If you owned a method that can make plants grow bigger and faster on every acre of land, what would you do to best exploit it? Targeted Growth CEO Tom Todaro is hedging his company’s bets 50-50, wagering that his Seattle-based firm will become a player in two potentially huge industries—agriculture and clean energy.
If you can sense that it takes someone with supreme confidence to try to pull something like this off, you have good instincts. Todaro was standing up at his desk, speaking loudly on the phone when I walked into his office. “I was selling a guy 60,000 gallons of oil when you walked in the door,” he told me later.
This was a good sign, because even though Targeted Growth regards itself as a science company at heart, I wanted to ask him about how he plans to best apply the science to fuel the growth of his company, not just plants.
The basic underpinning of Targeted Growth comes from, ironically, basic research from the lab of Jim Roberts at the Fred Hutchinson Cancer Research Center in Seattle (who, small world, happens to be Todaro’s brother-in-law). It turns out that Roberts and other biologists there have learned a lot about genes that play a role in making tumor cells flip into fast-growing, rapidly-dividing mode—and this knowledge actually can be harnessed in a different way if you actually want to accelerate growth, like with plants.
But what plants should you boost, in order to have the biggest impact? As Todaro puts it, “It’s like being able to make your computer operating system run faster. Now all of your applications can run faster.”
This is what leads the company to the half-agriculture, half-energy strategy. Half of the company’s 50 employees, and half of its cash resources, are being put toward food crops, like corn, soybeans, and other grains that end up in your breakfast bowl, as I described in this story back in September. The other side of the company is the part that gets more attention. It’s for crops that can make renewable fuels, namely camelina (a relative of canola) and a version of corn that’s modified to have no kernels, no cob, and just be loaded with simple sugars, like a stalk of Brazilian sugar cane.
Camelina has captured some press attention, because Boeing is pumped up about using renewable fuel derived from camelina seeds as a low-emissions alternative to conventional jet fuel. Camelina was a good choice for a revved up plant, because it can grow on marginal agricultural land, meaning it won’t ever compete for prime land where food crops like corn are grown.
So how does the business model work? There are different models for different markets. On the food crop side, Targeted Growth is licensing its technology to seed companies (think Pioneer Hi-Bred International or Monsanto, although Todaro isn’t naming names). He suggested this is the way to go, because a typical bag of seed corn costs $400, with about $300 of that going to pay biotechnology licenses, and the rest being the cost of the seed, he says. “We don’t make the seed, it’s the technology in the seed,” he says.
Targeted Growth has a major partnership with an unnamed Fortune 100 company, which is paying “millions” while it prepares to launch a new kind of food crop seed, which will need to win FDA approval before it can reach the market, hopefully in a couple years, Todaro says. If that happens, Targeted Growth will stand to collect a “big royalty,” he says.
Energy works differently. Instead of collecting licensing fees on products other people make, Targeted Growth has decided to make the revved-up seeds for renewable fuels themselves. Camelina is used to make jet fuel, and what Todaro calls “Sugarcorn” is used as a feedstock for simple sugars that are refined into ethanol. The other energy-producing organism is genetically-modified algae, which, Todaro admits, is years away from becoming commercially viable. “We understand how hard algae is,” he says. “We’re doing the science, not just trying to do a press release.”
OK, but how does this all add up on the income statement? Targeted Growth has been around since 1998, and it isn’t yet profitable. The company walked away from a financing term sheet last fall, in which it could have raised tens of millions of dollars. Todaro was unapologetic about this point (which I’m sure must make many entrepreneurs scratch their heads in this environment). The company has raised $32 million in venture capital since May 2006, from Capricorn Management, AllianceBernstein, Integra Ventures, and WRF Capital, among others.
“We have deep-pocketed investors, and we’re much closer to profitability than people think,” Todaro says. “We create more value by building up our science than by selling or licensing today. I’d rather make $10 tomorrow than $1 today.”
Confident as he may be, he wouldn’t go so far as to predict when the company will turn profitable. He didn’t name any names when I asked him to pick a peer, or a competitor that’s trying to do something quite like Targeted Growth. “There are very few companies like us. The time horizons are quite long. It’s not an obvious place to be. It’s really not for the faint of heart.”