RIP Cobalt Technologies or…How Commercializing Butanol Technology is Like Riding the Tour de France

June 24, 2015 |

cobalt-tombstoneBy Sam Nejame & James Evangelow, special to The Digest

Sad to say Cobalt Technologies is dead – no really they’re dead – it’s not just double secret probation anymore. Although you’d almost not even know it given how quiet the company’s been over the last few years. And after the venture guys cleared out the Rick Wilson administration circa 2012 things got pretty quiet. Add a name change – goodbye Cobalt Biofuels, hello Cobalt Technologies and a pivot away from core biofilm technology and you have what might be called teen company identity crisis. A Series E placement without an exit in sight and a few high profile sector meltdowns (thank you KIOR) sealed the deal.

Now, with the Mountain View HQ closed, team dispersed and pots, pans, IP and strain library in the auction process, Cobalt is absolutely, officially, financially, technologically over. If they owe you money you have until October 15, 2015 to get in touch with the disposition guys.

Certainly, we’ve seen this movie before. Should we just pile it onto the premature demise of Tetra Vitae (assets sitting comfortably on the shelf at Eastman) and Cathay’s squelched public offering (who was that masked microbe?); or METabolic EXplorer’s denouement… And what about the others that started elsewhere and were eventually going to get around to butanol, hullo Coskata and ZeaChem? Some growing pains there for sure. Sounds grim, but don’t despair, O Pioneers!

With a one hundred year history of successful ABE fermentation, stretching from WWI, this was suppose to be easy. We really do know how to make n-butanol, but as with so much else in the bio-based world, competing on price with petroleum has been anything but. Synthetic biology and pathway engineering be damned. So, what do we take away from Cobalt’s demise? What does it mean for the rest of us still climbing the mountain?

Well, for one, there was clearly a lot of good work done getting clostridium to grow on C5/C6 sugars… and the company definitely built a formidable library of product tolerant non-GMO organisms. And we know fixed bed reactors get you high productivity numbers and lower CAPX, but we’ve also learned the siren song of distressed ethanol plants is hard to resist and what already exists in receivership is even cheaper to retrofit. So, Cobalt pivoted from biofilm and started to look more like its competitors. The company also went into hiding. Press releases ceased. Calls went unanswered. Consultants went un-consulted. The buzz died. Pardon the understatement, but in this environment it’s hard to raise money when people have forgotten about you.

If Cobalt had a baseball card what would it say on the back?

Let’s consult the executive summary for the ongoing liquidation…

• More than $90MM invested (Series E at least)
• Normal butanol production cost <$700/mt (pretty cheap)
• Proprietary biomass to sugar technology <$220/mt (i.e.10 cent sugars!)
• Library of 240 strains, covering 8 species
• Patented strain improvement methods (perhaps the most valuable Cobalt technology?)

And what doesn’t the executive summary say?

There are a whole lotta questions that don’t get answered without an NDA…

Such as what happens to all those relationships and plans to use Cobalt butanol as a platform for jet fuels, plastics, synthetic rubber, etc? What about the patent license agreement with the Navy for biojet and the relationship with the Naval Air Warfare Division at China Lake? What about the strategic butadiene work in Asia? Or the Solvay/GranBio relationships in S. America. Are those up for grabs? The vultures are circling.

Of course, it’s NOT all bad news for n-butanol. There’s plenty going on beyond the Cobalt fade out. The technology and the strains will live on for sure somewhere. As for the straightest arrow from the crossbow… Seems like we’ve seen the steadiest measured progress from scrappy, pull- yourself-up-by-the-bootstraps Green Biologics. Any surprise that they’ve done what they’ve done largely without US based funding (except what went into ButylFuel)? Do I sense more patience from the European venture community at least in some sectors? Let’s just keep fingers crossed and hope that CMEC facility gets up fast and runs like a Tesla in 2016. Announce those off take agreements boys!

And what about Abengoa? They’ve made public their plans to bolt Guerbet technology onto one of their ethanol plants, but have gone strangely silent – on y’er bikes laddies or should I say Ole!

So, where can you get bio-butanol now? The short answer is basically nowhere unless you want to toll produce in China. Longer version… Ever been to an ICIS Procurement meeting, talking to buyers at chemical companies, talking to people looking to source bio-based products… and hear, “Great, we want it, when can we get it?” I have, and given the grand scheme, it’s a wonderful problem… And well, let’s say you just have to smile… a lot.

I believe the winning technologies are out there, but remember this was suppose to be easy. ABE is the oldest industrial fermentation on the planet. We’re talking straight out of the laboratory of Louis Pasteur and the smell of cordite. The craziness of WWI and the modern Middle East owes it much. We’ve done this for a hundred years. So, why don’t we have bio-butanol now?

Other than GBL, where do we see progress?

Maybe with the new kids on the block… Will Celtic Renewables ride away with it on their draff and pot ale powered bike? Should we take little White Dog Labs and their critical fluids separation seriously? Phytonix makes butanol from waste carbon dioxide, waste CO2 is pretty cheap, but where’s the money and land to grow cyanobacter going to come from? And in this increasingly decentralized decision making world, what about Butrolix’ quorum sensing peptides? Seems like pheromones could be very very useful at getting bugs to produce in lock step instead of just when they feel like it. Could be the special sauce that would help a lot of companies.

Speaking of tough slogs and bikes, we’ll end with a bike race/parable.

Bike race first. The Tour de France begins this year on July 4th in Utrecht, Netherlands. That’s right, it doesn’t start in France. And it’s actually not a bike race – it’s twenty-one bike races strung together… Even better, it’s many races within each race. There are sprinter, there are climber and other category accolades. There’s a lot to keep track of. Most likely, this year’s TDF will be won by one of three guys: a Spaniard, an Englishman and an Italian, but there are maybe twenty guys, who could win. That’s because in the TDF every second counts – every flat tire, every mechanical failure, every mountain climb and descent, every sprint to the line counts. They sleep in crummy hotels. Viruses get passed around like cheap wine. And there are crashes, sometimes lots of them and… sometimes people die. It’s a spectacle.

The 2015 version, the 102nd edition, is more than 2000 miles long. Riders will roll by beautiful countryside, but generally won’t enjoy the fields of sunflowers, the ancient castles or glorious chateaux. The leaders will ride protected in a peloton, that looks like a school of fish sheathed in fluorescent nylon, until their last worker is spent. Then they will seize the moment. It’s a long way to go. In the end, the saying goes – it’s not how bad you feel, it’s how bad the other guy feels.

Now for the parable. Imagine you’re building a bio-butanol company. Or maybe you ARE building a bio-butanol company. Right now you hurt.

Now imagine you’re a petrochemical company and you’ve made the wise decision to ride the fracking wave and the flood of unconventional gas. All your crackers have switched to ethane and you are not going back to cracking naptha. You’re now short the propylene you need to make n-butanol and you’re building propylene on demand facilities, lots of them. You’re building them in the United States and China. They cost half a billion dollars each…

Then the Saudis decide they are going to open the spigots and crush oil and take naptha and propylene prices along for the ride. They are going to do this for the next five years, maybe longer.

Remember you’re in a bike race. It’s a long one. Who’s in more pain? Who’s going to win?

Sam Nejame is CEO of Promotum, a management consulting firm focused on technology commercialization. His practice covers the fields of petroleum, bio-based fuels, chemicals and biologics. He can be reached at [email protected]

James Evangelow is President of Chemical Strategies, a consulting firm focused on renewable and petroleum based chemicals and fuels. He is one of the world’s most sought after consultants in the field of synthetic and bio-based ethanol. He can be reached at [email protected]

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