The European Circular Bioeconomy Fund has smashed its funding target by raising €300M. The aim is to help sustainability-focused biotechs scale up and usher in a ‘bio-revolution’ in Europe.
As European economies grapple with the aftershocks of the Covid-19 pandemic, policymakers have pledged to prioritize sustainability in plans such as the European Green Deal. However, the EU’s current greenhouse gas emissions trajectory remains insufficient to limit global warming in accordance with international agreements.
One way to correct this trajectory is to switch to a circular bioeconomy, which could source energy and other goods from plants and agricultural waste rather than fossil fuels. But one of the biggest obstacles to developing technologies capable of implementing a circular bioeconomy is a lack of funding for startups to scale up their technology.
According to Michael Brandkamp, co-founder and Managing Partner of the sustainability-focused European Circular Bioeconomy Fund (ECBF), this lack of funding is a problem that stems from a dearth of knowledge from investors about the field of sustainable technology.
“The market is flooded with liquidity, however, it does not find a way to the bioeconomy companies,” Brandkamp noted. “And why is that? That’s because there’s a lack of expertise.”
When the European Circular Bioeconomy Fund (ECBF) made its first closing in 2020, it was the first-ever fund in Europe dedicated to supporting the scaleup of companies developing ways to reduce our waste and turn it into commodities. This week, the ECBF made its final closing at €300M, far overshooting its initial €250M target. The fund’s 25 investors include big names such as the European Investment Bank, the Dutch company Corbion, and Nestlé.
The latest companies to get a scaling-up boost from the ECBF include the Dutch insect protein company Protix and the French agri-biotech firm Elicit Plant. Industry experts see the fund’s mission as a major help for industrial biotech companies struggling to make the leap from the lab to the market.
“You are okay until you have a big investment to make in building your first plant. And then it becomes more difficult to find the right funding,” said Martin Stephan, Deputy CEO at the French bioplastics developer Carbios. “I think this fund could play a significant role in financing this phase where the startups are moving from a big lab to a small plant.”
In contrast to its oversubscribed final closing, the ECBF’s early stages were fraught with uncertainty caused by the Covid-19 pandemic. The co-founders had quit their previous jobs with the goal of launching the ECBF’s first closing in the first quarter of 2020. Instead, the first closing was delayed until the third quarter of 2020.
“We were really affected by Covid-19,” explained Brandkamp. “We had quite a number of investors in place. We expected to have all these approvals and licenses. However, in March , many investors removed us from their list because of the very high level of uncertainty. There was no chance to get access to new ones because everybody was shut down and it was very difficult to connect with new potential limited partners for the fund. And in the end, the regulatory things took much more time than expected.”
However, funding going to life sciences investors across the sector has since recovered and even broken records. Once the ECBF hit its €300M hard cap, Brandkamp’s team was having to turn away interested investors.
The Covid-19 pandemic and shifting public attitudes are spurring investor and consumer interest in the bioeconomy, such as technology focusing on bioplastics and meat alternatives. This is one of the signs of an impending bio-revolution that could shift industrial paradigms in a similar way to the digital revolution.
“We see a pull from the market,” said Brandkamp. “The pressure from the public — these are the customers and politicians — on the companies to become CO2 neutral and invest more in sustainability drives the transformation. In addition, the support from the governments and public institutions is increasing.”
The ECBF is one of several venture capital funds cementing their interest in sustainability biotechs. Earlier this month, Seventure Partners in France launched a €130M venture fund focused on investments in companies promoting the ‘blue economy,’ which includes improving aquaculture and tackling waste in the oceans. And late last year, Sofinnova Partners closed its second industrial biotechnology-focused fund at €150M.
As to whether the ECBF might help the EU to meet its climate goals, Blandkamp was cautiously optimistic. He emphasized that the fund will strictly monitor where it invests, making sure to maximize the ecological benefits of the technology.
“We think that it will have an effect, but we cannot really calculate it,” he said. “If we do 25 investments in this area, we will hopefully motivate other investors to follow.”