Bio-based materials and chemicals to attract nearly $1 billion investment in 2014: report

Bio-based materials and chemicals (BBMC) are poised to attract nearly US$1 billion in investment in 2014, led notably by later-stage funding rounds, according to a new report.

The estimated US$974 million investment represents a 28 per cent increase from 2013, the report from Boston-based firm Lux Research said, suggesting companies that endured the waves of economic disruption have regained investors’ confidence.

“Over the last two years, funding for bio-based materials and chemicals has shifted decisively toward later-stage rounds, reflecting the growing maturing of the industry and the shift from R&D to production,” said Meraldo Antonio, Lux Research Associate and the lead author of Dynamics of Venture Capital Funding in the Bio-based Chemicals Industry.

“Participation of corporate investors has also increased, suggesting that large multinationals in many industries see bio-based materials as strategically important,” Antonio continued.

Lux Research analysts studied the investment landscape for BBMC, evaluating VC, corporate VC, IPOs, and M&A activity. Among their findings:

North American companies dominate. Driven by technology entrepreneurship and a favorable investment environment, North American companies cornered 87 per cent, or US$2.2 billion, of the total venture capital funding for the BBMC sector over the past three years.

Fermentation leads the way. Among technologies, fermentation took home the largest share of investment, with companies in this space pulling in nearly US$3 billion total since 2000, hitting a peak of US$475.6 million in 2011.

M&A is on the rise. Subpar performances from companies such as Gevo and Amyris have dampened the public markets’ enthusiasm for the space. As a result, many start-ups have scrapped IPO plans and sought other exits – examples include Stora Enso’s acquisition of Virdia, Renewable Energy Group’s purchase of LS9, and Cereplast’s cheap acquisition of Trellis Earth.

The full report, Dynamics of Venture Capital Funding in the Bio-based Chemicals Industry, can be purchased from Lux Research Bio-based Materials and Chemicals Intelligence service.