Biobased materials, chemicals attract significant investment

By Lux Research | October 22, 2014

The bio-based materials and chemicals industry is poised to attract nearly $1 billion in investment this year, led notably by later-stage funding rounds, according to Lux Research. The estimated $974 million investment represents a 28 percent increase from 2013, suggesting companies that endured the waves of economic disruption have gained maturity and regained investors’ confidence.

“Over the last two years, funding for bio-based materials and chemicals has shifted decisively toward later-stage rounds, reflecting the growing maturing of the industry and the shift from R&D to production,” said Meraldo Antonio, Lux Research associate and the lead author of the report titled, “Dynamics of Venture Capital Funding in the Bio-based Chemicals Industry.”

“Participation of corporate investors has also increased,” he added, “suggesting that large multinationals in many industries see bio-based materials as strategically important.”

Lux Research analysts studied the investment landscape for BBMC, evaluating VC, corporate VC, IPOs, and M&A activity. Among their findings:

North American companies dominate. Driven by technology entrepreneurship and a favorable investment environment, North American companies cornered 87 percent, or $2.2 billion, of the total venture capital funding for the BBMC sector over the past three years.

Fermentation leads technologies. Among technologies, fermentation took home the largest share of investment, with companies in this space pulling in nearly $3 billion total since 2000, hitting a peak of $475.6 million in 2011.

M&A is on the rise. Subpar performances from companies such as Gevo and Amyris have dampened the public markets' enthusiasm for the space.  As a result, many start-ups have scrapped IPO plans and sought other exits – witness Stora Enso’s acquisition of Virdia, Renewable Energy Group’s purchase of LS9 and Trellis Earth’s cheap acquisition of Cereplast.

The report, titled “Dynamics of Venture Capital Funding in the Bio-based Chemicals Industry,” is part of the Lux Research Bio-based Materials and Chemicals Intelligence service.