Biofuels Venture in crisis? Check staff ratio, milestone payments, downtime

December 18, 2012 |

Investors, policy-makers, supply-chain partners, observers – so many stakeholders ask the same question – how do you really know when your favorite biofuels venture is having real trouble as opposed to a non-material slowdown or hiccup.

In industrial biotechnology as in all business, the laws of gravity apply — and profits are the driver and indicator of almost all good things. Customer offtake agreements, healthy margins backed by real-world deals. Good, affordable project financing. All these are the classic signs of health. Claims that exceed the Laws of Thermodynamics, or traffic in theoretical rather than real-world results – well, that’s the opposite side of the coin.

But not every venture is far enough along or transparent enough to offer classic data for analysts or the adventurous private investor.

How do you tell – what are some tell-tale signs that, from the outside, can tip you off that you “got trouble, right here in River CIty.” Let’s look at 12 Signs – 4 through 6 here below.

4. Biology-to-engineering staff ratio.

Another tell tale sign. The ratio should be heavy on biology in early stage, heavy on engineering at later stages. If you see a spike in the wrong direction, that’s a good indication someone has gone unexpectedly back to the drawing board. Especially watch layoffs – if they are heavy on biologists, that a lot better than heavy on engineers — classic sign of trouble is when the engineers are sent home while the biologists stick around.

Also, look at who’s working on what? Any one working on characterizing predators and competitors? In exotic biological systems, you;d better have a team trying to knock your system down as well as a team trying to make it work. Takes offense and defense to win in the Notional Fuels League. Also, how many people are working on extraction.

5. R&D milestone payment flow.

If you have a friend in accounting or are otherwise have access to news about milestone payments, watch them like a hawk. Miss the milestone, miss a payment – can lead to layoffs, or hard choices.

6. Downtime and uptime between batched runs.

Venture going down for 4-6 weeks between batch runs? Classic sign of trouble – although could be a sign of a new system being installed, so double-check on that. 4-6 week downtime between runs can indicate contamination problems, which are complex to address and often involve complete disassembly of systems to sterilize.

One way to tell? Ask your friends at the water department – maybe they’ll tell you. Big negative or positive changes indicate a change in plans or a change in process — rarely a good sign.

Wait! There are more signs. Check them out.

EXTENSION: Biofuels Venture in crisis? Check layoffs, project delays, truck counts

EXTENSION: Biofuels Venture in crisis? Check ordering, design changes, capacity reductions

EXTENSION: Biofuels Venture in crisis? Check samples, suing, extraction technology

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