sharing your thoughts about all things materials. I'm sure we could have gone on for another multiple hours, but I learned a lot, and hopefully everyone here has some key takeaways as well.
Po Bronson (53:49):
Thank you, Cody. It's been great talking to you.
Susan Schofer (53:51):
Thanks for having us.
Jason Jacobs (53:53):
Thanks again for joining us on My Climate Journey podcast.
Cody Simms (53:57):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (54:06):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter @mcjpod.
Yin Lu (54:19):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (54:29):
Thanks, and see you next episode.
