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Virent’s New CEO Talks Tesoro Purchase, Company Culture, and More

Xconomy Wisconsin — 

Last week, Virent, a Madison, WI-based developer of biofuels that are designed to replace crude oil, announced it had hired Stacey Orlandi to serve as the company’s next chief executive.

Virent says its base technology can help produce cleaner and more sustainable versions of liquid transportation fuels, including gasoline, diesel, and jet fuel. The 40-person company also makes bio-based paraxylene, a plant-derived form of the chemical that can be used to make packaging containers, fabrics, and other items.

In September, the San Antonio-based petroleum refiner Tesoro (NYSE: TSO) acquired Virent for an undisclosed amount. Under the terms of the deal, Virent now operates as a wholly owned subsidiary of Tesoro.

Orlandi, whose previous career stops include stints at Royal Dutch Shell and BP (NYSE: BP), recently spoke with Xconomy about Virent’s product mix, how it feels to be working at a small—or at least smaller—company, and other topics. Our conversation has been edited for clarity.

Xconomy: Can you start by talking about your background and what led up to your decision to join Virent?

Stacey Orlandi: I’ve got a little over 20 years of experience in the oil, gas, and energy industry, largely split between technology development and manufacturing leadership roles. My last role was at Shell as the vice president of one of the research and development divisions that developed novel processes for the new energies industry and for the chemicals industry. It’s a background that’s well aligned for this type of role.

I think for me, [Virent represents] a unique opportunity to be part of the final stages of commercializing a biofuels technology and being able to really lead the end-to-end process, rather than one slice of a process where you’ve got multiple divisions that are at play, which you’d have in all the larger corporations.

X: Would it be correct to say that Virent has two primary divisions, one being transportation fuels and the other being plant-derived chemicals that can be used to make a number of items commonly found in peoples’ homes and workplaces?

SO: It’s less that Virent has two divisions, and more that the core technology that Virent invented can make both fuels and feedstocks that go into chemicals [and] ultimately get converted into packaging and fibers. The [single] technology platform can produce both products, depending on how you set the design. You can flex the design of one plant, one manufacturing facility, to produce both chemical feedstocks and fuels for transportation.

X: But as far as you know, following Tesoro’s acquisition of Virent, has there been more emphasis on fuels than on chemicals?

SO: I’m only on day three [at Virent], but my experience in doing technology development in both Shell and in BP, at different stages, is that the economics will tell the story of what the optimal product slate is to make—whether that’s the chemicals, the feedstocks, or the fuels products.

And I think those can change depending on the price of oil and the baseline price for the chemicals market … basically, the price of [Renewable Identification Numbers] under the [EPA’s Renewable Fuel Standard program] standard in the U.S. regulations, as well as the low-carbon fuel standard under California Carbon.

[Virent is part of a] consortium that has players who are interested both in fuels (like Tesoro) but if you look at Coca-Cola (NYSE: KO) and [Japanese plastics maker] Toray, [they’re] interested in the chemicals and feedstocks. So at the end of the day, when you start to look at, “What’s the optimal plant to build?” your medium- and long-term view of the economics of those two products is what will play out.

X: Do you expect things to feel any different working at a company that’s much smaller than Shell and BP?

SO: Yeah, it’s definitely a different feel. If I think about my own development and leadership growth, it’s a different culture to work in. I look at the ways I can get the best out of people in whatever culture I’m in.

But yeah, a lot of differences between a big company like Shell or BP, where you have huge amounts of resources [under] the same umbrella and brand, versus a more startup feel to a company that’s much smaller. People wear more hats. There are more people multitasking.

But I think the other nice benefit of the relationship with Tesoro purchasing Virent at the end of last year is that I think we also have access to a lot of the capabilities and the expertise that Tesoro brings to the table, which is a huge benefit as well, I think. I look at it as it’s really the best of both worlds.

X: During your time at Shell and BP, were you ever involved with onboarding a startup that had recently been acquired by one of the larger companies?

SO: Both companies do a lot of mergers and acquisitions. In some cases, when a company buys another company, there’s a full integration where you are really looking for the new company to become part of the fabric and fiber of the parent company. In other cases, the larger companies will actually hold it more as a subsidiary that’s more autonomous.

X: Based on what Lee Edwards—whom you replaced as CEO of Virent—told Xconomy just after the deal was announced (“Tesoro is clearly aware of the benefits of being nimble and innovative, given [Virent’s] foundation”), it seems like the company will still have quite a bit of autonomy.

SO: I think that’s right. When the folks from Tesoro came to recruit me, they were clear that … Virent has got a strong reputation in the industry, and they wanted to make sure that the entrepreneurial spirit and the culture of the startup was preserved.

Also, having someone who could link back into the larger corporation to make sure that we took advantage of the resources that Tesoro could bring to bear to help with the ultimate commercialization of the technology. So that’s absolutely the intent, is to keep Virent’s … culture and startup mentality and kind of flexibility.

X: Are you able to comment on what the expected timeline is for commercializing Virent’s technology?

SO: In general I’ve kind of trained myself to not talk about commercialization timelines, for all kinds of reasons. I think that we’ve got some development work to do. We certainly want to get the technology to market as fast as possible.

X: You mentioned the prospect of Virent building its own plant. Is that something that’s already happening? If not, do you know if the facility would likely be constructed in Wisconsin?

SO: No. The plant is kind of the end of the commercialization [process]. The end product is to build the first commercial plant.

I also wouldn’t comment on the location. All those end up being commercially sensitive pieces of information.

X: As you come into this new role, do you have any specific goals or ways that you’ll measure the progress that Virent is making?

SO: In my last role, I had a large portfolio of novel process technologies. There’s a reason why people talk about the “valley of death” when you have capital-intensive new technologies. There’s a high failure rate in general for these types of technical developments.

I think that the measure of success for any of this type of research and development, where you’re resulting in a manufacturing facility running on a new process, is that you actually build a manufacturing facility running the new process. That’s what every researcher who works in this area dreams of seeing, that they can walk around with their hard hat on and see the big plant, the big manufacturing facility that started as an idea in someone’s mind one or two decades prior.