The Fundamental Things Apply: The Rise of Checkerspot and Supermaterials

April 30, 2019

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by Jim Lane (Biofuels Digest) Recently from California comes the news that advanced materials wunderkind Checkerspot has closed its Series A financing for $13 million.

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...(A)dvanced materials are perhaps the first breakout anyone will really notice. Because materials are stuff and stuff never passes you without notice in the manner of the data slipstream. So far, Checkerspot’s been active in two classes of materials: polyurethanes and textile finishes, each of which is derived from novel triglycerides (oils) from microalgae. If polyurethane sounds a bit too much like science class, think varnish, paint, adhesives, foams.

If textile finishes sounds a little vague, think how a breathable waterproof fabric can draw moisture away from the body. Wet cotton hangs onto you, making your t-shirt heavy and clammy and — well, think of wet t-shirt contests. Now, think of technical polyesters that pick up the moisture and lift it from your body and transfer the moisture towards the outside of the fabric, bringing the water to the surface where it can evaporate, and keep you cool and dry. That’s called a wicking fabric, and that’s got real value, not by the pound of product but by the peal of performance.

Checkerspot has just such a development partnership underway with Beyond Surface Technologies. But let’s think beyond wicking fabrics. Mattresses, foam insulation for the fridge or freezer, car seats, spandex, adhesives, and shoe soles with performance characteristics you’d know from rubber.

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Well, as Checkerspot CEO Charlie Dimmler told the Digest:

“It supports the infrastructure plan, adds a little headcount but not wildly significant’, and supports commercial development. For example, the partnership with wicking moisture management, we continue to lean into that. We will be bringing our first consumer product this year. And the investment is helpful for that and for the business development side. Bottom line, what it delivers is driving revenue as measured by product sales and more JDAs.”

Checkerspot’s development path and the Laws of Bioeconomy General Relativity

Last year, Checkerspot and DIC Corporation announced a Joint Development Agreement to create a new class of novel, high performance polyols. And, if you’re wondering “what’s a polyol”, exactly. For one, it’s a building block to make a polyurethane. But also think of oil-based coatings that you might add on top of surfaces. Those are from a class of alkyds derived historically from plant oils and the triglycerides thereof, which can be of course developed via microalgae.

Specifically, think outdoor recreation, composite materials that have a high strength to weight ratio, good for lightweighting, and for damping, energy absorbing.

Why these? Bottom line, speed to market. It’s an embodiment that enables a Checkerspot to get commercial quickly. These triglyceride-based materials will have performance attributes that apply transformatively in other markets. We mentioned car seats above, so think “automotive”. But that’s a more complex supply chain, that takes time. And which brings us to:

The First Law of Bioeconomy General Relativity

The nearer you get to supermassive Corporate Partner objects that create their own internal and crushing gravity, the more time slows down relative to Venture Speed. In other words, what seems to be the blink of an eye for a giant multi-national is a venture-crushing delay for a start-up.

And this brings us to:

The Second Law of Bioeconomy General Relativity

Small Venture Objects that come too close to supermassive Corporate Partner Objects get sucked past the Partnership and Financing Event Horizon and get crushed by the gravity of the Corporate Partner Objects. But Venture Objects that arrive at the proper distance from the Corporate Partner Object enter into a symbiotic and mutually beneficial orbit.

So, in the case of Checkerspot and DIC — or others in the future — be mindful that Checkerspot is not a service company but a product company, but will not be a capex-raising, steel-in-the-ground entity we might have seen in the past — and more on that model in a moment. Checkerspot might have a contract manufacturer in the mix or could be licensing the technology to 3rd parties or the joint development partner to manufacture. But what will be important in a partner is not technology — Checkerspot will lead that — or manufacturing, that can be obtained elsewhere. What will matter is application development and the sales and marketing heft to get a product across. So, when a company like DIC expresses an interest in a new polyol and is interested in the commercial rights more than a “we made it here” stamp, that’s the Checkerspot moment. Or, the Checker Spot, if you will.

You Must Remember This: a turning point in industrial biotechnology

One day, we may look back for a turning point in the rise of industrial biotechnology and decide that it was the development of Algenist, the algae-based beauty products unit of the old Solazyme.

Up to the point of Algenist’s development in the early 2010s, industrial biotechnology companies were being formed left and right, as they are today, but they were generally about producing bulk materials for the supply chain, most tried to develop for one market, and most aimed as soon as possible to put steel in the ground and build a first commercial facility. It was proof of concept, pilot, demo, commercial, and then the venture aimed to sell as much of that bulk commodity into the market as possible, to as many refiners and formulators, at the highest price the market would bear.

That was the story of the technologies making renewable fuels, and later renewable chemicals, more or less. When the DOE published its list of hot renewable chemical prospects for the years ahead, every single one was a bulk commodity chemical, often organic acids, that would be made that way. It was the era of renewable ingredients, if you will, and the measure of success was more or less the enthusiasm of offtakers, the force of carbon policy in the absence of that, and above all the pursuit of a drop-in replacement for bulk commodities at a competitive price.

Which of course took the entire 130 year history of petroleum-based refining and sort of tossed it to the side, as if the decades of pursuing scale and perfecting and optimizing the yields could be duplicated in fermenters in a wave of overnight success. Not to mention the cheapness of petroleum feedstocks, which generally if they cost in the $70 per barrel range is a reflection not so much of the recovery cost but the value of these hydrocarbons.

You can sell an awful lot of hydrocarbons at $15 a barrel and still make a profit, and that has been the Achilles heel, always, of industrial biotechnology. So, the purveyors of low-carbon technologies have been intensely dependent on carbon prices — expressed in the various forms of mandates, standards, tariffs, tax credits, incentives, and so forth. The makers of fuels assembled a coalition which erected the supportive scaffolding upon which renewables have flourished, in the name of energy independence, rural revival and combating climate change.

But there wasn’t much carbon help erected for renewable chemicals and materials — despite the higher prices for those bulk commodities sold into the supply chain.

They’ve been condemned to jump out of the frying pan of low oil prices into the fire of formulator indifference to all the wonderful things that might be achieved in the lower echelons of the back label. When companies see less carbon, less greenhouse gas, less rural displacement, and less money, all they are generally structured to do something about is the money, which is to say the avoiding of the making less of it.

Which is to say, no matter what kind of a premium you might pay for a Starbucks grande latte, the buyers at Starbucks pay no more than anyone else for the coffee beans, and probably pay less.

It is the Law of Ingredients: no one pays more for anything described on back of the label, they pay more for what’s described on the front of the label.

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So far, we have learned that the model that appears to work best is the separation of distribution and manufacturing. Companies that license technologies (even if they finance and assist in the development) and aim to use their distribution networks to get the product out — why, it was the very approach that Solazyme used with its partners Sephora and QVC.

It would have been crazy for QVC to development alguronic oil-based skin care, even Sephora shouldn’t be in that business, And crazy for Solazyme to build out a global distribution. Finding the most efficient route to market and cutting out a s many middle partners is what matters. Not just because of value capture — though investors like to hear about capturing more of the product value. It is more about speed to market, and about getting to that front label. READ MORE

CHECKERSPOT RAISES $13M TO PRODUCE ADVANCED MATERIALS FROM ALGAE (Algae Biomass Organization)