Late last year, Solugen, a startup using synthetic biology to take hydrocarbons out of the chemicals industry, decided against pursuing a new round of funding that would have valued the company at over $ 1 billion, TechCrunch has learned.
Instead, the Houston-based bio-manufacturing company raised an internal round of roughly $ 30 million from existing investors and continued working on its latest project — a new bio-based manufacturing process for a high-value specialty chemical that can act as an anti-corrosive agent.
That work represents a potentially lucrative new product line for the company and charts a course for a host of other businesses that are refashioning the basic building blocks of life in an attempt to supplant chemistry with biology for manufacturing and production.
If Solugen can get its high-value chemical into commercial production, the company can follow the path that sustainable tech companies like Tesla have mastered — moving from a pricy specialty product into the mass market. And rather than over-promise and underdeliver, Solugen wanted to get the product line right first before raising big bucks, according to people familiar with the company’s thinking.
As the world looks to move away from oil and its byproducts to reduce greenhouse gas emissions and slow down or reverse global climate change, the chemicals industry is in the crosshairs as a huge target for disruption. Vehicle electrification solves only one part of the oil problem. The extractive industry doesn’t just produce fuel, but also the chemicals that make up most of the products that defined consumer goods in the twentieth century.
Chemicals are everywhere and they’re a huge business.
Companies like Zymergen raised hundreds of millions of dollars last year to develop industrial applications for synthetic biology, and they’re not alone. Startups including Geltor, Impossible Foods, Ginkgo Bioworks, Lygos, Novomer and Perfect Day have all raised significant amounts of capital to reduce the environmental footprint of food, chemicals, ingredients and plastics through synthetic biology.
Some of these companies are seeing early success in food replacements and ingredients, but the promise of biologically based chemicals have been elusive — until now.
Solugen’s new product will produce glucaric acid, a tough-to-make chemical that can be used in water treatment facilities and as an anti-corrosive agent — and the company can make it with a zero carbon (or potentially carbon negative) manufacturing process, according to Solugen co-founder and chief technology officer, Sean Hunt.
The glucaric acid from Solugen is cheaper to produce and more environmentally friendly than existing phosphonates that are used for water treatment — and the company has the benefit of competing against chemicals manufacturers in China.
Given the continuing tensions between the two countries, the U.S. is looking to make more high-value products — including chemicals — domestically, and Solugen’s technology is a good way forward to have home-grown supplies of critical materials.
Solugen still intends to raise more capital, the company just wanted to wait until its latest production plant for the acid came online, according to Hunt.
It’s also the fruit of years of planning. The two co-founders, Hunt and Gaurab Chakrabarti, first realized they could potentially use the technology they’d developed to make specialty chemicals back in 2017, according to Hunt. But first the company had to make the hydrogen peroxide as a precursor chemical, Hunt said.
“It’s advantageous for us to focus on this,” said Hunt. “As we scale, we can enter more commodity-type markets down the road.”
It’s all part of the notable strides the entire industry is making, said Hunt. “Synthetic biology has really made significant strides,” he said. “We have our commercial plant coming online this summer [and it proves] synthetic biology has gotten to the point where we can compete on price and performance.”
So the capital infusion will come as the company gets closer to the completion of these commercial scale facilities.
“It’s not like we were sitting on a term sheet and we said no,” Hunt said. “We want to make sure that we are hitting the milestones and the goals at a commensurate pace which is this year. I’m extremely bullish and optimistic of 2021.”
Solugen’s co-founder sees the path that his company is on as one that other startups working in the synthetic biology space will pursue to bring profitable products to market at the higher end before competing with more sustainable versions of commodity chemicals.
“How do you start a company that has this level of capital intensity?” Hunt asked. “You can start in the fine chemicals space where everything sells for tens to hundreds of dollars per pound. For us, glucaric acid is that specialty chemical and then we will do commodity.”
K Health, the virtual healthcare provider that uses machine learning to lower the cost of care by providing the bulk of the company’s health assessments, is launching new tools for childcare on the heels of raising cash that values the company at $ 1.5 billion.
The $ 132 million round raised in December will help the company expand and help pay for upgrades, including an integration with most electronic health records — an integration that’s expected by the second quarter.
Throughout 2020 K Health has leveraged its position operating at the intersection of machine learning and consumer healthcare to raise $ 222 million in a single year.
This appetite from investors shows how large the opportunity is in consumer healthcare as companies look to use technology to make care more affordable.
For K Health, that means a monthly subscription to its service of $ 9 for unlimited access to the service and physicians on the platform, as well as a $ 19 per-month virtual mental health offering and a $ 19 fee for a one-time urgent care consultation.
To patients and investors the pitch is that the data K Health has managed to acquire through partnerships with organizations like the Israel health maintenance organization Maccabi Healthcare Services, which gave up decades of anonymized data on patients and health outcomes to train K Health’s predictive algorithm, can assess patients and aid the in diagnoses for the company’s doctors.
In theory that means the company’s service essentially acts as a virtual primary care physician, holding a wealth of patient information that, when taken together, might be able to spot underlying medical conditions faster or provide a more holistic view into patient care.
For pharmaceutical companies that could mean insights into population health that could be potentially profitable avenues for drug discovery.
In practice, patients get what they pay for.
The company’s mental health offering uses medical doctors who are not licensed psychiatrists to perform their evaluations and assessments, according to one provider on the platform, which can lead to interactions with untrained physicians that can cause more harm than good.
While company chief executive Allon Bloch is likely correct in his assessment that most services can be performed remotely (Bloch puts the figure at 90%), they should be performed remotely by professionals who have the necessary training.
There are limits to how much heavy lifting an algorithm or a generalist should do when it comes to healthcare, and it appears that K Health wants to push those limits.
“Drug referrals, acute issues, prevention issues, most of those can be done remotely,” Bloch said. “There’s an opportunity to do much better and potentially cheaper.
K Health has already seen hundreds of thousands of patients either through its urgent care offering or its subscription service and generated tens of millions in revenue in 2020, according to Bloch. He declined to disclose how many patients used the urgent care service versus the monthly subscription offering.
Telemedicine companies, like other companies providing services remotely, have thrived during the pandemic. Teladoc and Amwell, two of the early pioneers in virtual medicine, have seen their share prices soar.
Backing K Health are a group of investors led by GGV Capital and Valor Equity Partners. Kaiser Permanente’s pension fund and the investment offices of the owners of 3G Capital (the Brazilian investment firm that owns Burger King and Kraft Heinz), along with 14W, Max Ventures, Pico Partners, Marcy Venture Partners, Primary Venture Partners and BoxGroup also participated in the round.
Organizations working with the company include Maccabi Healthcare; the Mayo Clinic, which is investigating virtual care models with the company; and Anthem, which has white-labeled the K Health service and provides it to some of the insurer’s millions of members.