Renewable chemical company raises $12 million
SAN FRANCISCO (Private Equity Week) - A new generation of entrepreneurs seeking alternatives for common chemicals are finding favor with venture capitalists.
The most recent company to connect with financing is DNP Green Technology, which last week announced that it raised $12 million in Series A financing from Sofinnova Partners, Mitsui & Co. Venture Partners, Samsung Ventures Investment Corp., the Clifton Group and AquaRIMCO.
The Princeton, N.J.-based company has developed a substance called succinic acid - a non-petroleum chemical used to make plastics, paint, pharmaceuticals and other products.
"We anticipate that the company will rapidly become the market leader," said Sofinnova managing partner Denis Lucquin.
Part of the reason Lucquin is so confident is that DNP has already signed a joint venture agreement with French research and development company Agro Industrie Recherches et Développements (ARD) to build a production plant to produce its biochemicals. ARD is footing an estimated $27 million for the plant, which is expected to go online this year. Ultimately, DNP is looking to license its succinic acid-making technology to large chemical companies. Industry analyst firm Frost & Sullivan projects the demand for succinic acid will grow at a yearly rate of 32 percent through 2014.
The market research group predicts that DNP's joint venture with ARD will capture a large part of that increasing demand because its technology will make succinic acid price-competitive with diacids, a petroleum derivative. Patrick Piot, the manager in charge of the joint venture, said he expects the market for succinic acid to reach $3.7 billion over the next several years.
Government agencies are also bullish on the use of renewable resources for chemicals. The Department of Energy has asked U.S. chemical producers to make 25 percent of their products from renewable resources by 2030, a more than five-fold increase over current levels.
DNP Green Technology isn't the only clean chemical company to raise capital from VCs lately.
Ithaca, N.Y.-based Novomer raised $14 million in a Series B round this summer from OVP Venture Partners, Physic Venture Partners, Flagship Venture Partners and DSM Venturing. The company, which also uses carbon dioxide to produce chemicals, has now raised $21 million from investors.
In the spring, Okemos, Mich.-based Draths Corp. raised $21.7 million in a Series C round from Khosla Ventures, TPG Ventures and CMEA Ventures, records showed. The startup has bioengineered bacteria to convert corn into various chemical intermediaries used in the production of numerous materials, including plastics, paints, nylons and resins.
Recently, Khosla also invested $15 million in Golden Valley, Minn.-based Segetis, a startup working to pull petroleum out of the chemicals business. Last year, the company hired Jim Stoppert to be its CEO. Stoppert, a former executive at Dow Chemical, ran that company's collaboration with Cargill to create corn-based bioplastics.
Also, this fall, early-stage chemical development company Rennovia raised $6 million from 5AM Ventures and Versant Ventures. The funding is the first infusion of a proposed $12.3 million Series A round the company is seeking. The stealth Menlo Park, Calif.-based startup is working to make specialty chemicals from renewable feedstock. The company has not disclosed what chemicals it will make.
