The CEO of biocatalyst company Codexis (s CDXS) — Alan Shaw — has a message for the U.S. government, and more specifically, the Department of Energy: Don’t act like a venture capitalist. In Shaw’s view, the government has rushed into supporting some early stage renewable energy companies “that clearly haven’t made it,” he told me in an interview at the ARPA-E Summit in Washington DC last week, adding, “I’m not so sure that’s a good use of taxpayers’ money.”
While Shaw didn’t name any specific companies, there’s a decent-sized list that could fit that government-backed, lack of success, bill. For example, biofuels company Range Fuels reportedly is shutting down its plant in Georgia after making just one batch of ethanol, and after having received a DOE grant and a USDA loan guarantee.
Shaw thinks the best endorsement of whether an early stage green technology is real or not is if a real company has endorsed that technology. ” If I was running DOE, I would wait until I could see some significant interaction with industry,” before he supported a company, said Shaw.
It’s no surprise Shaw thinks as much; Codexis has been working with oil giant Shell for years. As this article reports, Shell has invested $350 to $400 million in Codexis, and Shell is essentially outsourcing its biofuels R&D to Codexis. Shaw says:
It’s not for a VC to tell Royal Dutch Shell, ‘you should buy this fuel molecule.’ What the hell does a VC know about fuel molecules?
The difference between the VC approach and what Shaw says Codexis has done, is pretty simple. Codexis has taken strategic investors (Shell), and used what Shaw calls “big brother,” to grow the company. VCs, in comparison, largely opt to “go it alone,” explained Shaw, and can easily get burned in the process.
To be sure, Codexis won’t be commercializing its technology for another 4 to 5 years. The company, which had its IPO almost a year ago, is focusing on both providing its enzymes for cellulosic biomass production (breaking down biomass into sugar, that a company can then make into ethanol), and also bio-based chemicals, like more sustainable chemicals for products like shampoo. Shaw says that by the end of the year, Codexis will announce a major partner for its bio-based chemicals production.
Codexis’ stock is down a bit from its IPO debut of a year ago. The company set final pricing for its IPO on the low end, at just $13 per share for a total of $78 million, and is trading at close to $11 most recently. Shaw says that’s because he’s not actively pumping up the stock.
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