TechStory: ZeaKal’s Series B points the new way of accelerating biotech companies to infinty and beyond

February 17, 2016 |

BD-TS-021516-smAs ZeaKal Closes $5.3 Million Series B, a new model emerges based on a deeper form of the private-public partnership.

Woody: All right, that’s enough! Look, we’re all very impressed with Andy’s new toy.
Buzz: Toy?
Woody: T-O-Y, Toy!
Buzz: Excuse me, I think the word you’re searching for is “Space Ranger”.
Woody: The word I’m searching for I can’t say because there’s preschool toys present.

In California, ZeaKal announced a $5.3 million Series B financing round – bringing total funding to date up to $9.1 million. In conjunction with the financing, ZeaKal also acquired Algenetix, an industrial biotechnology company developing renewable materials and energies from plant-based sources.

But in another way, it’s not just a technology venture capital story. It’s Toy Story all over again. You remember Woody’s struggle to avoid being tossed onto the shelf when Buzz Lightyear arrives.

So it is with biotechnology. It takes years, and zillions of dollars, to raise up a technology from its bench-scale lab roots. In too many cases, by the time the technology is ready, the market has moved on. Or, development time and money is directed towards solutions in search of a problem.

I mean, look at algae investment. The summer of algae in 2009 was all about breaking through on agricultural yield to make cost-competitive renewable fuels. Hundreds of millions of public and private dollars have gone into the chase. One by one, forced by time frames and investment return pressure, companies have repositioned into the nutritional supplement, protein and health & beauty sectors. Not because algae doesn’t grow faster than biomass used more conventionally for renewable fuels. Generally, because the investment model simply doesn’t support these long-term efforts, and the toys start to fear they will be castigated to the shelf. So the solutions start chasing a problem to solve.

Therefore, it’s big news when a technology promising a breakthrough in photosynthetic yields — with applications, as it happens, for both terrestrial nd aquatic species, not only appears, but gets an oversubscribed Series B.

Is it deja vu all over again? A foolish chase for targets that will never find a commercial application? In this case, we see a shift in the commercial approach. ZeaKal is not only about technology, but about  a new course for biotech startups, based in a capital-light, public-private partnership business model.

The idea is to get Woody to market before Buzz Lightyear comes along.

To Series B, and beyond

Mr. Potato Head: Oh, really? I’m from Playskool.
Rex: And I’m from Mattel. Well, I’m not really from Mattel, I’m actually from a smaller company that was purchased by Mattel in a leveraged buyout.

The oversubscribed round was led by Finistere Ventures with participation by Middleland Capital and several leading family office investors. With this funding, ZeaKal will expand its PhotoSeed product development pipeline and bring its lead soybean product into field trials this May.

ZeaKal and Algenetix were incubated out of Finistere a few years back, through its Kapyon Ventures unit. The science behind PhotoSeed was first conceived in collaboration with research funded by the New Zealand government. As the science matured, ZeaKal migrated the program to the University of Missouri to further augment its access to world-class talent, research infrastructure and expertise.

So, ZeaKal is a hybrid. Not exactly a spin-out of university research, licensed and incubated out of a venture capital firm. In this case, venture capital is reaching into academia and helping to steer research towards solutions that will become commercial companies. Taking money that is already being expended in the public sector and ensuring that the market has a hand in steering development, and that technologies will not only solve real-world needs but do so in a commercially viable way.

As an alternative to good solutions that solve real-world needs but not in commercially viable ways, — and end up as beloved but forgotten toys on the shelf.

“Investments in agriculture biotechnology have been limited largely by investor misconceptions that it takes hundreds of millions of dollars to build a successful company,” added Chen. “While this may have been true 15 or 20 years ago, the rapidly dropping cost of computing and biotech tools has created a new paradigm for innovation—and, therefore, investments. Biotech is experiencing the same trends that software did, and these trends will carry over to agriculture.”

ZeaKal’s PhotoSeed technology is an example of next-generation biology that can address pressing challenges posed by population increase. Rather than focus on pest and weed management that often require more chemicals to improve yield, the technology increases plants’ intrinsic photosynthetic capacity. PhotoSeed plants can harvest more sunlight, fix more carbon dioxide and do so with less water. For farmers, this means better seed and grain yield with forecasted yield improvements by as much as 20 percent.

More about ZeaKal and its technology

Plants are notoriously inefficient at converting sunlight into biomass with levels between two to three percent. Making matters worse, under hostile environmental conditions (especially higher temperatures), plants work much harder and yield much less. Improving resource management is the first step, but ZeaKal’s founders are adamant that the world needs better biology to cope with increasingly severe environmental pressures.

“The need for innovation in the farming and food sector is important not only for farmers and consumers, but also for AgTech itself,” noted Arama Kukutai, Partner at Finistere Ventures. “The current consolidation among the big AgTech companies and low farm commodity price trends are cyclical. When these conditions change, there will be strong demand for new technologies to fill that innovation void. We back game-changing companies that deliver value from farm to the consumer in a sustainable manner and think ZeaKal is a revolutionary technology play in plant sciences.”

“As the world population increases to more than nine billion people by 2050, we need to develop the next generation of crops that can cope with the food supply demands,” added Dr. Henry Nguyen, Curators’ Professor of Genetics, National Center for Soybean Biotechnology at the University of Missouri.” “Both conventional breeding techniques and biotechnology will be needed to increase the genetic gain in yield and improved drought tolerance in response to climate change. However, this is an extremely complicated area of research that has yet to make significant breakthroughs commercially.  ZeaKal’s impressive out-of-the-box technology approach to increasing photosynthetic efficiency and carbon fixation addresses the shortcomings of previous science strategies.”

“We need to rethink the way we feed and fuel the world. The problems of population growth, increasing climatic volatility and dwindling natural resources are not going away, and farmers around the globe will need new tool sets,” added Han Chen, CEO of ZeaKal. “As daunting as these problems are, technology can be equally powerful in solving them. Startups such as ZeaKal are leading the next innovation wave. Our mission is not just agricultural productivity for this year. We aim to build a photosynthetic future to sustainably feed the world for generations to come.”

Additions to the board and management team

Arama Kukutai, Managing Director of Finistere Ventures, Scott Horner, Managing Director of Middleland Capital, and Bryan Wilson, former President of United Agri Products will be joining the ZeaKal Board. Dr. Amy Curran will also be joining the company as the new Chief Operating Officer.

Finistere Ventures, is a leading California-based agricultural technology and life sciences venture capital investor, with offices in Palo Alto and San Diego. Middleland Capital is a private investment firm focused on global early stage opportunities in agricultural technologies.

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