Episode 175: A New Way to Produce Chemicals with Sulogen's Gaurab Chakrabarti & Sean Hunt
Episode 175: A New Way to Produce Chemicals with Sulogen's Gaurab Chakrabarti & Sean Hunt
Today's guests are Gaurab Chakrabarti, Co-Founder & CEO, and Sean Hunt, Co-Founder & CTO of Solugen. Gaurab and Sean explain how Solugen started, the impact traditional chemical manufacturing has on climate, and what motivated them to focus on climate change.
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Before we get too much into the Solugen story, tell me a little bit about your origin stories. How did you come to be doing this work? Maybe each of you can give us a snapshot of your personal journey and how you got into the seats that you're sitting in today?
Gaurab: Very interrelated, very, very interrelated. I'm actually a physician-scientist. I've been studying pancreatic cancer for some time. And discovered a very fascinating set of reactions in cancer cells that make a lot of the chemicals and molecules that we talk about every day. The first molecule that we discovered in pancreatic cancer was hydrogen peroxide. And it was just remarkable how efficiently these cancer cells were able to make the peroxide. And the weirdest thing was, you know, I was, you know, really excited by how this stuff was being made in the cell. Really cool. It's using, you know, biomass to do it in the cell, but then Sean was at MIT. He did his chemical engineering Ph.D. on, he was working on the production of hydrogen peroxide on metal catalysts at massive scales.
Sean: So my background is something called heterogeneous ketolysis. So it's something a lot of people don't know, but actually 90% of all the chemicals, materials, you know, things you interact with every day, at some point they pass through what's called a metal-catalyzed reaction. That's something you could think of kind of like classical chemical engineering. And I started my career actually developing fuel cells for the US Navy. And so then, you know, went to grad school and I met Gaurab through my wife when he was at medical school with her. And so it's just kind of very unusual for someone with my background to talk to someone who studies enzymes.
So in a pre-Solugen world, how have chemicals been made historically? And what are some of the issues with the current way of doing things?
Sean: So there's really actually only two ways to make chemicals. So there's petrochemistry, which is my background, but then there's also fermentation. But if you, if you take a big step back and you think about like, what are you actually trying to do in the chemicals industry? All you're doing is you're purchasing some feedstock, putting it through this black box process, and trying to make a product, and you want to do it as efficiently as possible. And the problem in the chemicals industry is that we're actually really bad at doing that. Chemical Engineers have been trying for over a century now. And the problem with petro-chem is used really toxic feedstocks, really high temp temperatures. And so your feedstock gets converted into a whole bunch of products. Many of them are toxic and you have to pay to separate them out. And so the economics become pretty poor.
Similarly, on the fermentation side, you know, people look at fermentation as a potentially better way to make molecules, but the problem is that the cells are living organisms like you and me. So 50% of the sugar feedstock in the cells actually gets converted to carbon dioxide via respiration, and the cells do 20,000 reactions simultaneously. So you end up with the same problem where you kind of get this soup of products and you can't convert your feedstock directly to the product. So what's really exciting about Solugen is it's actually an entirely new way to manufacture molecules. It's a third way. We take the best elements of fermentation, which are the enzymes that are within the cells. And we take the best part of petrochemicals, which are heterogeneous metal catalysts, and we combine them together. And when you combine these together, it's called a chemienzymatic process, and Solugen has created a new asset class called a Bio-Forge.
And so for the first time, what's really groundbreaking is that we can convert a feedstock directly to the product. We don't make side products. And this has really big implications for the chemicals industry, 'cause there's really three buckets of emissions. There's the front-end process that I just talked about, converting a feedstock to a product. Then there are all the separations that you have to do if you make a super product. And then there's all the transportation associated with moving those products around. But because Solugen solves that first bucket, converting the feedstock directly to the product, we can also solve the other two. We don't have to pay huge amounts of money, huge amounts of CapEx, and emit huge amounts of emissions doing separations. And we can also build smaller plants, which means we can essentially provide our products directly to our customers without having to ship across the world.
When you went through YCombinator, how much symbio had gone through there, and with the benefit of hindsight, how is it different getting a symbio company off the ground versus say a consumer company or a SaaS company?
Gaurab: [laughs] I don't think many symbio companies had gone through YC in the winter, 2017 batch. Sean, you can correct me if I'm wrong there, but I'm just thinking of a handful. I think Ginkgo went through, Ligos, iMicrobes, only a handful. So it was still, like, I think fairly new to Y Combinator on how to give advice and how to advise a business strategy for companies like that. And for us, what we latched onto was less about, let's peg ourselves as a symbio company, and let's just immerse ourselves in the world of YC, right? It's all about customers at that point, customer discovery, customer traction, understanding customer pain points, and delivering products and applications for that.
That fundamentally, I think was what allowed us to succeed in the early years, was we got lucky because we were so customer-focused. We knew what the customer wanted before we spent all this money trying to build something that no one really cared about. So I think fundamentally that framework at YC didn't matter if we were a symbio company or a software company, that framework was very true to us. And we, we were pretty scrappy in those early days just to try to get revenue going for the business.
As you have gotten further along and started to scale up your production capabilities and you're selling more as well and into various markets, I mean, is the pitch the same from market to market, or does it really depend on the industry that you're targeting and, and what is the value prop that makes people's eyes light up and gets them to lean in?
Sean: Imagine like the customer has a problem and we're there to solve that problem. We're delivering a solution, not just a molecule. So there, it does change by industry, but I think the commonality across all of them is we do not lead into any customer engagement with some sort of green premium. That was one of the big learnings that we got from the Cleantech 1.0 companies. And that's also like the really critical thing to highlight about the Bio-Forge, is this is about delivering carbon-negative chemistry at a really good value in terms of price and performance. So like when we go directly to a customer, we go straight to the field, we go straight to the end-user and we deliver on price and performance and what environmentally and like sustainability, governance, like what ESG means at the operator level is actually safety.
They care a lot that we're delivering a safer molecule. We don't have to ship hazmat. They don't have to wear as much, really crazy PPE when they're using our chemistry. And what we found, which is really exciting is, once we get that first sale and we do that first field trial with the customer, we can then show the P&L improvement for that customer. And what's really exciting, you know, especially in the era that we're in, and this is even different now than it was two years ago, is the number of corporate sustainability groups. Many of our customers have come out and said, "Hey, we've got this carbon reduction target by 2030 or by 2040." And so what we do is after we do that first case study is we go to that corporate sustainability group and we say, "Hey, look what we did. Look at this value we delivered, come join our life cycle analysis stakeholders group, and like we'll quantitate for you." Like if you were to roll out Solugen's products company-wide, what would be that impact on your environmental footprint?
I get that you don't wanna lead with a green premium. I think that makes a lot of sense. What objections did you get early on and how have you navigated to get around that overtime or work through them?
Gaurab: Yeah, I think the objection was actually less about the product, it was more of, it actually ended up being more of a supply chain distribution and QA/QC question. So the boring stuff, right? Jason, like, [laughs] this was fundamentally like what customers care about? Am I going to get my product on time? Is the product going to be on spec? Is it going to do what you say it's going to do? And are you going to be able to consistently deliver this product in the future?
And for us, what we did was we very early on built out our supply chain ops team to kind of handle that because fundamentally we're in the chemicals industry and operational excellence is kind of table stakes. So we knew that for us to be taken seriously, that's where we had to be most proficient. It, it's just funny, 'cause it's like the technology matters, don't get me wrong, but like, if you're not delivering your product on time, no one cares. No one's going to like take you seriously. So we ended up investing heavily into our supply chain operations team and infrastructure early in the company's history. Sean, I don't know if you have anything to add to that one.
Sean: No, I think that's exactly right. I mean, I think people get excited about the technology, but then you end up in the same category as, you know, everyone else. Where it's like we're in conservative industries and their assets are critically enabled by these types of chemistries. So you have to demonstrate that you can supply, that you can be there on time with the right product every single time. And I think that's something that a lot of people forget when they're building, you know, a technology platform, is that it's something that sounds so basic, but it's really, really important.
How hard would it be for the incumbents for these traditional two ways that you described to move into the territory of combining them in the way that you have?
Sean: It would be very, very difficult. So imagine combining a front end enzymatic process with a downstream metal-catalyzed process is non-trivial, it took us many years and, you know, we're now supported by over 60 patents, but even in those over 60 patents, there's a significant amount of know-how in terms of how do you integrate these two things that normally don't talk to each other? How do you build teams with very diverse skill sets that can even do that?
Those teams do not exist at any of these incumbents, whether you're on the fermentation side of the petrochemical side, and then the know-how to actually go from a 400 microliter well plate to a 40,000 liter pressurized bubble column, which if you do the math, that's a 100 million X factor of scale-up. So it's very much nontrivial, but then I think what's really exciting is that, okay, it's non-trivial on the tech side, but then what Gaurab was talking about for us in the marketplace is, we're going directly to the end customer. So like the actual incumbents from the molecule side, if you look at who we're displacing in the industry, these are manufacturers predominantly located in China. They're using carbon monoxide as a feedstock. They're using nitric acid as a feedstock, they're using methane as a feedstock, they're using phosphate or rock as a feedstock. Very toxic, very nasty feedstocks.
They make their molecules and then those molecules change hands on average, five times before it reaches one of our end-use customers. And there's a margin bump along the way. For us, where you think water, air, and corn syrup, it's made in America, and we ship it directly to the end-use customer. So like not only do we have this really exciting technology moat, we also have a really exciting commercial moat, in terms of how we go to market.
Gaurab: And I'd argue, that's like a knock-on effect of the technology. And when you're asking, well, can someone easily replicate this on a technical level? No, but on top of that, there's that commercial level as well. That it's really, really hard to do what we've done and create the network of customers and distribution that we have.
If you look at the things that are outside of the scope of your control, what are the big levers that if moved could have the biggest impact on accelerating this transition, and what would you do to those levers to most impactfully bring about change? Like where are the blockers?
Gaurab: Yeah, I think the blockers are just, it goes back to, this is a slow industry, Jason, like to qualify a new product, to qualify a new material or plastic, it's a lot of work. And I think understanding what those pinch points are and how we can hack our way around them or make them happen faster, that's where we're going to find success. I hate to say it because it's like people often think that it's just a better mousetrap. It's not the case. It's proving that it's a better mousetrap. So it's a lot more communication, trust-building, really, I mean, anything that's true for any fundamental old industry, you have to be able to understand where things are. And then simultaneously use that as a judo move to start moving it forward, but it takes time. It's not going to happen in a couple of years. It's going to take a couple of decades, to be frank.
Sean: And an example there, Jason, is like, we serve as power plants, right? And like a power plant should be conservative. They should be slow to adopt. I think it's really important, right? But when I think about external factors that could enable companies like Solugen to grow faster, I do think sort of a rework to how the Department of Agriculture, Department of Energy do their project financing loans. You know, more innovative structures, the ability to do it for first-of-a-kind plants, I think would be super helpful. And then of course, for companies like ours, a carbon tax obviously would have an impact. I mean, people move when they see the compelling value. And so the more compelling value that we can deliver to a customer, the faster that customer’s incentivized to move and to adopt our technology.
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