Navigating the Valley of Death

The Unique Challenges Scaling Biomaterials… and the Pathway to Success. 

The Unique Challenges facing Biomaterials Businesses as they Scale 

Michael Saltzberg is a distinguished industry expert and leader in the biomaterials sector, having served as the CEO of Covation Biomaterials after a long career with DuPont. With a seasoned career in leadership, he has made significant contributions to advancing sustainable technologies and innovations. He now uses his deep industry experience and knowledge as a sector consultant. 

Mike is also on the Green Executive Advisory Board. 

Here Clare Nasir interviews Mike about the challenges faced. by Biomaterials organisations as they scale — and to traverse what is known as the “Valley of Death”. 

Why are biomaterials unique within the broader industry? 

Sustainability and decarbonisation are making important progress across industry in general. Great strides have been made globally in transitioning to clean energy and greener practices. 

Biomaterials play an important role in replacing fossil fuels — particularly oil — in our global economy. To give some perspective — although most of the volume of a barrel of oil will provide fuel for transportation, a proporation goes into materials, which provide a significant share of the profits to petrochemical companies. Moving to a decarbonised society requires viable solutions to replace fossil feedstocks in both fuels and materials. 

Talented entrepreneurs and innovators are providing effective bio-solutions to reducing global oil usage, why do so many not pass beyond the pilot level? 

Firstly, it’s an incredibly challenging task to come up against a large incumbent industry and replace petro-based materials, that are already at scale, with new biomaterials. The petroleum-based materials industry has been around for a long time and theirs chains are fully optimised. 

There is more to it — an important aspect that makes biomaterials unique. It’s not enough to invent a clever process that turns a renewable raw material, like biomass or sugar, into a chemical. That’s only the first step because, unlike fuels, materials feed into a large and extended value chain to convert those materials into useful consumer products. 

Many different people and organisations downstream of the materials manufacturer have to see profits by working together to convert and adopt that new material. 

That’s a huge challenge. 

On numerous occasions, I have witnessed talented folks building a company and focusing solely on their conversion technology, transforming a raw material into a useful product. Very often they don’t take into account how difficult it is to apply that material to downstream markets. 

Across Biomaterials — identifying strong value propositions for potential applications of your product is everything. 

This is different to, say, the clean energy sector, where once you qualify for a fuel standard, your product can drop into a large existing market. Not saying it doesn’t happen in biomaterials –for example when introducing a biobased version of a large commodity material such as polyethylene, large markets can be accessed in a straightforward manner. But that’s not always the case.

Are brands and consumers interested in adopting biomaterial applications? 

There’s a huge interest in sustainable solutions across the globe, from the food industry to textiles. Biomaterials have a fantastic value proposition; they help solve the decarbonisation problem. 

The biggest issue holding this sector back is that brands typically have not been able to pass the extra cost of implementing new biomaterials on to consumers, or at least they think they can’t pass the extra cost on to consumers. 

If you’re accustomed to using a petro-based polymer or chemical at a very large scale, where it’s positioned low on the price volume curve and is very cost-effective, introducing a new product that currently costs more can be challenging. You need to justify the higher cost or it will reduce your profits. 

This has been the biggest issue, compounded by geopolitical factors. In regions where biomaterials operate, the cost of petro-based materials has been driven down further by developments in China. With effectively zero cost of capital, Chinese manufacturers have increased manufacturing capacity for many chemicals and polymers well beyond what is required for market demand, artificially reducing prices below profitable levels for other companies. 

Another issue is effectively communicating the benefits of biomaterials to consumers. Globally, there’s so much information directed at consumers now that it’s hard sometimes to cut through the noise to make a resounding case on why biobased products are better than petro-based equivalents. 

Is there tangible growth across Biomaterials? 

It is growing, but not as fast as everybody wants it to. 

I’ve been in the industry since 2006. Like many, I would like to see the scale rise much faster. It is coming, but mostly still in niches. Success is happening in areas where customers are willing to pay a little bit extra to make a more environmentally friendly choice. 

For example, PLA is a biodegradable plastic used in packaging or other applications. It’s more expensive than the cheaper polyolefins that it replaces, but it provides a benefit that many are willing to pay for and that some governments are beginning to legislate as a requirement. We are seeing some growth there. 

However, petro-based manufacturers are often supported by government subsidies because energy is viewed as a national security concern. Importantly right now petro-based materials also create a huge amount of external costs to the environment not recognised in their cost structure. As there’s no penalty on externalities caused by petro-based materials- it’s going to be very tough for biomaterials to compete due to their smaller scale and, thus higher costs. 

Are some parts of the world making good progress? 

The best markets for biomaterials are those with strong environmental regulations, high consumer awareness of sustainability and significant investment in green technologies. 

Europe is a leader in adopting sustainable practices, with stringent regulations and incentives for green technologies coming onstream. Countries like Germany, the Netherlands and the Nordic countries are particularly strong markets. 

The U.S. and Canada have growing markets for biomaterials, driven by increasing consumer demand for sustainable products and significant investment in research and development. 

Also, countries such as Japan and South Korea are investing heavily in biomaterials — helped by strong government support. 

Yet more support is needed, and many organisations still face what is sometimes called the Valley of Death. 

The Valley of Death is a critical phase for biomaterial startups, where many fail despite having promising technology. Initially, these companies operate with minimal costs, focusing on transforming renewable raw materials into useful chemicals or materials. However, as they approach the scaling stage, the investment required to scale and drive the adoption of applications surges, leading to significant cash burn. 

Unlike medical biotech, where success in trials can lead to immediate financial rewards, biomaterials companies face a prolonged struggle. After demonstrating their process and scaling up they must gain acceptance from the extended value chain, all the while continuing to spend money. 

This makes the Valley of Death particularly challenging for biomaterials, as they need to reach a scale that instils confidence in customers. The unique aspects of the materials business, compared to pharmaceuticals or energy, make this phase longer and deeper. 

The journey is fraught with risks and uncertainties. This is a significant reason for the slower adoption of biomaterials products and tools. 

Explain ways that businesses can survive this… 

There can be real naivete, embedded within some young businesses about what scaling really means. This is when hiring experience matters. 

Many biomaterial companies fail because they don’t have the right people in place as they grow. While they may have fantastic scientists to develop the process, at the time of scaling the hiring of experts across scale-up, operations and application development along with skilled business development professionals, are so critical. These roles are crucial for simultaneously getting to an economic scale and working with the entire value chain to build partnerships with converters and brands. 

Companies often underestimate the time and capital required to scale up and manufacture their material at a reasonable volume. This miscalculation can lead to significant financial strain and delays in market adoption. Bringing in experienced professionals, who sharpen pencils and do the math early on, will provide realistic cost and investment estimates and address the typical issues that arise during scaling. 

An underlying sense of realism should also be threaded through the leadership mindset. Many companies overestimate the market’s willingness to pay a premium for sustainable products. While sustainability is important, the higher costs associated with biomaterials can be a barrier.  

Companies need to have a very clear view of their value proposition to all the members of the supply chain and consumers that is validated through repeated testing. They also need to ensure that the product’s benefits are clearly communicated and justified. 

There are many unknowns, the process can be brutal, but success can be sweet with the right team and partnerships. 

How to scale successfully? 

Firstly and most obviously — making sure the technology works and so secondly, ensuring it can be made at volume at reasonable cost and investment. Thirdly and a very important aspect is to have at least one large application (a “killer app”) lined up before the plant is built. 

A big focus for many biomaterials companies is on volume offtake agreements. I think that’s absolutely critical. 

The DuPont Example 

At DuPont, we developed a fermentation process that produced a chemical called 1,3-propanediol (Bio-PDO ™), which can be used to make a polymer called Sorona®. Before building a large-scale manufacturing plant for Sorona®, we partnered with Mohawk Industries, the world’s leading flooring company. 

By integrating Sorona® polymer into their carpet fibre technology, Mohawk was able to qualify the polymer over 3 to 4 years using prototype Sorona® material produced using PDO made with a traditional petrochemical process. When our BioPDO™ plant started operations in 2006, we had already secured 40 to 50% of the plant’s planned output volume with Mohawk and were able to swap in the biobased product seamlessly. This collaboration resulted in the successful launch of SmartStrand®, a revolutionary carpet fibre technology made with Sorona® derived from Bio-PDO™. 

A key aspect of our success was conducting application work with customers and securing committed offtake agreements before building the plant. This parallel approach ensured we had a market ready when the plant came online. 

Being part of DuPont provided us with significant expertise in both petro-based and biomaterials processes which helped immensely in this critical application development work. 

Entrepreneurs may not always have this advantage, but they can achieve similar success through strategic partnerships. It’s crucial to have people in your organisation who can build these partnerships, whether with co-suppliers or downstream customers, to develop the necessary volume for your product. 

Is there a product or application that could rise exponentially and change lives? 

One of the most promising areas right now is a replacement of petro-based single-use plastics, primarily used for packaging. While recycling has been touted as a solution for plastic waste, scepticism is growing about its effectiveness. Some countries, like Japan, manage plastic pollution through incineration, but globally, recycling isn’t solving the problem. If the world decides to tackle plastic pollution seriously, especially in the single-use sector, legislation could drive the adoption of bio-based and biodegradable materials, leading to significant growth in this field. 

Successfully navigating the Valley of Death: What qualities do you look for in a Biomaterials leadership team? 

Firstly market understanding; leaders must have a deep understanding of the materials markets and focus on customer needs/values and market trends, not just technology. 

Secondly, techno-economic expertise. A solid grasp of techno-economics is crucial. Leaders need to understand the technical and economic aspects of manufacturing, including costs, investments and potential technical barriers. 

Thirdly, resilience and adaptability. Given the unique challenges in the biomaterials sector, leaders must have a strong, positive mindset and the ability to adapt and stay resilient in the face of adversity. There are many cases where the first application envisioned for a new material was not accepted by the market, but another previously unforeseen application was identified that could drive the volume for that material. 

Michael Saltzberg highlights the importance of leadership in scaling business 

Our thanks to Michael Saltzberg for his insights and industry expertise. 

https://www.linkedin.com/in/michael-saltzberg-ab40692/  

Mike Saltzberg spent more than 36 years in leadership positions in the biomaterials and specialty chemicals industries, mainly with DuPont and later as CEO of Covation Biomaterials, which formed as a spinout of DuPont Biomaterials. He now heads his own consulting firm, MA Saltzberg Consulting, with a focus on helping companies and investors in the sustainable materials industry to succeed. 

He holds a Ph.D. in Materials Science & Engineering from the University of Pennsylvania and a B.A. with Honors in Chemistry from Oberlin College. After completing his Ph.D. at Penn, he joined DuPont’s Central Research group.  

Over the next 34 years he held increasingly responsible positions in R&D, Sales & Marketing, and General Management across a diverse group of DuPont businesses, including Electronic Materials, Corian®/Surfaces, Titanium Technologies and, from 2006 onwards, as head of DuPont’s world-leading Biomaterials business.  

When DuPont sold its Biomaterials business to the Huafon Group in 2022, as CEO he led the spinout and set it up as an independent wholly-owned subsidiary headquartered in the US. He retired from CovationBio in March 2024. 

At CovationBio, Mike was responsible for the ~$250M Sorona® polymer and Bio-PDO™ (Susterra® and Zemea®) global businesses, with manufacturing plants in the United States and China and sales/R&D personnel in 15 countries, including a strong presence in China.  

In his career, he has also led a number of programs from the research phase through to commercialisation. Some examples include Zodiaq® quartz surfacing, Designed Enzymatic Biomaterials (launched by IFF), and FDME monomer/PEF polymer. Over the years, Mike has had the opportunity to sit on Boards in the USA, Japan, China, and Chile for companies manufacturing a wide variety of products.