The web is abuzz with the news that local startup Origin Materials is going public at a $1.8 billion valuation. This is the first clean tech unicorn in the region and is deservedly getting lots of attention. This is a huge accomplishment for John Bissell, Ryan Smith, Rich Riley, Nate Whaley, and the whole team. It is hard to overstate what a big jump this is for them. As well, it is going to focus a lot of attention on this region from investors looking for more hidden gems. It is one of those big “proof points” that create credibility for the region as a good hunting ground for cleantech stars. See their full press release.
This is no overnight success. It represents a decade and a half of hard work, persistence, and a willingness to adapt. The whole story begins sometime around 2006 with an engineering student team looking into a research project at UC Davis. By 2008, the team had won an $85,000 EPA grant, paired it with a $200,000 angel investment, and launched Micromidas to pursue making chemicals used for making plastic containers from sewage sludge through a microbial conversion process. In 2010, they raised $3.6 million, in part to fund a switch to a much different chemical conversion process they saw as having a better yield and based on a better raw material—wood and cardboard waste.
Converting wastes to some commercial product was not a new idea, but the conversion was usually into electricity or methane. In reality, these are pretty low-value products. The genius idea of the team was to convert the materials into high-value chemicals that could exactly replace the same chemicals made from petroleum and create zero net carbon bottles and containers.
By January 2013, they raised $16+ million more and gotten interest from some big global strategic investors. In October 2016, they raised $40 million from a consortium that included Nestle and Danone, and moved into commercial production of small volumes of their product slate, renaming the company Origin Materials along the way. Two years later PepsiCo joined in, probably adding more cash.
We hadn’t been able to learn much more about them since 2018 but were thrilled to see this morning’s announcement. They are raising $925 million in net proceeds from a special transaction that will end up making them a public company trading under the symbol ORGN. The way they did this is to be acquired by a Special Purpose Acquisition Corporation or SPAC called Artius Acquisition Inc. Artius had gone public in July 2020 and raised $630 million basically on a promise to find a good company to acquire. Typically, a SPAC has no significant operations and no assets. It is just a mound of cash and a hunting license. They bagged Origin, brought in more private investment from the existing consortium, and resulted in Origin having a valuation of $1.8 billion. Pretty good outcome for the students from long ago.
What will they do with all that cash? Usually, this sort of thing is done in order to do a major scale-up of manufacturing. They will likely leverage this with debt to get the needed warchest. It is doubtful that the manufacturing plant will be in our area, but nothing has been announced. Watch for it.
It’s a great success story for the team, for the region, and for UC Davis. It is a good example of what it takes and how long it takes. How many pitches did it take to keep the company going and raising so many rounds? How difficult was it to make the pivot in the whole process? How many disappointments were there along thy way? Obviously, it took a lot of patience and persistence. But it had a good outcome.
We think there will be many more companies with great stories as well from this region. It just takes time.
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ABOUT THE AUTHOR
Gary Simon is the Chair of CleanStarts Board. A seasoned energy executive and entrepreneur with 45 years of experience in business, government, and non-profits.