Lanzatech looks to go global without leaving home

WASTE NOT: Lanzatech founder Sean Simpson's passion fand confidence will have been deciding factors in attracting early financial support from US billionaire Vinod Khosla.
WASTE NOT: Lanzatech founder Sean Simpson's passion fand confidence will have been deciding factors in attracting early financial support from US billionaire Vinod Khosla.

Sean Simpson bounds into the room, all green sneakers, yellow T-shirt with a big red star, seersucker brown shorts and kind of Robert Plant hair.

The chief scientist and co- founder of Lanzatech, one of the most exciting companies in New Zealand today, looks a little more nutty professor than the inventor of a microbe that could change the face of global transport fuels production while pulling vast quantities of polluting gunk out of the atmosphere.

As soon as he opens his mouth, everything changes.

This Zambian-born citizen of the world, who came here from Japan in 2002 and only set up Lanzatech because ill-fated Kiwi startup Genesis Research laid off him and fellow co-founder Richard Forster, is as sharp as a tack.

His articulate passion and confidence will have been deciding factors in attracting early financial support from US billionaire Vinod Khosla - one of the world's leading clean technology investors, who looks for world-changing new technologies with potential for "massive impact in a large, important market".

Given that Lanzatech's technology appears to deal, in one fell swoop, with some of the biggest problems confronting the biofuels industry, it's easy to see why Khosla, one of Silicon Valley's heaviest hitters, is on board.

Lanzatech's particular strength is its focus on using waste gases from sources including steel mills, oil refineries, and coal-fired power stations. By doing so, it neatly dodges one of the biggest criticisms of biofuels - that they require crops and land that might otherwise be used for food production, and could drive up food prices.

Equally importantly, those waste gases are so widespread that they offer Lanzatech's technology global scale.

"Right now, with just even carbon monoxide in steel mills, there's potential for 30 billion tonnes of ethanol," says Jennifer Holmgren, who has been the company's Chicago-based chief executive since last June.

"All the other biofuel projects are measuring in hundreds of millions, not billions. This is a huge step forward, especially when steel mills are just one kind of input stock. That says we are way ahead of all the other things that are possible."

Says Simpson: "If you think about biomass, you won't get that for less than $60 to $70 a tonne. If you're making 100 gallons, that's 70 cents there and you haven't paid for anything else. If you could prove a technology that didn't require farmers to take the risk on a crop, you would be way ahead of the game, and waste gases are free."

Not to mention that biofuels are but one of many high-value chemicals and polymers the Lanzatech gas fermentation microbe technology could help to produce.

The Lanzatech microbe - bred over two years from a delicate organism to something capable of handling the harsh, variable conditions in an industrial smokestack - has a host of possible applications, with work just starting now on the much bigger challenge of a version that could process carbon dioxide - the main greenhouse gas – into a range of new products.

The first demonstration unit was built at Bluescope's Glenbrook steel mill, south of Auckland. However, the fact the technology works doesn't automatically mean it will find a market. For a start, steel mills are all about applying heat to iron ore. Their workforces aren't trained to keep a living organism alive as part of the process.

"It's not volatile, but if you are going to be operating with this in your facility, you're going to be asking 'do I know what to do? Can I grow it and not kill it?'," says Holmgren. "It's a whole new set of skills. "There's no global workforce. We will build demonstration plants as needed by partners to get comfortable with it, and in different jurisdictions."

That's why it's so important that the six-year-old startup has in the last year signed contracts to build demonstration plants in two steel mills and an oil refinery with three of the biggest global players in those sectors: Baosteel in China, Posco in South Korea (the world's third largest steel producer), and Indian Oil Corporation, that country's largest oil refiner.

In the process, Lanzatech has had to shift from a pure bio- technology focus to becoming a chemical engineering company, says Simpson.

"We need to be involved in the success of the plant. That's to everyone's advantage. This isn't accounting software or a new printer. Half the company are design process engineers, and as soon as you get your fermentation scientist, microbiologist, genetic engineer and chemical engineer in a room and think about the challenges to get to scale, the arguments from that meeting are relevant," he says.

"Until we've shown something is possible, people don't think creatively around the possibilities. We allow people to think beyond the existing paradigm, which really shifts the possibilities. But it's not till you start thinking across the process that you start moving fast to scale."

The inevitability of a partnership approach also opens up numerous ways for Lanzatech to be involved, from licensing the technology through to participating in joint ventures.

Simpson's commitment to speed is also the best hope for keeping Lanzatech's scientific development in New Zealand.

"If you think about the next 10 years, we need to be fast, and really efficient. If you take a year out of that to shift everything to a different country, that's my fast goal taking a 10 per cent hit straight away."

To prove the point, the company already tried moving some research to Denver, Colorado, and quickly reversed the decision.

"Here's where the team is. Here is where we will continue to grow the team," says Holmgren of the multi-national group of scientists assembled in the bowels of an old Crown Research Institute laboratory in suburban Parnell, Auckland.

Simpson reckons being tucked away in New Zealand keeps his key staff out of the conferences where they might soak up company time, "say more than they should" to the wrong people, and entertain alternative job offers.

"Our goal, if we do this right, is to have the research in NZ," says Holmgren. "We will create jobs in China, the US, and here. We'll be a multi-national like any other."

Already, there are offices in Shanghai and Illinois, as well as Auckland.

"Our goal is to become a half to one billion dollar company in the next five to seven years," she says. "That requires us to have multiple operating units in the 2013/14 timeframe. We've got a good trajectory for that."

Progress to date has also attracted heavyweight political attention. When the world's two most powerful men, US president Barack Obama and his Chinese counterpart Wen JiaBao, met for a summit in Washington in January, Lanzatech was in the White House press statement, sandwiched between Boeing and General Electric. "That just blows me away," says Simpson.

To get to global scale, however, requires more than a top-notch political pat on the back. It will require injections of capital well beyond the capacity of New Zealand capital markets, even though Holmgren wants the company to stay as "capital-light" as possible. That means an initial public offering is more likely to be staged in China or the US than on the NZX.

The Chinese option is all the more attractive because of the official thirst for clean-tech, which has seen Lanzatech partner with the Chinese Academy of Sciences, the country's premier scientific agency. In a country where the rule of law and protection of intellectual property are not always secure, these kinds of high quality connections - along with two full- time patent lawyers at the Auckland laboratories and a policy of "compartmentalising" IP to make it hard to fully replicate - are crucial to Lanzatech maintaining control of its discoveries.

"China wants this kind of technology. It's the obvious place to go," says Holmgren.

That, after all, is why Khosla sits behind Lanzatech as its most important capital backer to date. His belief that current technological answers to climate change are simply too small to make the difference needed.

"If it doesn't scale, it doesn't matter," Khosla said recently. "Most of what we talk about today - hybrid, biodiesel, ethanol, solar photovoltaics, geothermal - I believe are irrelevant to the scale of the problem."

It could just be that clever science and smart global business- building from Lanzatech will be one of the answers.

The Dominion Post