Funding Basics for Bio Projects

Funding basics for bio related projects?  Funding for a bioeconomy business can come from many sources.  It is important to understand the types of funding, and what is necessary to secure each.  These points just touch the surface of available financing for bioeconomy ventures.

Venture capitalists are normally large, well established companies that invest in businesses in which a demonstrated growth can be shown.  They normally take equity in return for their investment.  Angel investors are somewhat the same, with the distinction that these are often individuals who are willing to invest in riskier start-ups or early stage developments and often command a higher equity for a greater risk.  Convertible debt describes situations where monies are borrowed initially with the idea of converting this debt to equity at some future point or event. Sometime, those seeking funds use strategic partner financing where some other player in the industry extends a lump sum in return for something like process licensing rights, product distribution rights, ultimate sale, or some combination of these.   Another alternate funding source is Crowdfunding. Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.

Grants are payments made by the state or federal government.  There are many types that can be used in a variety of ways, but essentially these are government funds given to businesses focused on some science or research endeavor or start-up ventures.   There are also loans made by financial institutions, with payments in part, or in full, backed by the government in some cases

In seeking any funding, it is important to be prepared.   At a minimum, one seeking funding should have a professionally prepared, and third party reviewed:

1. investor slide deck (the opportunity, key economics, management team, competitive advantage, assumptions, and key financials);
2. business plan (that at a minimum highlights the economic story, gives summary of technology and team, addresses questions like market size market, and shows any commitments and LOIs with respect to offtake);
3. financial documentation (like funds invested to date, funding already lined up, and any guarantees that will be available);
4. feasibility study (analysis that takes all of a project’s relevant factors into account—including economic, technical, legal, and scheduling considerations—to ascertain the likelihood of completing the project successfully)risk assessment (like feedstock risks, transportation costs, permitting); and
5. site information (the choice of site and the justification for that choice, if chosen, and if not, what will be necessary to identify and secure a site, and whether the project is flexible or only works in a certain site).

All lenders and investors are going to you to be ready with funding basics, including:

1. SCOPE: All about any project they are considering funding (is it a new technology or an existing technology, and if construction is involved, whether this will be a new project, expansion, or retrofit).
2. AMOUNT: How much they are being asked to invest and over what period of time. Is this a “one time” funding request, or whether this is a pipeline of projects and will involve future funding needs? Are you seeking equity, debt, or some combination?
3. FINANCES & SECURITY: Have you invested your own funds, and what is available as security? The higher the risk for lenders or investors, the higher the expected return.
4. PROTECTIONS: If you are using any technology or process which needs legal protection, lenders and investors will want to know that you have freedom to operate and that licenses are in place.
5. DOCUMENTS: Solid documentation – business plan, feasibility study, agreements, financials and use of funds.

 The key to remember is that “you only have one chance to make a good first impression”.  Enlist professional help and be prepared to give yourself a good chance of success.

Lee Enterprises Consulting is the world’s premier bioeconomy consulting group, with over 100 bioeconomy experts.  As the world’s largest renewable energy and biochemical consulting firm, we offer a wide range of services in business and financial areas like due diligence, market studies, grants and loans; in technical areas like feasibility and techno economic studies, environmental evaluations, technology evaluations and selection, and risk analysis.  We have experts to fit virtually any expert witness engagement in the bioeconomy and have strategic partnerships in place to assist with insurance, legal, accounting, plant fabrication, feedstock procurement.  will certainly have experts in more common areas like biofuels, biomaterials, biomass & biomass power, bio-based chemicals, biotechnologies and in renewable fuels and chemicals in general.  Energy consultants in this type of firm should be willing to discuss a client’s initial questions about things like renewable energy sources, the types of biofuels, biofuel companies, synthetic biology, the fermentation process, biomass renewable energy, biofuel energy, conversion technologies for things like tires and railroad ties, and about the circular economy in general.  As part of a larger, multidisciplinary group of green energy consultants, our experts have the ability to collaborate internally with a wide variety of expertise in more specialized areas like biomass production, financial due diligence, organic synthesis, fuel additives, ethanol gas, biodiesel fuel including algae biofuels, solid state and industrial fermentation, green energy grants, ag biotech, agricultural waste, alcohol fuels, alternative proteins and animal-free products, sustainable foods, beverage fermentation, biocatalysis, biodiesel conversion, biogas production, biomass power, carbon intensity, co2 utilization, combined heat & power, Fischer-Tropsch technology, food waste, hydrothermal carbonization, industrial enzymes, landfill management, microbial fermentation, organic synthesis, plastic pyrolysis, plastic recycling, plastic waste, pyrolysis oil, reactor design, renewable identification number, the Renewable Fuel Standard (rfs2), solid recovered fuels, torrefaction and torrefied biomass, waste to energy, and waste-to-hydrogen.  We are bioeconomy consulting “one stop shop” for any client need and can handle all types and sizes of projects.

Look at our 150+ experts and the services we provide.  Most of our experts are also available to advise and serve as expert witnesses in bioeconomy litigation matters.  For the larger projects, we specialize in putting together full service, interdisciplinary teams with one point of contact.  See video about LEC here.  Call us at 1+ (501) 833-8511 or email us for more information.  See also:  Federal Programs Available to Support the Bioeconomy and  Biofuels Project Funding.