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Michael Krel, Partner at Sofinnova Partners, joined the firm in 2013 and is a key member of the Sofinnova Industrial Biotechnology Fund. His primary focus is on identifying early-stage deals in Europe and North America with applications ranging from chemicals, materials, agriculture, food, feed, and synthetic biology. He is on the Board of Directors of several companies including EnobraQ, Afyren, and Enginzyme, and an Observer on Comet Bio’s Board. He served for two years as the CEO of EnobraQ, a Sofinnova Partners’ Green Seed Fund portfolio company. Previously, Michael spent six years in industrial biotech startups, in senior business development roles. He also worked in a consulting firm advising on strategic R&D and organizational issues. Michael is an engineer who graduated from Ecole Polytechnique in Paris and holds a Ph.D. in organic chemistry from Paris X Orsay University.
In an interview with Life Science Review, Michael Krel, sheds light on the upcoming trends in the biotech startup space.
Could you elaborate on the genesis of the company and your role in the organization?
I joined Sofinnova in 2013, having tried my hand at a number of things, including consultation, before entering the business development space in 2007. Sofinnova is one of the largest and oldest venture firms in Europe. We turn 50 years old next year, which is a huge thing in the venture world.
We have always been propelled by innovation and have been investing in it since the beginning. Our investments started with the life sciences but ventured into healthcare by the mid-2000s. Later on, we decided to refocus on life sciences which made us expand the life sciences investment scope from pure healthcare application towards other applications like industrial biotech and leveraging biotechnologies or sustainable development in agriculture, food, chemicals, and materials.
How has the biotech startup space evolved over the years?
During the tenure of George Bush, as part of the Energy Independence and Security Act, a lot of money was put towards the development of biofuels and biochemicals. That was a naïve approach going after something like fuel which is the most commoditized with higher volume and lower value. But even though we did not want to invest in biofuels, we went into the space understanding the boom around it.
The lesson we learned from the first wave of investments is that biofuel is difficult for a venture capitalist play. Now, over the last ten years, people have been focused on more value-added, more differentiating products.
"It is not about large commodities anymore, but high specialty product ingredients, pigments, additives, and so forth"
For instance, when the first human genome sequence was done, it cost one billion euros. Now anybody can get their genome sequence done by paying a meager amount of 50 euros. So today, instead of aiming for a $500 million investment, we need to go for a $100 million market. Also, it is not about large commodities anymore, but high specialty product ingredients, pigments, additives, and so forth.
Now, most companies are focusing on those markets instead of focusing on very large but very low-value products.
What are some of the major market pain points, and how can they be effectively mitigated?
There have not been Netscape moments in the biotech industry so far though there had been a few jingo moments. So people are yet to realize that it has become a huge market that people can make money out of. That is a pain point from an investor’s perspective.
From a scientific perspective, startups in this space find it very hard to scale. In the majority of the cases, startups like in the pharma industry go to phase2 phase 2b but mostly stop at phase 3. So the transition from a pure lab and research organization towards an industrial organization is very challenging.
How do you envision the biotech startup space a few years from now?
From the feedback we have gathered, the future of this space looks pretty bright. There are huge opportunities in the synthetic biology and industrial biotech space. On top of that, it also fits very well with all the sustainability prospects our world need for the next 20 to 30 years.
Some other markets like the meat without meat, milk without milk, egg without egg, or the cheese without cheese are already maturing, and developing making it now more of a gross market than a pure startup market.
I feel agriculture, bio-control, and improvement of crops is also a very appealing market because there is very simple regulatory pressure and customer pressure. With more and more customers aware of the food and agricultural chain, there has been an increasing demand for high-performance products through biotech because we have reached a plateau in terms of what can be done with chemistry. So similar to what is happening in the healthcare space, efficiency comes from biology. This is true with respect to the textile industry as well. People are aware of the impact of the textile industry on the planet.
So production in a more sustainable way, being economical but with better performance is looked upon with great vigor.
What advice would you give budding entrepreneurs in this space?
They are welcome to come to see us. It is also important that the upcoming entrepreneurs have clarity when it comes to deciding the job. Though the past five to six years have been difficult, we are reaching the culmination. So I would tell everyone to keep moving because happy days are coming!