In this episode, I had the great pleasure of catching up with Roger Wyse, Founder and Managing Partner at Spruce Capital Partners. I have had the pleasure of collaborating with Roger over the past decade (or more) and have always found his insights of great value and was delighted to have the chance to discuss his experiences and learnings.
Roger reflected on his early experiences at Burrill and the opportunities and challenges of being the first biobased economy venture fund. He then looked back on the early syndication efforts in building the fund and the journey to establishing Spruce Capital Partners in 2013. Spruce was seeking true disruptors, yet in bioeconomy, disruption is an oxymoron! Producers are conservative as they notionally have ’40 shots on goal’ (i.e. 40 growing seasons) and industrial biotech is conservative as consumer facing companies have brands to protect. We also reflected on the motivations and time horizons associated with different limited partners.
We discussed time associated with the market forming actions from regulators, such as sustainable aviation fuels (SAF) and market constraining actions from (same) regulators in securing approvals to construct processing plants or introducing technologies to market. Roger noted that in terms of time, society now has a 100-year environmental debt that we need to start to pay off!
It came to light that the technology transfer process from research institution to commercial partner in the US and Australian systems have eerie similarities! IP valuation disparities and divergent incentives amongst the parties can make alignment and deal finalisation time consuming. We speculated that this may in fact be the first of the ‘valleys of death’ that a licensee or venture might face!
Roger co-authored a discussion paper Building a Robust Bioeconomy: A Statement of Concern and Call to Action in October 2023, which explores the convergence of enabling technologies to accelerate the concept to commercialisation process. Reducing the time to market requires market, product and development processes to be undertaken in parallel, rather than the near linear fashion they are today. This requires patient capital alongside a systematic engagement across the stakeholders (or value pool participants). Roger also noted that there are process engineering expertise and infrastructure challenges to support scaleup and bridging product to market challenges.
Transcript
CB: Hello everyone, and welcome to Tech Transfer Talk. My name is Cameron Begley, Managing Director of Speigare. And joining me today, great privilege and thrill actually to have joining us, Roger Wyse, Founder and Managing Partner at Spruce Capital Partners in the United States. Roger, welcome to the podcast.
RW: Well, thanks, Cameron. Glad to be here.
CB: Uh, Roger, I’ve been very keen to talk to you in this format. We’ve known each other for well over a decade and really started to get to know each other, I think, as Spruce was investing in Amfora. We started to really get talking in some detail about the world and what’s around us.
RW: I think that’s right. And maybe it even went before that. But that’s when most recently, when we started chatting about the opportunities and the challenges.
CB: Absolutely. And with that, it’s been a bit of an interesting journey, I guess really the best place to start is Spruce, really, and the formation of that first fund and how that journey took off.
RW: Yeah, I think Spruce is a good example. But frankly, I would go all the way back to our first ag biotech fund when I was at Burrill and Company that started back in 2000, and it was the first ag biotech fund. And probably that journey is indicative of both the opportunity and challenges. When we formed that first fund, it was the first, which meant putting together a funding syndicate was difficult and there weren’t a lot of companies there. But what we did and what we continued to do in Spruce was to have multinational corporations as our investors. And Bayer Crop Science was an investor in that first fund, and they were using that as a window on innovation which plays to your tech transfer, open innovation is an important part of that. And so, over the years, that’s been our model is to have large corporations as our investors and use that window, our deal flow as a window in innovation. In about 2013, we spun out of Burrill and Company and founded Spruce Capital and raised that new fund, which was $150 million. We invested in ten companies, which we still have today, in the 10th year of the fund. And we were looking for companies that have technologies that can be truly disruptive. As you know, the ag food space faces some serious challenges to increase productivity, reduce an environmental impact, and actually replenish the quality of our soils in which we grow crops. And so, we look for companies that could meet that challenge with some of the new technologies that are available. As companies, they’ve done well.
CB: It’s interesting that notion of disruption, Roger. In ag bio, it’s an interesting concept from an investment perspective, because the time horizons I’ve observed in the biophysical sciences don’t necessarily align with the expectations harboured by the digital investor and dealing, how is that tension, if I can call it that, being handled, managed, observed from, from your vantage point?
RW: Unfortunately, disruption in the ag food space is an oxymoron, right? In fact, there’s a convergence of technologies out there in biotech and AI, robotics, machine learning, that really enable some of these really creative approaches. At the same time, you’re trying to deploy those into—I’ll just use agriculture—a very conservative market. Farmers, they have, what, 40 shots on goal to maintain the farm and make a profit. And so, asking them to take any risk, without compensation in many places, in many cases, and looking to reduce cost and reduce environmental impact is a challenge. And therein lies the conundrum, right? Disruption can be very valuable. It’s needed. Yet you’re trying to put it into an environment that’s very conservative. And so, we don’t have the timelines that you do, and putting out a new app, for example. So, you rightly bring it up as a major challenge.
CB: That inherent conservatism in the ag biotech, ag space, as you pointed out, 40 shots on goal. So, you’re pretty reluctant to stake 2.5% of your, you know, total income on a single play. However, if I just move adjacently momentarily into the world of industrial biotech, which is a space that we also occupy and invest in and have activities in, in industrial biotech it’s a little bit different in the sense that it’s not necessarily, I would contend, it’s not necessarily the conservatism of the producer., it perhaps is more the access to capital to build the steel and concrete. Or is there a few other things going on that are holding up the industrial biotech piece?
RW: I think it’s the conservative customer for these technologies. And in the case of Ag, the customer is the farmer. In the case of industrial biotech, in many cases, it’s the consumer facing company. So, if you think about the process of bringing a product into a food company or a consumer-packaged goods company, they have brands to protect. And so that’s their conservatism, right? So, they’re going to do, as you go along from developing a new molecule that you want to bring out, it goes through some pretty serious testing, right? Both as a chemical itself and then that chemical formulated into a product, and then that product entered into a brand environment. It’s the same very conservative environment.
CB: That’s a very interesting framing you’ve brought through there, Roger, around, it’s the customer who’s conservative. And in its way, you know, a consumer such as you and I, when we’re buying consumer goods or farmers who are ultimately planting a seed, being framed as the customer, and yet there are so many other value participants on the way along that chain. So, whilst there’s an inherent conservatism, all those other value participants also need to get aligned around timing and risk and appetite. I can see you nodding there. It’s a theme that might be a bit familiar. How do we get these guys aligning? This is a market development problem. What’s the challenge in bringing the alignment together?
RW: Well, I think there’s a couple of things. One is the value that we create. Let’s use this biotech. And whether it’s biotech in agriculture or biotech in industrial applications. There’s a couple of issues. One is in the case of industrial. You’re competing against a, probably a molecule that can be produced from fossil fuels. And that industry has been around a long time. It’s been subsidised, and it has depreciated assets that it’s using to produce the product. Conversely, industrial biotech is producing something that has got to compete against that and we’re having to build new facilities. So, the cost, you just can’t hit the cost point. And so there needs to be, in my view, there needs to be some government policy that recognises the importance of moving to a biobased economy, reducing, uh, to moving to more biological inputs in agriculture. And you need some support to get there, right? Other industries have had it. Electric vehicles have had it, as an example, and is a recent example. And I think we need something similar. You just need to agree that we’re going to build a new industry. In the, at least in the short term, it’s going to need some policy support; it’s going to need some financial incentives. It may even, you know, need some government guaranteed loans. It may need some de-risking tools for early adopters. And so just think of it as we’re building a new industry. And it’s going to need some support. You’re hearing a lot today, AI was out there, right? Well, you know, we just were talking about building a, what-a $500 billion facility. It’s the same kind of thing that if you look at industrial biotech or moving to a bio-based economy, we’re going to have to have those same kinds of moonshot support.
CB: Yeah. The interesting piece of that around support from government, this is a theme that’s popped up from time-to-time. And Jim Lane has been on the podcast a couple of times. The sense I have is from some of the conversations with Jim, this is my interpretation, is that the free use of the atmosphere in order to eject emissions is an enormous subsidy in and of itself. Whereas I get the sense that industrial biotech and ag biotech are being held to the new standard, rather than the incumbents being brought up to the same standard. Is that a reasonable perspective, or am I being a bit biased toward bioeconomy?
RW: You know, I think it is. You know, it goes, it’s the old traditional tragedy of the commons, right? No one wants to take care of the atmosphere because everybody has free access to it. So, part of it is that we don’t value, and therefore we don’t pay for these ecosystem credits, right. They get generated and then consumers worry about inflation. And think of us, we’re trying to pay off a 100-year environmental debt, right? And somebody’s got to pay for that. And so, as we try to look at carbon credits and, you know, sustainable aviation fuel is hot now because of the credits available. And so, it’s filtering all the way down to farmers.
CB: It’s interesting. Sustainable aviation fuel, if I might Roger, is a really interesting case study, I think at the moment. It’s a very contemporary issue with the tax credits coming out of certain jurisdictions, Europe and California and the like. It reaches all the way down to the farm gate, because there are decisions to be made around which crop to grow and also how to grow it. There’s carbon intensity scores and the like. And yet I would contend that while SAF is a noble cause to be pursuing, is it the tail wagging the dog around volume and scale? Because renewable diesel would have a much broader impact if we got that to scale. Let’s just sort of play out a little scenario where we didn’t do any SAF and we just got all the volume into RD. Uptake has a much lower barrier to entry, I would contend. Things don’t fall out of the sky if they’re already on the road. So, is the tail wagging the dog a little bit on this one? I’m not saying this is a bad thing, but if we got it sort of a bit arse about.
RW: If you step back, you know, the point you’re making is if you step back and say, where can we have the greatest impact, it wouldn’t be SAF, right? It would be in other uses. But politics are still alive and active.
CB: Yeah, they are. I guess, just to nuance that momentarily, is it politics as in amongst politicians or is it just we have a really focused group in the aviation sector who have taken the opportunity, in contrast to a maybe, a more distributed or less, well, less concentrated industry in road transport and, and rail and the like. Is that perhaps more what’s happened?
RW: I think SAF really, the tax on aviation fuel was started in Europe, right? So it was more of a principle that, you know, the airlines are coming in, they’re polluting our atmosphere, and we’re going to put in regulation to tax them. They fly in. And that played out since almost all airlines are global coming into Europe, that’s what they all said, ‘Okay, then let’s invest in sustainable aviation fuel to help us reduce our tax.’ So, I think it was all driven by policy initiative in Europe.
CB: Europe, of course, is a whole conversation about how their regulations set the standards for a lot of industries around the world. We’ve seen that in agriculture for a long time, as much as we’ve seen it in sustainable aviation fuels today.
RW: But sometimes European regulations are counterproductive. You know, they have this, this goal of reducing emissions. But yet the regulations that constrain the rapid construction of a facility can delay that goal. And I can give you an example of lots of tech. One of my companies, about seven years ago, did a deal with a Chinese steel company. And they did a deal with a Belgian steel company. In China, because, you remember, China had a lot of pollution issues around Beijing. So, they were interested in reducing that. So, LanzaTech did a deal with the steel company in China; three years later that facility was up and running at full capacity. The one in Belgium is just getting there seven years later. So it was, you know, the Chinese just made the way possible and moved forward. The Europeans had to go through a massive amount of regulatory approvals to get that in place. So sometimes the Europeans are counter…they have the right goal, but they also counter that with the regulatory system that slows it down.
CB: And another theme that comes out in that, in my mind, Roger, is that no one’s valuing time in this conversation.
RW: Except for investors.
CB: Except for investors, right? Which brings us back, brings us back to your, you know, the Spruce interest. But the zero value associated with time distorts a lot of behaviours, and it allows a very laissez faire or relaxed approach when everyone else is actually, as you say, they’re going through cash, time, but there are actual human resources involved in this that also, in the nicest possible way, get affected by these delays.
RW: Yeah, and, you know, I jokingly said investors care because that has been the other tension here, is that we all agree that moving to a biobased economy is important. We talked a little bit about that as a new industry, so it needs policy and incentives. But even in the best of times, biobased products take 15 to 25 years to come to market. And a venture fund is ten years, which means you have to identify the portfolio, invest in it, build value and exit within ten years. That’s just not consistent with something that takes 15 years to get to market.
CB: Which begs the question, should the funds run more than ten years or, and/or how do we compress this 15-to-25-year window and bring it, bring it into a tighter time horizon? And for those playing along at home, there was a paper you wrote a couple of years ago now, or about 18 months ago, called ‘Building a Robust Bio Economy’. And you talk to that very issue in that paper, Roger.
RW: Yeah. I think it’s a three-pronged approach. First of all, we as an industry need to think about how we reduce that time to market. And there’s ways to do that if it’s going to require new culture and new ways of working. But we need to. Rather than going through a linear process to get to market where you make a product and then have it tested, you then have the offtake partner evaluate it. You then have to have an offtake agreement, uh, to get financing and to get that. So, all of that and then you go out to the brand testing and product testing in the marketplace. That’s what, if we could compress that down and get that conversation going earlier in the process, that would reduce time. But then the other is to have the appropriate kinds of financing available. Venture may be great for some kinds of things, but it does require very fast development and value creation. But so that means that maybe there’s another category of funding that has a longer-term horizon, is more patient, consistent with even accelerated development of products. So, you need consistent support along the entire value chain. And so, financing is one of those.
CB: Just interested on that types of finance conversation, Roger. It’s a big topic in and of itself, of course, with lots of debt instruments, certainly in North America, with the policy that’s unfolded over multiple administrations going all the way back to the mid-2000s with Bush. There’s been multiple administrations with different types of debt and grant type financing. But coming into the venture conversation, and I guess particularly in light of the contemporary announcement that happened a couple of weeks ago, FMCs change in their corporate venture arrangement. Is corporate venture different to, you know, what I might call a private venture? And I’d put Spruce into that private venture model. Are they different? Can they work on different time horizons?
RW: Well, venture, you know, traditional venture like we’re doing, right? We raise money from a combination of investors and and pull it into a fund, and then we make investments. Those are by agreement ten-year funds. And so, you have to establish the portfolio, build value and exit in that ten- year period. And sometimes you get an extra year or two, depending. Now the problem with corporate venture, is that corporate management’s always interested in taking risk when times are good. And the first thing that happens when the economy or their financial situation changes, the first thing that goes is venture. Because it’s a nice to have, not a must have. And so right now the ag community, as you know, farmers as well as the multinationals in the ag and food space are not doing well. So, they’re going through very tough times and they’re laying people off and dramatically. And so, guess what? First thing it goes, is we can do without the venture that, you know, we might get something out of that, might not. It was a nice window. We learned a lot, but it doesn’t compare to laying people off.
CB: It’s that timing issue now, not so much time, it’s timing. And as you say it, corporate venture taking this broad generalisation, rises and falls with the balance sheet and the P&L of the company involved.
RW: Exactly right. And also, with the philosophy of management, right. Some want to do things internally, others want to have an open innovation strategy, and that fluctuates as well. Corporate venture is very important. Part of building out these companies has many advantages, but it can be fickle.
CB: I’d like to circle back to that idea we were discussing earlier around competing with the incumbents with, they’ve got depreciated assets and they’ve got basically a license to emit, or however you want to phrase that, or no license and emit anyway. But when we look at trying to compete head on with petrochemicals, we are going to be challenged because if you try and make the same molecule from biology, you’re competing purely on cost. However, how do we reorientate the conversation to think more performance oriented rather than cost oriented? And the story that always comes to mind in framing this question is Sorona® in 1,3-PDO, which was born out of DuPont, and we were very lucky to have Ray Miller on very early on in the podcast series talking about that story, but it can’t surely be the only one. There have to be other value-based bioproducts out there that we can position, what are the challenges and why aren’t we making more headway in this direction?
RW: You know, a lot of it has to do with, again, it comes back to a bit of timing. You may be able to get your costs down to compete, but you’re going to have to get to scale and it’s going to take some, quite a few years to get there, right? Because you got to somehow get into that market. And that’s why I’m saying I think government incentives and policy is important for moving into the market in a significant way. You have to get support because no small company and no investor is going to pay you to do that, right? The return is long and it’s going to take volume.; it’s going to take scale and time to get down to where you can at least compete. And as you well know, if it’s a similar molecule, guess what? Any manufacturer is going to go for the lowest cost molecule. He doesn’t get paid for it being biobased, he gets paid for performance of a product. And so, it’s cost and there’s not a green premium.
CB: Yeah, there certainly isn’t a green premium, Roger. I think we’ve all been disavowed of this view over the past 15 or so years. I do recall Coca Cola actually putting a small premium in place for early biobased PET products. I thought it was quite clever that they offered a premium and they said, we’re going to drop this down over time, but we’ll help you out to get going. But in principle, we’re going to drop that off.
RW: You would hope that some of the big players would do that, or you would hope that the consumer facing companies would demand it, right? The Walmarts, the P&Gs and Unilever‘s that would demand it. Then it plays back down through the whole value chain. But unless they’re willing to do it and can afford it, it’s going to be really difficult.
CB: It’s really trying to shift the bio conversation from cost to cost-in-use. If you’ve got a funky molecule that can lower the overall cost, then you’ve got a shot on goal. But if you’re just going, you know, like-for-like molecular equivalent is the phrase I used to use in certain forums, if you’re looking at molecular equivalents, you’re really going to be up against the wall.
RW: Yeah. Unless we start paying for the externalities of these products, it’ll be hard to continue.
CB: Yeah. If we do think more about cost and use, is there an opportunity to shorten up the timelines or perhaps even stop things early by getting this earlier market engagement? How can we get this engagement with others in the value chain happening sooner? You mentioned that linearity earlier and the tech guys do their thing, and then someone tries to scale it up, and then we hope someone turns up and buys the molecule and…
RW: Right. Yeah, I think it’s a really important concept but difficult to execute. So that means that you have to get those consumer-facing guys to spend some time and effort in engaging earlier in the value chain. They have to go all the way back to that start up company that has an idea, and they need the input of these consumer-facing companies to tell them, help them understand the risk and timeline to bring it all the way to market. And the fact, when you, it is a molecule we’re interested in but here’s how long it’s going to take. Or you tweak your process to make a different molecule that we’re really interested in; that’s really valuable information earlier. But how do you entice them to make that effort to do it? And downstream they may philosophically, or they may even have sustainability goals, but they have to give a return to their shareholders, right?
CB: Yeah. So, it’s that, it’s that managerialism that we touched on earlier around corporate venture, which focuses on the here and now and the quarterly returns. How do you, you know, take a little bit of that internal capacity or know how and get it into these conversations with these really early stage guys to sort of bump them in the right direction or perhaps, in certain circumstances, convince them that this isn’t a great idea at all, and you should go elsewhere.
RW: Yeah, we’ve been working with a number of groups trying to put together a concept called a clearinghouse, where you go and get access to your early stage company, you could go and get access to advisors, to capital, to understanding the market, and maybe make this engagement with downstream folks that may not be in your specific area, but they certainly know the generalities of what you need to do to get your product to market, the regulatory path, etc. And at the same time, for larger companies that are looking for biobased products, this could be a community in which they engage to find out who has the right technology? Maybe who has the right products for them to engage with? So, think of it as a clearinghouse for engagement. And we’re working on that concept.
CB: Yeah, that’s not necessarily a new idea in the sense that there are portals with oodles of intellectual property posted, but I suspect that’s not what you’re trying to do in and of itself.
RW: That could be a piece of it. But you have to think about how the entire value chain has to be balanced. And I’ll give you an example. Right now, here in the US there’s a lot of discussion as we lack biomanufacturing capacity. And so, we need pilot plants to scale up facilities in commercial production facilities. Well, if I don’t have the right products coming in and if nobody cares about those products on the other side, it really doesn’t matter. And so, if you think about it, it’s like any workflow, right? It’s determined by the slowest step. You have to think about that as the entire value chain. It’s going to be, the rate of movement to market is going to be determined by the slowest step. And so, we need to optimise and have innovation along that entire value chain. And just, we’ve had tremendous developments in genomics and AI and computers and robotics, but we haven’t had that same kind of innovation in downstream processing and market strategies and business plan value- capture strategies. So, we need that innovation along the entire value chain.
CB: Yeah, I think with regards to the manufacturing, that’s an interesting biophysical set of challenges. And unless you’re planning to break the laws of physics, Roger, and I wouldn’t put it past you, but unless we’re looking to break the laws of physics, there will be some natural limitations. But where I think the opportunity is most prospective is all the human systems stuff. People, I would contend, Roger, people are two thirds of the challenge in innovation and tech transfer.
RW: I, you know, let’s just speak about this, the value chain that we’re talking about and I’ll come back to the tech transfer. As you scale these up, that scale up is both an art and a science. And where do you find those artists and science combinations? A lot of them are in big companies where they’ve had a career in fermentation. We need to tap into that knowledge base, to train the next generation, the next workforce, to be able to manage these complex facilities. But you’re right, it’s all about human nature, right? If you think about that value chain, it’s kind of in the category you work in. There’s that transfer from the lab at the university into the private sector. Something I hear about almost daily. A huge challenge.
CB: It certainly is the world we live in, Roger. And I think the business model piece is an important part of it. But just to touch on the clearinghouse concept momentarily, I would suggest, and I suspect you know this and a lot of people listening know this, that’s going to be driven by human relationships; that’s not going to be driven by an algorithm and a website with a bunch of intellectual property listed on it.
RW: That’s right. And there’s all kinds of issues there, right? You know, first of all, why is it valuable to be part of it? Right, and the entire value chain to be part of it, so how do we get those consumer-facing companies to say it’s worth my time and effort to participate. And then you got, you know, coming back to intellectual property, right? What do I share? What do I put into the community? What do I not, you know? And then having all those agreements somehow standardised to make that whole process because, you know, we spend more time negotiating a material transfer agreement than it takes to run the test, right?
CB: We do. We do. And that’s always a bit of an alarm bell for all of us, isn’t it? When the bigger alarm bell is a non-disclosure agreement, the length of time an NDA takes is inversely proportional to the chances of success. That’s a rule of thumb I have. But it’s interesting, you just touched on the university and the bench scale, and there’s no limit to the ideas and the experiments and intellectual property that sits therein. But why does it take so long to extract the technology or really the intellectual property? I’m not even sure they’re technologies in some cases. But why does it take so long? Or why is it so challenging for us to get that engagement at an-I’ll use the phrase industrially practical engagement, not theoretical,
RW: I think…so as you know, I was a former dean at two universities, and both of them had responsibility for some portion of tech transfer. So, I’ve been on both sides. I think the fundamental issue is the disparity in understanding the value of the technology or the IP. In other words, the university is going to way overvalue it and the company coming in, or whoever’s licensing it, is going to undervalue it. And there’s that big discrepancy, right? And in part they’re both wrong. The university doesn’t understand, thinks it has a big market, and doesn’t understand the risk and cost of getting to that market, and then the licensee sees all that as a big risk, right? And he doesn’t want to put a lot of money out or upfront because he doesn’t know what he’s going to be successful in the market. So, to me it’s a knowledge gap of really understanding the technology. And the question is, how do you bring those together? I mean, a lot of different places have different ways of doing it. When I was there, I had a little fund that you could actually…you get them to agree on what are the killer experiments that need to be run to, so we have a closer or better common understanding of the risk. And you put money into those killer experiments. It’s not another science project. It’s the killer experiment. And then once you get that data, you can get a little bit closer. When I worked with the Autumn Group here in the US, I don’t know if it’s still called Autumn, but it’s…
CB: …I think it is.
RW: The thing I was really shocked is that many universities have very different ways of funding their tech transfer offices. So, as an example, some of them, they have to essentially generate their own budget. So that means that they can only do licensing deals that have upfront payment. And if you go to a small company, he doesn’t have cash. He’s glad to give you some equity and some options, but it doesn’t pay the bill for the tech transfer of it. So there’s some real anomalies in the system that we need to think about and we frankly need to fix, because it’s a major impediment to the rapid development and commercialisation of technology, or at least getting them into the environment where you understand whether they’re valuable or not.
CB: That example, Roger, is an example of quite a distorting behavior because, broad generalisation warning here, those who probably can afford an upfront fee for a license, bigger multinationals may not necessarily have the agility and the wherewithal to be able to take what’s on the table as is, and adapt and modify and take those sidesteps that always seem to occur in these journeys, they may not have that flexibility to do it. And yet the smaller guy who probably is all in, committed, sees the opportunity but doesn’t have the cash.
RW: It’s a real conundrum, right? When, and it took me a while because I would, when I was working with Autumn, we were brainstorming about how to make this more efficient, I found I suddenly got confronted by the complexity of what’s out there. And then the other thing is, even successful universities that have good portfolios that generate a fair amount of revenue, it’s on a fairly small number of patents. You know, so we’re out there fighting over, you kind of said, you know, we’re fighting over things that in many cases the licence fee doesn’t pay, barely pays the IP cost. And there’s not many that really generate a lot of revenue for the institution.
CB: Well, they are called unicorns for a reason, I guess. I have seen that behaviour many a time, Roger, over the journey. And that is the fear of missing out. What if this is the one? Notwithstanding, there’s a 99.8% chance that this isn’t the one, everything gets treated as if it’s in the 0.2%. And instead of, maybe structuring things to say, well, if you happen to be in the 0.2 percent, we expect some upside, but otherwise just go and do your best.
RW: And that’s why, you know, maybe, we’re coming back to the clearinghouse, maybe there’s a role there for, I’ll call it mediation, right? If you…you can bring in a bun…you know, there’s some neutral expertise there that could be brought in to take a look at something and they give you some sense of what the risk and cost would be, and then you have a little…but right now it’s a broken system, no question.
CB: Yeah. The mediation is a great word for it, particularly when you’ve got two parties you described earlier. You know, poles apart. Maybe this is the first Valley of Death, not the funding one. Maybe the first Valley of Death is trying to get the license deal done and getting across that valley. The other thing that does strike me with the FOMO is another phenomena, I’m not sure whether you’ve seen this, Roger, but just to sort of test it in the spirit of tech transfer office discussions, is this notion that that somehow this, if you put this value on it, there must be someone else out there that values at the same, or possibly even more so I couldn’t give it to you in case someone else needs it. A good friend of mine, Alan Green described it this way when he wanted a pool car one day at work, and the person who manages the pool car said, ‘I can’t give this to you because someone else may want it.’ And of course, Alan said, ‘But yes, that’s right, I want it.’ They said, ‘No, no, no. In case someone else wants it.’ Then you end up in this, I mean, it really is true circular economy, isn’t it? Like no one ever lets go in case someone wants it. But the person who actually wants it never gets it. Have you ever seen this, Roger, or is this just an Australian phenomena?
RW: No, no, I think it’s, well, it partially affects how they’re negotiating, right? Well, this is not going well, maybe there’s somebody else that values it more and therefore I should hold.
CB: So okay, so it’s not just an Australian thing. This idea that there may be someone else who wants it and sometimes of course, and we’ve probably both seen this, Roger, that person never turns up. And value actually gets to…so instead of taking what’s on offer value you get zero because nothing actually gets exchanged.
RW: A bird in the hand is worth two in the bush.
CB: Yes. But, Roger, in some circumstances, a bird in the hand might actually defecate on your hand. So, the two in the bush is obviously a better thing because there’s nothing on my hand. So, these are the psychological challenges we face in tech transfer offices. Roger, this has been a fascinating discussion, and to range through from looking at ag and industrial biotech, ranging through the venture conversation and this idea of a clearinghouse concept and mediating between parties, I think is a sorely required function in the system because the larger corporates, and even some of the smaller guys, don’t really know how tech transfer works. That’s not in their natural DNA. They’re executing on their business, so they need a bit of help. And as we’ve just described, the universities are a bit stuck in their own paradigm and not able to see the industry piece. So, I think that’s a really interesting idea.
RW: Yeah, I think the concept goes all the way from tech transfer out to, you know, how do I find the right consumer-facing partner that I need?—I know I’m going to need.
CB: No, I think that’s quite true, Roger. The need for connection right across the value chain is alive and well, particularly with the different types of actors. And they’re all working in different modalities, different head spaces. Someone has to learn to connect them all together. And you know that clearinghouse idea, and in truth, Roger, you know, I’d contend that’s probably what you’ve been doing for most of the last 30 years or so, is identifying those parties and connecting them up and connecting them up through capital.
RW: That’s true. And I’m sure some of your listeners will say, well, there’s people already doing database for how do you get access to pilot facilities or people doing a database for this or that, or there’s networks here and organisations that do that, but they’re not all integrated and connected, right? They should be part of one neural network if you will, not separate. Because even an early-stage company or a big company, to find that right network at the time they need it, is not optimised.
CB: No, it’s not optimised. And the evidence of why we need it is the fact that we wouldn’t have just had that conversation if it was all functioning properly and efficiently. So, and there is no limit to the number of databases and networks, but it is the connectivity and the relationships that are needed to drive all this along. It’s not just more databases and more troves of intellectual property.
RW: Yeah. That’s right. Yeah, it’s how do we efficiently get it into the marketplace, or at least get it into a place where it can be fairly evaluated and then into the marketplace as quickly as possible?
CB: Yeah, absolutely. So, Roger, just in closing, what do you see for the next, you know, 1 to 4 years? I guess, venture in the ag bio and industrial bio spaces.
RW: A lot of it is going to be determined by what happens in Washington over the next year, to be honest. You know, if you think about the biobased economy, it was being driven by the Inflation Reduction Act and Infrastructure Act, right? Two major bills that funded a lot of that. And in fact, the Europeans looked at the Inflation Reduction Act in the biobased area and said ‘It’s unfair. You’re investing too much.’ So, all that was shut down in the last couple of days. So how that comes back online will determine what this all looks like. Now, in my view, you’ve heard me say I think there needs to be government support for this moving to a biobased economy. That includes, you know, having farmers move to more regenerative practices, which then are the low-CI (carbon intensity) feedstocks that feed into that biobased economy. And it’s the right thing for agriculture to make that change. How all that gets linked together, so that going back to our example of sustainable aviation fuel, there’s credits there, so how do those get played all the way back down to improve farmer and rural economies? Farmer economics and rural economies. That’s critically important, right? That’s the political base, now, that’s just, they’re not doing well and they just showed their discomfort over the last year. And so how do we build that? Make sure that farmers get to capture and produce more, use more sustainable practices, produce more low carbon intensity feedstocks to go into the bioeconomy. All that plays out to me is the challenge for the next few years, right? We’ve got to get the right policies, we’ve got to get the right incentives, and we’ve got to make sure that farmers benefit. And I’m working on some things at the National Academy, putting together a working group on that exact topic, right? How do we link those ecosystem credits back to farmers that generate them?
CB: No, that’s great, thanks, Roger, because at the end of the day, not only does value need to be distributed appropriately through the actors, but there’s no doubt I think, not just in the United States, but also I think in almost every jurisdiction, without farming communities being vibrant and economically sustainable and environmentally sustainable, the idea of a biobased economy and the, you know, a significant mechanism to carbon reduction disappears. Because if those communities cannot produce at the scale and do that profitably and sustainably, then the rest of it really doesn’t happen.
RW: It’s the foundation of a biobased economy. And I guess right now, as the new administration comes in, how that plays out here over the next year will determine kind of how that all moves forward.
CB: Yeah, absolutely. Roger, it’s been terrific having you with us on the podcast today. Really appreciate your insights and look forward to our next conversation.
RW: Well thanks, Cameron. Enjoyed it.