We caught up with Ed Craig, the CEO of Carbogenics as part of ‘Product | People | Potential’. Carbogenics are a former spin-out of the University of Edinburgh. Founded by Jan Mumme in 2016, Carbogenics specialise in producing CreChar®, a bio-additive that improves the efficiency of Anaerobic Digestion plants by stabilising the digestion process. In addition to this, the final solid product can be used as a fertiliser and soil enhancer, sequestering carbon for >1000 years.
The purpose of article series ‘Product | People | Potential’ is to feature and showcase the very best UK start-ups with grand potential, truly inspiring businesses that are shaking up their sector. We capture and share the stories behind the name. We collate authentic peer to peer real talk, while celebrating the growth and success thus far and gather a glimpse of what’s ahead.
Ed: My name is Ed Craig; I am CEO of Carbogenics. The stage we are at is technically pre-revenue, even though we are providing and doing some consultancy services. We have completed 3 industrial trials of our bio-additive and we are completing a further 2 in the next 2 months. I am in the middle of a Series A fundraise and what’s unique about us is that we are the only company in the world which gathers paper waste, pyrolysis it (that means burns it in the absence of oxygen) and adds it into anaerobic digestors, which are large engineering containers full of agricultural or food waste which naturally creates methane. Our bio-additive, by adding it to the AD process, creates up to 20% more biogas from the process. The second product is an organic fertiliser. When you separate the residue you get a solid and a liquid, the liquid gets treated and the solid gets put onto the land. That solid now has our CreChar® product in it which is carbon enriched so you are sequestering carbon onto the land and storing carbon for upwards of 1000 years. This means we are displacing fossil fuel gas with biogas and creating carbon sequestration opportunities for the land as well. This is unique, no one else is doing this in the world except for us.
Ed: Absolutely. CreChar® is a biochar, and biochar’s are traditionally used as a soil enricher and fertiliser. They are very porous and they act as a natural catalyser for biological activity and storage for water and. nitrogen etc. Because biochar forms strong bonds but not permanent bonds with other chemicals, it allows for nutrients such as nitrogen and phosphorous to be slow released with the demand of the crops. This has a massive beneficial impact on the soils and crop production as well. It (biochar) is often seen as a miracle cure for so many things, but few have thought to add it to AD in the way that we are to create more biogas as well.
Ed: There is no investment required as this is using existing industries; all we need to do is create the bio-additive to add it into an existing industry which is based in rural locations, so it can also help with Build Back Better schemes. Also, we have left the EU so we are looking for new strategies for the rural economy to help create better green jobs there as well. Of course, there is also energy security too; this is locally, regionally created biogas which can then be used and cleaned and produced and put into the grid to not have 5% of Russian gas coming through, it can replace it.
Ed: Sure; it started with the founder Jan Mumme, who is a leader in the anaerobic digestion sector and is an agricultural engineer by training. He came to Edinburgh as Marie Curie Research Fellow to do his project on biochar at the world-renowned UK Biochar Research Centre at Edinburgh University. He came up initially with this concept of not just simply looking at different waste streams to pyrolyse but also at what you did when you use a variety of temperatures and a variety of different techniques to create different types of char. Then he looked at where you can apply that char to have a variety of impacts. So, Jan got his typical series of research incomes coming through, grew the team, developed new co-founders to come through and help grow and help the team- Lidia Krzynowek our current COO being a key addition in 2019 to focus and drive our development. Now I lead a team that has blended a range of both researchers, AD experts, business developers and people with more leadership, management, and sustainability experience.
Ed: An SME growing is like driving a snow plough to work the horizon appears unclear and even hazardous and there are just constant challenges often arising unexpectedly- the driver needs to see and react to what is right in front of them while also scanning the horizon for these challenges and opportunities. Let me list the main challenges which are being small, and having what is increasingly being seen as proven but is still technically unproven technology because it hasn’t technically be done at a scale, how can you convince wealthy people and organisations (who want their money back x5,10 or even20 in amount) to give you money to allow you to do the development of your research and technology in such a way that will allow you to grow the team and ultimately, your company. This is a massive challenge for us.
Think about it going down a level, we have a new bio-additive called CreChar®; we would like to add this bio-additive into a plant which costs from £5-20mn so how do you gain the trust of these individuals to convince them that what you are doing will not hurt but indeed enhance their performance?
Thirdly, as a small company, how do you attract the talent you need when you have limited reach and you have limited resources to bring people into engineering, into business development, sales, and research activities. Which partnerships do you use to ensure you get the right talent to allow your company to grow especially in a scenario like now where it is difficult to hire and retain top talent.
These are some of the main challenges. My advice would be pick people to work with you who are proactive not just on their knowledge or experience, pick people who do not add problems to your team as you need people who can multi-task. Secondly, as a small company with limited reputation because of your size, try to attract individuals or associate yourself with organisations with much bigger or powerful reputations. A clear example is myself with Carbogenics, plus the company being based at the University of Edinburgh, the 16th best University in the world which gives us credibility too. A key piece of advice would be always keeping a track on your cash flow as this is what kills so many businesses. It is not about the volume coming in for potential sales, it is the actual money in the bank. Finally, focus, focus, focus, focus! If you are a business and you are supposed to be raising revenue, make sure you are taking the easiest tasks for A to B to C to D with as little noise as possible in the channel. In the end, if you don’t make the money your business will collapse, so focus on the shortest line possible to get that money in.
Ed: Product market fit has been a really interesting one, as what we have been developing has been in a lab on a very small scale, and then growing to half-scale (10 L digesters), and then to industrial trials. All the way through this process we have been conducting background market research with either intensive (1-2 AD owner operators) or with a wider market view which is asking about what others think of using bio additives, what their experience has been and what has the cost been. From an AD perspective, has it aided the stability of the process, has it aided to reduce foaming, has it worked and what were the results? We are trying to harvest this information and at the same time, to build relationships with sufficient people both directly in the industry but also with the business and policy associations that sit above these organisations going forward. This has been a key focus, and by harvesting that information, mixed with the costs we have to actually generate our bio-additive, we then came up with a pricing structure. We have 2 different pricing strategies; one is simply a payment per tonne for the product which is based on the information I’ve mentioned and also on the financial profit we generate by that. The second approach pricing wise is a cost + profit sharing model where a fee per tonne is provided but then a 50-50 share is agreed between ourselves and the provider regarding the profit made. This of course has to have agreements made regarding data sharing, and regarding the plant. Some plants in the UK are run very well but many are not, so this can be an additional challenge.
Ed: Yes, I will answer this traditionally and then focus on sustainability too. First of all, ultimately there is 1 person doing this, even though there are lots of people helping you. My advice would be finding a network through your board, your advisory board or your contacts and make sure that you have people who actually have experience of raising investment. Make sure you seek advise but have 1 people coordinating the raise. Be organised and set yourself a reasonable time frame and aim for a reasonable amount; don’t over or under ask. Some businesses don’t ask for enough money, and it stops them being taken seriously. However, some businesses also over ask and so you need to demonstrate how this money will be used as well. You also need to prioritise; if you are the CEO and are coordinating the raise, there are so many things you could be spending your time on, you need to be spending 70-80% focusing on the fundraise otherwise the chances are you will not achieve the timetable you’ve aimed for.
More specifically, we have the ongoing challenge of having sustainability at our core. A growing number of investors are now saying they want to give money into sustainability projects, their key motivation remains maximising their returns. So, when you have people that need to change, like large companies that are polluting but are saying they want to give you money potentially, how do address that issue? Do you take them at face value or do you ignore them and say I am sorry but my values say I am not interested in your money and you need to go for an investment house that only has people who prioritise sustainability? The investment system is still primarily based on maximisation of short-term financial returns over trying to deal with issues such as the global climate crisis – or profits before planet. Many still don’t seems to realise there is no Planet B and there can be no marketplace without an actual market….
Ed: Couple of things; I use soft referrals from people that are in my network. I also speak to people that are in my general geographical location who know the brands that I am associating with, such as Edinburgh University. I also speak to a diverse range of investors; some may only want <£500,000, some £5mn+. The sweet spot in the middle is known as the ‘Valley of Death’ and it can be hard to find investors in this range. Until you start speaking to them, you won’t know what the investors want. Sustainability does give a rate of return, but it is not often 20x, ocassionally10x, and profitability returns take place over a longer period of time. I also think that B-Corps are fantastic, and making that commitment is wonderful.
Thank you for your time, Ed!