A Plymouth-based biotech startup, which uses algae fermentation to improve animal feed and enhance food safety, is getting a $7-million boost to accelerate its growth.
Algal Scientific is expected to announced Series B funding round today, led by Formation 8 Partners of San Francisco, along with investment firms from Germany and Chicago.
“This will be a pretty great year for us,” Geoff Horst, Algal’s cofounder and CEO, said in an interview with the Free Press. He expects to add 10 people to his current staff of 13, and to boost production capacity between five-fold and eight-fold this year.
Algamune, a beta glucan compound processed from algae instead of yeast, stimulates the immune system in humans and animals at lower cost — and greatly reduces the need for antibiotics in animal feed. Major meat, poultry and fish producers have long used antibiotics to reduce disease and improve production, but animals are becoming more resistant to the antibiotics — and consumers are more worried about food safety.
Earlier this month, McDonald’s announced it will phase out use of chicken treated with antibiotics, following similar moves by Chipotle, Panera and Chick-fil-A.
Algal moved to a larger plant in Plymouth a few months ago, with a fermentation tank 20 times the size of its initial 500-liter tank. “We’ve now reached commercial scale. We’ll do five to 10 times more volume this year than last,” Horst said, selling large quantities to poultry producers in the U.S.
“One of our best customers,” he added, “is the shrimp industry in Vietnam.”
Jim Kim, founder and managing partner at Formation 8, said the investment in Algal align with his firm’s desire to tackle big global problems, “in this case the negative consequences associated with current methods of food production.”
Algal was launched in 2009, receiving much of its early money through the New Economy Initiative for Southeastern Michigan (NEI), backed by a group of philanthropic foundations. It occupied office space in the NEI-funded Michigan Life Science Research and Innovation Center and got $50,000 grants for the NEI-supported First Step Fund.
And in 2012, Algal won the $500,000 top prize at the Accelerate Michigan Innovation competition created by NEI.
With more than $10 million in total funding since its inception, Algal is edging closer to self-sufficiency.
“We are not cash flow positive yet,” Horst said, but he expects to be in about two years, if production and sales meet current projections.
Although his major investors are from out out of state, Horst expects that headquarters and the initial production facility will remain in Michigan. “We’ve been effective in convince our investors that Michigan is a good place to grow the company. We’ve got plenty of talent here from our universities,” said Horst, a biology PhD from Michigan State.
And while he’s giving up equity in return for growth capital, that’s OK with Horst.
“We will get a smaller piece of the pie, but it will be a much bigger pie. We don’t just want to be a couple-million-dollar revenue company. We want to be a natural alternative to antibiotics, and we really do have ambition to be a several-hundred-million-dollar company.”
Source: Detroit Free Press