Scalable or Bust: Why Do Some Biological Companies Succeed While Others Fail?
Editor’s note: Each year, 2BMonthly’s State of the Industry feature includes a Q&A with executives from leading biocontrol and biostimulants companies worldwide. The 2023 feature touched on a wide range of prevailing topics including the biologicals M&A climate, growers’ buying intentions for biologicals in 2024, and the ongoing challenges facing biocontrol registrations in the EU. In the excerpt below, experts offered their insight on the most important factors in the success and failures of scaling a biological company.
Q: We are seeing a bifurcation of successfully scaled bio companies, and busts. In your view, what are the most important factors in successfully scaling a biological company and why do some companies fail?
Vladyslav Bolokhovskyi, CEO, BTU Center: Factors: long-term study, consistency, demonstration. Professional team, quick learning and adaptation to market needs, ability to bring our benefits to partners and target audience. In a case of a failure, we quickly analyze, make decisions, and confidently move forward. Startups often fail because they were thought to be easy or quick and people often have excessive expectations. Unfortunately, unprofessionalism and unfaithful partners can also lead to failures.
Ludwik Pokorny, CEO, Bioline: Particular attention to the business case, when most companies focus on the technology only. The marketing dimension is often forgotten, as founders are generally scientists. Shortening the time to market and identifying ways to generate cash as soon as possible are often not a priority for scientific-minded executives who rather focus on the development of the technology and its registration. So as a consequence, there is a need to quickly attract and recruit ag marketing specialists.
Frederic Chagnon, President & General Manager, Lallemand: There is a perception that this market is easy, and the truth is that success in the ag biological space takes an inordinate amount of patience, and a strong balance sheet to withstand the boom-and-bust cycles and important working capital requirements. Further to this, growers demand consistent results and value, which requires companies to have a highly technical approach and to have boots on the ground. Companies that underestimate this when entering this space are often faced with an unfortunate reckoning.
Amy O’Shea, President & CEO, Certis Biologicals: Successfully growing a biological company involves a few key things. It is important to invest in research and development to make effective products and to ensure a complete understanding of when, why, and how the technology works. Then you must also be able to successfully communicate that message to retailers and growers. Following rules and regulations carefully, finding the right market position and setting up an optimal manufacturing and distribution supply chain are also crucial. Building strong relationships with farmers and staying up to date on new technologies play a big role in success.
On the flip side, companies might encounter difficulties if they cannot articulate how their products perform, the specific conditions for their intended use or the dynamics influencing their performance. Issues may also arise if they overpromise growers regarding the capabilities of their biological products, if they struggle to meet regulatory requirements, or cannot adapt to changes in the industry. All of these factors will impact trust from retailers and growers and the overall success of a company. So, success comes from smart innovation, supply chain position, navigating the regulatory landscape, and being adaptable to change.
There are many reasons why companies fail in the bio space. Understanding the attitudes and needs of growers and stepping up to the market challenges is the bottom line.
Bénédicte Flambard, Vice President, Plant Health, FMC: Success in the crop protection space depends on the ability to navigate the complexities of both the scientific and business aspects of agriculture. Companies that address these key factors stand a better chance of success. Four of the most important factors in successfully scaling a biological company include: 1) Market Knowledge – Failure to understand the unique challenges and regulatory landscape can lead to the development of products and solutions that do not align with local regulations and farmers’ practices and expectations; 2) Innovation – The agricultural sector is dynamic with ever-changing environmental conditions, pest pressures and market demands. Successful companies continually innovate and understand the challenges and opportunities to adapt their technologies to broader integrated offerings that address these changes; 3) Operational Efficiency – Successful companies optimize costs and operations to align with demand and customer expectations; and 4) Market-Centric – Educating farmers, advisors, and retailers on the benefits and use of new technologies is essential to fostering trust and loyalty.
Frederic Beudot, Director & Global Portfolio Leader –Biologicals, Corteva Agriscience: As an industry, we are working to create greater awareness and understanding of the value of biological technologies. Successful approaches connect, and demonstrate, the real value of biologicals to the real and unique issues farmers are facing on their farms.
Loading ...Pam Marrone, Co-founder & Executive Chair, Invasive Species Control Corporation:
Success factors include:
- Innovative, differentiated, effective products that fill an unmet need in the market.
- Product portfolio across the full range of grower needs or one product/technology that is first to fill a large unmet need in the market.
- Partners with early adopter growers to test early versions of the product; uses their feedback to improve the product.
- Grower-focused pull-through marketing and sales. Many on-farm demos comparing farmers’ standard program with the program that includes the biological(s) integrated into it.
- Articulate specific details of how to use the product and when, how, and why it works.
- Highly profitable for the distribution channel. Provides excellent support to the channel.
- Successful transition from R&D-based startup to a commercial enterprise.
Reasons for failure include:
- Me-too products or only products in a crowded category perceived as a commodity (e.g., biofungicides). Overly enamored with your technology and ignorance of competitors; unable to articulate clear competitive advantages.
- Focus only on the channel and not growers (all push, no pull-through).
- Not enough high-quality, grower-focused demos.
- Lack of specific education/instructions how to use the product.
Mark Trimmer, President & Founding Partner, DunhamTrimmer: There are a number of challenges that companies must successfully overcome. For young start-ups, there is a challenge to combine your product with successfully scaled production and market access quickly. These companies need to use their limited resources wisely and focus on getting to commercial launch in the shortest time possible. Falling in love with the technology or pursuing too many opportunities can lead to money running out before they reach commercialization stage. For mid-sized companies, the transition from success in their home market to expanding regionally or globally can be daunting. Failure to do your homework to understand the new markets, their distribution system, and the competitive landscape can waste resources. Recognition that things that worked in your home market may not be successful elsewhere is essential. Larger companies that are successful often make the mistake of assuming things that worked for their current markets they participate in will be the same for biologicals. Focusing on opportunities that are synergistic with their current business is usually a better strategy than entering a completely new area with biologicals with no link to current product portfolio.
Jim Thompson, Director of Business Development, Portfolio Management Biologicals and Non-Crop, AMVAC: We see five key critical success factors for biological companies to scale. First, a successful company must have a unique intellectual property portfolio. Given the large number of companies to have entered the industry, companies must have a strong and defensible position relative to competitors. Second, their products need a strong and rigorous data package that shows in detail that the products not only work, but how they work, and how they are unique from other like products. Third, the successful companies must develop strong partnerships that allow them market access, as many of these companies are unable to fund both the technical and commercial investments required to enter multiple markets. Fourth, a successful company must be able to cost-effectively manufacture product with consistent quality. Last, the company must have access to the required capital to achieve their milestones, and need to be funded by creditable investors that understand the challenges of the ag sector.
View more expert insight on the state of the biologicals industry here.
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