[Update: The original title of the post said that the algae used in the Algenist cosmetics line was genetically engineered. That’s not the case—the compounds come from existing microalgae that Solazyme has been able to identify and grow. We’ve fixed the headline—my apologies.]
Trying to make a biofuel startup work is tough. On one hand, you’re fighting for a share of one of the biggest markets on the planet—last year the global oil and gas market was an astounding $2.6 trillion. But fuels are a commodity—customers really don’t care whether they get their gasoline from Exxon or Shell or BP, because the product is essentially the same. That means the margin on fuel is extremely low, which then means you have to produce in large-scale to make any meaningful profit. But that in turn means a lot of capital spending—just building a pilot plant to produce biofuels can easily cost more than $100 million. At the same time, experimental second-generation biofuels—made from cellulose or algae—are still more expensive to produce than conventional oil, which puts them at a disadvantage as they battle for a little market share against the biggest companies in the world.
All of which is to explain how Jonathan Wolfson—the CEO of Solazyme, a San Francisco-based biofuel startup—came to sell high-end cosmetics. Solazyme makes biofuel from the oil produced by microalgae that has been engineered by the company. Algae has become a popular method to make second-generation biofuels—algae can be grown in fermentation tanks, as Solazyme does it, in open pond systems or photo bioreactors that can be placed on non-agricultural land, all of which means that algal fuel doesn’t directly compete with food supplies the way that corn or sugarcane ethanol might.
Solazyme has had some success with its fuels business—the company had a strong IPO in May, and it has already delivered hundreds of thousands of gallons of its fuel to the U.S. Navy. But—for the reasons outlined above—it’s going to take a while to be able to sustainably produce algal biofuel at scale, and in the meantime, there are bills to be paid. “You have to focus on what you can really do,” Wolfson told me on a visit this week to New York. “You have to think about the scope of what’s needed.”
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As it turns out, though, microalgae can do more than just produce oil for fuel. It can also be used to derive a flour that can produce cookies, cakes and other treats that are lower in fat and calories and higher in proteins than conventional foods, as I wrote last year:
The venture began when [Leslie] Norris, a Solazyme food chemist, discovered that an algae-derived flour could be substituted for conventional flour to make a product similar to pita bread. And the lipid profile of the algae flour was strikingly similar to that of healthy olive oil. Using the algae-derived flour, Norris and her colleagues were able to make cookies, snack drinks, dipping sauces and more — all with less fat and calories and more protein than conventional food. “Fat delivers flavor in food, but this fat is healthy fat,” says Norris. “For us a little fat delivers flavor very well, which is why this doesn’t taste like diet food.”
Solazyme doesn’t want to get into the cookie business, so it’s focusing on partnerships with larger food companies. But it’s not just snacks and gasoline that algae can be used to make. Besides secreting oil, microalgae also produce compounds to protect themselves against environmental injuries like too much sunlight or lack of moisture. As it happens, human skin deals with those same insults every day, and we’re always looking for products that can help us in that fight—which is one reason why the global cosmetics industry is worth more than $40 billion.
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Eventually Solazyme was able to isolate Alguronic Acid—a compound produced by one microalgae species that protects it from the environment. That compound, according to the company, is significantly more effective than other popular anti-aging skin care ingredients like vitamin C, retinol and vitamin E in increasing skin elastin production, inhibiting melanin production, protecting against UV-triggered cell damage and generally allowing you to look younger. Alguronic Acid seemed the perfect ingredient for moisturizing creams and other anti-aging products.
As it did with food, Solazyme could have chosen to partner with larger cosmetic companies like L’Oreal or Lancome—and indeed, Solazyme met with cosmetic giants. But Wolfson had hired Frederick Stoeckel to handle the work, and the French cosmetic veteran convinced his CEO to launch an independent brand. In effect, the value was too good to give up. “It’s really the story of Solazyme that works, a story of innovation and technology,” says Stoeckel.
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So earlier this year the company launched the Algenist brand of cosmetics, earning top shelf space at Sephora stores in the U.S. and Europe and selling out on the shopping channel QVC (which, in case you were wondering, sells a lot of cosmetics). The cosmetics industry is almost a complete inversion of the fuel business—brands matter hugely, and the margin is gigantic. That complements perfectly with the larger Solazyme goals of scaling up in biofuels, with cosmetics serving as a potentially profitable way station. “Some people might say that it’s not a business we should be part of, but this works for us,” says Wolfson. And if algae can’t save the planet, at least it can make us look a little younger.
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