Algal Scientific, a Plymouth, MI-based startup focused on developing algae-based chemicals to improve animal feed and human nutrition, announced this week that it has raised a $7 million Series B round.
The round was led by Formation 8, with participation from Evonik Industries and Independence Equity, all of whom have invested in Algal Scientific in the past. The company has now raised a total of $10 million since its inception in 2009.
“We’re fortunate that we had enough interest from our current investors, so we didn’t need to go outside of that for more money,” said Geoff Horst, Algal’s CEO.
The company’s flagship product is called Algamune, which Horst claims is the world’s first beta glucan that is produced commercially from a proprietary strain of algae instead of yeast. Beta glucan is a chemical that stimulates the immune systems of humans and animals; it helps animals, particularly those being raised in aquaculture, fight infection and grow faster with less food. The Algamune product is added to an animal’s feed to bolster the immune system without antibiotics.
Beta glucan has traditionally been made from yeast, which Horst said is an expensive process. Because of that high price, beta glucan’s commercial appeal has so far been limited. “You find it in the aquaculture and human markets, but it hasn’t been used on chickens and pigs because it doesn’t offer a positive economic return,” he told Xconomy last May. “That’s where we come in. We can make it much cheaper.”
Horst pointed to research from the U.S. Centers for Disease Control and Prevention that calls resistance to antibiotics one of the world’s most pressing health problems. The number of antibiotic-resistant bacteria has increased in the past decade, and Horst said the overuse of antibiotics on the animals we eat has a significant impact on the problem.
“Antibiotics are added to animal feed to help the animals grow a little faster,” he said. “It’s a small improvement, yet it has a significant effect by increasing antibiotic resistance.”
Consumers are beginning to pressure commercial chicken and pig producers into raising their animals with fewer harmful effects, which Horst sees as an indication that the market is ready for Algamune. “When you have McDonald’s and Chipotle saying that they’re going antibiotic-free—that’s really great, and we’re hoping to be part of that solution,” he said.
Horst said the company has moved from Northville to a 30,000-square-foot facility in Plymouth with a tank that can produce five tons of algae per month. Horst said the goal in 2015 is to raise production capacity to five times what it is now. “We’ll be able to grow without physical constraints and have the flexibility to ramp up production as needed,” he said.
In January, the company went to the International Poultry Expo—Horst calls it “the auto show for chickens”—and he said the response from food producers continues to be positive. “We’ve garnered a lot of attention, and now we’re reaping the benefits of that exposure,” he said.
Algal Scientific currently has trials underway with multinational animal health corporations that are among the biggest producers of chicken and pork in the country, though he declined to give specifics. The company plans to use its latest funding to continue those efforts, do more research, and “double down” on sales and marketing, Horst said.
“It’s been great, especially when you can do trials with customers and they can see how it works on their own farms with their own animals,” he added. “We’re doing a lot of trials, but that’s fine with us. Our customers are data-hungry, and that helps us, too.”
