The Carbon Fix? Think Carbon Suit. ZeaKal raises $3.8M in Series A financing

April 1, 2013 |

ironmanCrop yield and oil content increases of up to 50% and 34% seen from ZeaKal’s HME technology.

Though in early days — what’s going on?

Last week, ZeaKal announced that it had raised $3.8 million in its Series A financing. A successful Series A is always a good indication that, while it is early days for a technology, there is a good idea being worked on that has acquired some level of validation in the lab.

In ZeaKal’s case, even more so — because it comes out of the Kapyon portfolio of companies, based in San Diego, a venture firm with an interesting idea of how to leverage research coming out of universities and government research institutes. A Series A, then, that in some ways acts like a Series B or C and is indicative of a technology much closer to the market.

We’ll look at that financing model in more detail in a moment. For now — what’s ZeaKal up to?

ZeaKal is focused on plant science — specifically focused on raising the production of biomass in specific crop targets including soybeans and rice. It’s HME technology has shown crop yield and oil content increases of up to 50% and 34%, respectively. Interestingly, this is a technology that is focused on increasing the efficiency of how oilseed plants, for example, handle their current levels of inputs rather than increasing input levels.

“Several years ago, in biofuels, almost everyone was looking at ethanol,” recalls ZeaKal’s executive chairman Jerry Caulder — familiar to Digest readers as the chairman of SG Biofuels, the jatropha developer.

The photosynthetic problem

“There was a lot of discussion on how we convert to a carbohydrate economy from a fossil fuel economy. Myself, I thought that using corn was not sustainable. There were a finite number of acres, and there were some problems with ethanol — for example the way it absorbs water and so on. On the biodiesel and oil side, I didn’t see those problems.

“But some of us thought we should look green plants convert carbon, look at the inefficiencies. Of the 350,000 or so species out there, almost all of them are only 1-2 percent efficient in photosynthesis. At the top of the pile you have something like sugarcane at 5 percent.”

It was the biochemist Dr. Ganesh Kishore, now the CEO of the Malaysian Life Sciences Capital Fund and formerly Chief Biotechnology Officer at Dupont and Monsanto, who raised the issue at the 2010 Burrill & Company Limited Partners meeting. He said that biofuels research, while impressive and laudable, is overly focused on midstream processing technologies and not on the key factor: the appallingly low rate at which plants convert sunlight to energy.

For example, corn checks in with a 1-2 percent efficiency rate. Raise photosynthetic efficiencies to 10-12 percent, said Kishore: that’s the opportunity. With such a fix, so many of the concerns about biofuels – cost parity, food vs fuel, the cost of transporting biomass – begin to melt away.

Caulder agrees. “If you can increase biomass without input – more efficient in using sunlight, take them from 1-2 to 3-4 percent — that’s double the production, and you are still at bottom of the curve.”

ZeaKal is accessing two families of IP developed within Kapyon and its ecosystem of research activities — increasing both yield and oil content. And addressing some of the issues we highlighted in “To fix carbon, food, energy: fix RuBisCO (the mother of all biofuels challenges).”

What’s the problem ZeaKal is attacking?

For one, that plants don’t understand plain English and can’t reengineer themselves the way that computers can have software or firmware upgrades.

If that were possible, you could sit down and explain to soybeans that the hot and dry conditions they have been experiencing lately (for example, the murderous 2012 US drought) may well be related, in some significant way, to the build-up of carbon dioxide in the atmosphere and the weather destabilizing impact of the greenhouse effect.

Therefore — when it gets hot and dry, why not grab as much CO2 as you can out of the sky. Helps you — the plant — grow biomass. Helps us — the human race — address the pesky carbon problem and stabilize the increasingly erratic weather. Help me help you, as Jerry Macguire would say. Right?

Well, wrong. Turns out that more than 99% of plants, in sufficient conditions of heat and aridity, close down their little stomata pores — the portal for carbon to enter — to limit water loss. And, they stop fixing atmospheric carbon dioxide altogether and start fixing oxygen. The little devils.

As CEO Han Chen explains, “In the leaves of C3 plants, the key enzyme responsible for photosynthetic carbon assimilation, Rubisco (Ribulose biphosphate carboxlase), is exposed to both molecular oxygen and carbon dioxide. Under ambient conditions, approximately one quarter of Rubisco enzymatic reactions fix oxygen instead of carbon dioxide to form phosphoglycolate. Under higher temperatures and/or water stress, the proportion of oxygen fixing cycles is considerably higher. Furthermore, the recycling of phosphoglycolate is energy intensive and leads to a net loss of fixed carbon and nitrogen.

“However when a C3 plant is engineered with the HME technology, ZeaKal is able to increase the level of carbon dioxide within the chloroplast resulting in a stable elevation of CO2fixation cycles.”

Consequently, the plant end up short on carbon, and having excess oxygen that has to be processed out. For that and other reasons, plants don’t grow fast in what they regard as stressful conditions — could even be in the midday summer sun. Unhelpful, all around.

The Carbon Suit

ZeaKal has what just about anyone would regard as a fairly novel solution to that problem. They have found a means to increase the plant’s ability to store oil — and, ultimately, carbon — during normal production cycles — in a way that becomes accessible to the plant in the form of extra CO2.

Currently, plants know a lot about how to sequester carbon by making oil, but that oil is safely encapsulated in the oilseed, which the plant regards as permanent rather than temporary carbon storage. It never steals carbon back from the seed.

In other words, carbon needs a new suit — a technology to safely encapsulate oil (and thereby carbon) carbon in no-traditional parts of the plant and permit it to accumulate. Like Ironman, the path to power may well be in the suit.

In this case, the company has developed a means of storing oil in other parts of the plant — by developing a means of encapsulating the oil. It hopes over the next two years, for example, to demonstrate that it can express genes in soybeans to get a stable accumulation of oil within the leaf as well as the seed.

So, you avoid the problem that other pathways run in to, if they focus on increasing oil production at the expense of other items, such as protein. Protein is money, too — it can cost a farmer by reducing protein quality and hence the marginal value of the plant.

C4 productivity from a C3 plant

“ZeaKal’s proven HME platform achieves this effect from a different approach,” says Chen, “and will allow C3 plants to emulate C4 productivity and it is expected that the HME lines will also see similar improvements in water and nutrient utilization as well.

In this case, the ratios of the various elements are preserved — through attacking photosynthetic efficiency, there’s just more biomass.

The investor group

In this case the investment was led by Finistere Ventures, Two Oceans and the Missouri Soybean Merchandising Council (MSMC), and supported by ZeaKal’s Executive Chairman, Dr. Jerry Caulder.

The deployment model

Ultimately the goal is a licensable technology that can be used by seed companies such as Monstano and DuPont. Interestingly, there are some early stage discussions with companies like SGB that are focused on developing energy crops such as jatropha. It could well expand to other oil seed crops such as canola, palm, camelina or carinata.

With the Missouri Soybean Merchandising Council in the investment mix — and the large market that soybeans represent — expect this phase of activity to focus in on soy.

“The ZeaKal technology has proven to be extremely effective in increasing yields in other crops,” says Dale Ludwig, CEO, Missouri Soybean Merchandising Council, “Their technology can revolutionize the future of soybean yields and deserves the support of the investment community and industry.” MSMC is a farmer-run organization dedicated to improving the profitability of the Missouri soybean farmer through a combination of marketing, research and commercialization programs.

The Kapyon model

One of the fascinating aspects of the technology is the nature of Kapyon itself – which currently has three companies in the portfolio — ZeaKal, Phytagro and Algenetix. All focused on increasing basic productivity — all are biotechnology ventures formed in close association with research universities and government labs.

“Technologies have no borders,” explains ZeaKal CEO Han Chen, “and you can build broad platforms applications beyond one plant, and you can leverage government research institutes that invest significantly, but have the lack of an ability to commercialize. It’s not really about resources. It’s about building an ecosystem. Similar in some way to the Garage Ventures model, when the cost of computing went down.

“Biotechnology is going the same way. But how can we partner with institutions so we can direct their spending and create new joint ventures that deliver well-validated technologies. If we do so, we can make companies faster, with non-dilutive financing — where we are not paying for so much of the discovery.”

Kapyon Ventures is a San Diego based incubation firm focused on the development of technology startups from global research institutes. Kapyon’s areas of focus include agricultural biotechnology, industrial biotechnology and cleantech. It works closely with U.S. and international research partners as managers for an investment portfolio of several biotechnology joint ventures. More about Kapyon and ZeaKal here.

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