Rennovia, an early-stage chemical development company, recently raised $6 million in startup funding from 5AM Ventures and Versant Ventures, according to regulatory documents. The funding is the first infusion of a proposed $12.3 million Series A round that the company is seeking, documents show.
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.
A chemical company such as Rennovia is something of an anomaly in Silicon Valley, where information technology and life science companies vie with cleantech for attention from venture capitalists. Still, some VCs are willing to go out on a limb for a compelling chemistry process applied to an industry that has long relied on petroleum as the principle input for its products.
“There was just enough deal precedent in the chemical space that we weren’t treated as being that esoteric, at least by the investors we talked with,” said co-founder Tom Boussie.
Boussie is quick to point out that he didn’t found the company to pursue a save-the-world, green-related agenda.
“The company was not born of a political philosophy, it was the product of opportunities in the chemical industry and this is one opportunity of significant value, diversifying their feedstock base away solely from petroleum,” he said.
Many startups have tried to use renewable, biologic feedstocks to produce fuel. To date, VCs have invested several billion dollars into ethanol refineries that make the gasoline substitute from corn, switchgrass and algae. But few of the startups have made it to maturity, thanks to volatility in both the cost of inputs and the value of the product they produced.
Boussie says that Rennovia is focused on making chemicals, not fuels. “Margins are higher, volumes are lower and the capital barrier for the same return on investment is lower,” he said.
Rennovia isn’t the only bio-chemicals company to lately garner investor attention.
Ithaca, N.Y.-based Novomer raised a $14 million Series B earlier this summer from OVP Venture Partners, Physic Venture Partners, Flagship Venture Partners and DSM Venturing. The company has dropped petroleum out of its chemical products in favor of carbon dioxide and carbon monoxide.
“Not only are you getting these materials made without releasing these gasses, but you’re actually decreasing the supply of them too,” said Carl Weissman, managing director of OVP Venture Partners. Novomer has now raised $21 million in total funding 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 show. The startup has bioengineered bacteria to convert corn into various chemical intermediaries that are used in the production of any number of final products, including plastics, paints, nylons and resins.
Draths recently received a $5.2 million, 10-year tax credit from Michigan to build its production facilities within the state. The company’s Chief Technical Officer, W. Henry Weinberg, formerly worked at chemical maker Symyx Technologies, at the same time Rennovia’s founders were there.
Recently, Khosla Ventures 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 attracted 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.