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Barriers to Commercialisation for Green Chemical Startups


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Introduction:

The transition towards a more sustainable future has sparked a surge in green chemical startups aiming to revolutionise the chemical industry.  These enterprises focus on developing eco-friendly alternatives to traditional chemicals, using renewable resources, and minimising environmental impact. However, the journey from innovation to commercialisation is fraught with challenges.  

We recently caught up with Richard Lock, COO and Managing Director of Holiferm to chat about the key barriers to commercialisation for green chemical startups.  Holiferm was founded in 2018, with a mission to develop processes to manufacture sustainable biosurfactant products for use at commercial scale.  Holiferm has had its fair share of challenges over the last 6 years but is now manufacturing at scale at its kiloton-scale commercial plant in the North West of the UK.     

This article delves into the key barriers to commercialisation for green chemical startups, supported by examples and commentary from Holiferm, and discusses potential strategies to overcome these hurdles. 

 

Barriers to Commercialisation: 

Financing and Investment
Securing adequate financing is a perennial challenge for startups. The high costs associated with research, development, and scaling up often deter investors who are risk-averse.   For young companies in the chemical sector with novel technologies and the requirement to build bespoke manufacturing facilities, the challenge is much greater. 

Holiferm has found that raising investment has been an on-going activity, with the level of difficulty increasing over time.  Seed and early-stage investment & funding was comparatively easy (in hindsight)  with investment coming from ICOS Capital in 2019, which included building the pilot facility and UK government grants (BBSRC & Innovate UK).  However, when it came to raising investment for the manufacturing plant, it became apparent that they would have to go to the USA to find an investor prepared to invest the significant amount needed for capital expenditure. 

Takeaway from Richard Lock: ‘A major rethink of support and funding for capital expenditure is required by the UK government, if we want to have a green chemical economy in the UK.   One option would be for the government to fund Pilot plants themselves, and potentially manufacturing plants, with the startups entering into a pay back plan for using the facility. ‘

 

Scaling Up Production
One of the most significant barriers to commercialisation is scaling up production from the laboratory to industrial levels.   Cost is obviously a huge part of scaling up but so is the actual technical process. 

 Holiferm faced the challenge of scaling its fermentation processes to meet commercial demand.  The transition required substantial investment in its manufacturing facility and then optimisation of fermentation conditions to ensure consistent and efficient production.   It took the team 10 productions runs over 4 months to achieve their quality and efficiency targets. Longer than they expected, but they got there! 

Takeaway from Richard Lock:  ‘Don’t underestimate the effort (people & investment needed for scale-up). ‘

Technological Challenges
Developing green chemical processes that are both efficient and economically viable is a complex task.   We’ve talked about the issues of scaling up production above but there are likely to be others & not always things that you expected. 

Holiferm manufactures bio-surfactants using a fermentation process.  They have had to work on further purifying the product, to reduce any sensitivity issues.  

 

Regulatory Compliance
Navigating the complex regulatory landscape is another major hurdle. Regulations vary by country and even by region, making it difficult for startups to standardise their products. An example is the stringent European Union’s REACH (Registration, Evaluation, Authorisation, and Restriction of Chemicals) regulation, which requires extensive testing and documentation. 

Takeaway from Richard Lock: ‘Ensure that you have sufficient budget for chemical testing and take time, getting advice if needed, to understand the regulations and testing sample requirements.  Holiferm did get caught out, incorrectly naming their test samples, which caused delay and additional costs to re-test. ‘

 

Intellectual Property Protection
Protecting proprietary technology is crucial for maintaining a competitive edge. However, the process of patenting can be lengthy and expensive. 

Holiferm has taken a holistic view on Intellectual Property (IP) and put together an IP plan based on the aims of the company. They have a patent on their production process and issuing papers with their formulations in, allowing them to claim “prior art”. The plan is to use “trade secrets” when they develop new molecules. 

Takeaway from Richard Lock: ‘Patents are not the only form of IP protection, it’s important to take a broader view of protecting your technology and ensure it works with the business’ aims. ‘

 

Market Acceptance and Competition
Gaining market acceptance for green chemicals can be challenging, especially when competing with well-established traditional products.  

Holiferm manufacture bio-surfactants using a fermentation process, giving a product that is amber in colour with a sweet and malty taste. This colour and smell are not normally associated with surfactants, so Holiferm had to decide how best to deal with these differences.  They have decided to go down the educational route, providing good product information to their prospects and clients.  But they have decided to try and lighten the colour… 

 

Market Penetration
Establishing a presence in the chemical market is challenging for startups, as they must compete with well-established players who have strong brand recognition and customer loyalty. Green chemical startups must not only prove the efficacy of their products but also educate consumers and industry stakeholders about the benefits of sustainable chemicals. 

Holiferm are now selling in a number of geographies using distributors including the UK, US and various countries in the EU.  They have found that the smaller, localised, specialty distributors are working out best for them.  These companies take the time to understand the new products, know their local markets well and generally use a consultative selling approach. 

Takeaway from Richard Lock:  ‘Firstly, as a startup, you’re not going to get any special commercial dispensation from the suppliers, distributors, or the large industry players, so be prepared!  Take time to find the right partners. ‘

Scaling the team
Growing the team in a young company can be just as challenging as scaling the technology.  A team that can quickly adapt and innovate is crucial. A limited budget can make it difficult to attract top talent in a sector that typically requires technical expertise as well as experience.  You also need a team that is strategic and innovative in their approach to market penetration and product development. 

Takeaway from Richard Lock:  ‘The British are naturally conservative and risk averse – a startup needs a management team, including finance and health & safety, who understand risk, are willing to take calculated business decisions and not afraid to fail. ‘

 

Supply Chain and Logistics
Establishing a reliable supply chain for renewable feedstocks is a critical barrier. The variability in quality and availability of raw materials can disrupt production schedules.  

Commentary from Richard Lock:  ‘As pressure mounts on the broader industry to improve side-stream and waste applications, we are seeing a shift in sectors like biodiesel who are historically reliant on used cooking oil, they are now exploring more complex waste streams that, until recently, were considered unfeasible—even those that compete with anaerobic digestion processes. This presents a significant commercial challenge for us, as these particular streams have the potential to revolutionise our operations. However, due to our current size, we are not yet perceived as a viable option for suppliers, who often seek a one-stop solution for all their side and waste streams and in turn, we do not currently benefit from the economies of scale by taking dedicated streams into our site. ‘

‘When we delve deeper into the logistics and warehousing aspects of these streams, we find that their shelf life tends to be considerably shorter compared to virgin or highly regulated materials. This adds another layer of complexity, especially when sourcing from nearby regions such as the Netherlands. ‘

‘In summary, we face challenges on multiple fronts: demonstrating that we are the optimal customer for these suppliers (proving our flexibility), managing the day-to-day operations of a commercial plant with new and experimental materials and ultimately ensuring that these materials produce us the product we want in the market. Nonetheless, I am confident that with our current business, we will emerge as a far more attractive partner for stream suppliers, outperforming even large biodiesel or anaerobic digestion companies in the process. ‘

 

Strategies to Overcome Barriers
To navigate these barriers, startups can adopt several strategies: 

  • Collaborate with established companies to leverage their expertise, supply chains, and market presence. 
  • Seek government grants and incentives aimed at promoting green technologies. 
  • Partner with research institutions to accelerate innovation and share the burden of R&D costs. 
  • Focus on niche markets where the demand for green chemicals is already high. 
  • Build a strong intellectual property portfolio to protect innovations. 
  • Develop a robust business plan that clearly outlines the path to profitability and growth. 

 

Conclusion
In conclusion, the journey from innovation to commercialisation for green chemical startups is fraught with challenges, from securing financing and scaling up production to navigating regulatory compliance and achieving market acceptance.  

The case of Holiferm, a pioneering green chemical startup, illustrates the multifaceted nature of these barriers and the strategies required to overcome them. Richard Lock, COO and Managing Director of Holiferm, emphasises the importance of rethinking support and funding for capital expenditure, not underestimating the effort and investment needed for scale-up, ensuring sufficient budget for chemical testing, adopting a holistic view of intellectual property protection, and finding the right market partners. Additionally, he highlights the need for a management team that understands and is willing to take calculated risks.  

While the path to commercialisation is complex, with the right strategies and support, green chemical startups can play a pivotal role in transitioning the chemical industry towards a more sustainable future. 

 

How Strategic Allies can help  

Strategic Allies is here to help you find sustainable innovation partners. Whether you are searching for ways to replace chemical ingredients in your products, optimise your processes to be greener and cleaner, or reach your Net Zero goals.  Strategic Allies will work with you to find optimal solutions.  

If you’d like to find out more about how we can help you to explore and exploit new technologies and/or offer opportunities to differentiate your offerings, please contact John Allies at john@strategicallies.co.uk. 

 

Thanks to Richard Lock & Holiferm 

Many thanks to Richard Lock, COO and Managing Director at Holiferm, for his time talking to us.   Holiferm develops processes to manufacture sustainable biosurfactant products for use on a commercial scale.  You can find out more about Holiferm on their website.