Startup Stories: Pembient
This interview is part of the ‘Startup Stories’ series, originally published at Life Science Startups.
Pembient is a Seattle-based biotech company developing biofabricated horn to fight rhino poaching and offer a renewable alternative to petroleum-based plastics. I spoke with Matthew Markus, co-founder and CEO of Pembient, to learn more about their technology and the importance of understanding your market.
Why did you decide to develop lab-made rhino horn?
It’s an old idea of mine. I started out in computer science as an undergrad. With computers, it’s possible to make copies of files quickly and cheaply so everybody can have a copy. Reading about the poaching crisis back then, I thought, ‘Wouldn’t it be great if you could make copies of biological objects?’ That way people could get access to these materials cheaply without killing animals. At that time the human genome project was still in its infancy so this was very much a scifi type of idea.
Fast forward 15 to 20 years and the poaching crisis re-emerged in 2009 and was in full swing again by 2014. I was doing another startup and I kept monitoring the situation. I had gone back to grad school and had more of a background in genetics. At the time other people were starting to culture products like meat, eggs and milk. I decided to go for it — first as a side project then we got into IndieBio and incorporated.
How does your technology work?
When we first started we were looking at making powders because powdered horn is used in traditional medicine. Once we had a better understanding of the marketplace and how horn has been used as a plastic for thousands of years, we shifted from developing a powder to developing a plastic substitute.
There are a lot more technical difficulties in making a 3D biofabricated horn than making powdered horn. We started to investigate tissue engineering and other ways of producing solid horn through biochemistry. We are still refining our prototypes. We will have our first pilot run in 2022 which has been pre-sold through an Initial Coin Offering (ICO).
Now we are taking what we’ve developed at the bench and scaling up to fulfil this pilot order. We’ll do a small batch, learn and then use that knowledge to build a larger system and fulfil larger orders. It’s going to be a series of steps to scale up.
How are you different to competitors?
Many cellular agriculture companies are developing products to replace animal-derived food like meat and eggs. Prices are very important in that realm. If meat is selling for $20/pound, then the people making clean meat have to make it for close to that price. Some people may be willing to pay $40/pound for ethical reasons but no one will pay $400/pound. It is a really hard technical challenge to build the infrastructure to grow meat in the lab for the same price as factory-farmed meat.
We don’t have those pricing challenges since we are essentially competing against a high-priced black market. We aim to do smaller runs at the beginning for a higher price point, followed by medium-sized batches at a mid price point then larger batches at a lower price point.
Have you patented your product or process? Do you have any IP protection tips for biotech entrepreneurs?
We wrote a provisional patent very early on covering core ideas and composition of matter. It’s difficult because we are trying to recreate a natural product and natural products are not patentable. Our product will be slightly altered so that governments and regulatory agencies can track it through the supply chain. Rhino horn and other illegal wildlife products are highly regulated by government entities. Biofabricated horn replacements will likely also be regulated, at least in the beginning.
Once you file a provisional patent, you have a year to file a full patent application. We used the help of a patent attorney to draft our claims for our full patent application. Provisional patents are very cheap and you can do almost all of it yourself if you want to but for full patent applications, it is better to get the help of an attorney to draft the claims. Writing claims is a legalistic art. Costs can add up but it is worth making sure you have the right protection.
Are you developing other lab-made animal tissues?
We are focusing specifically on horn. We think it’s a great first product for the durable goods industry. Carvers, designers and artists have used it or want to use it. From a scientific standpoint, other animal products like ivory are very different even though the market is the same. Our platform is geared toward horn for now.
How will you convince people who buy horn or ivory or other animal poaching products to buy or use your product instead?
Rhino horn is used to produce high-end luxury goods and also in traditional medicine. It’s not really clear how much medicinal use really drives the actual poaching of animals. Often powder or medicines labelled rhino horn turn out to be ox horn or water buffalo horn. Once horn is shredded, it’s hard to tell whether it comes from a rhino or from a cow or ox. Also when rhino horn is carved, lots of the material is cast off and that waste material is taken and may be sold as medicines at a lower price point.
The products carved from rhino horns are the high-end goods driving poaching and that’s what we want to target with our lab-grown horn. Rhino horn is currently the largest solid mass of keratin in the world. In all other animals, horn is a thin keratin layer covering a boney outcropping. For designers and artists, rhino horn is like working with a block of marble, whereas other horn is like working with pebbles.
We want to destroy the current high-end luxury market for rhino horn. Right now, rhino horn is very unique and virtually unforgeable. We want to inundate the market with biofabricated horn at a much lower price point and collapse that market. From the standpoint of economic theory, we will be inducing what is known as quality uncertainty in the marketplace. Or, in other words, any horn could be a biofabricated horn! People will now be taking a financial risk when buying a purported rhino horn object and come to distrust purchasing anything labelled as such.
What is your business model? Who are your target customers?
Our target customers are artists, carvers and designers. Before plastics, people used horn to create many products like horn-rimmed glasses, suitcase handles, knife handles, cups and beads. We are offering an eco-friendly alternative to petroleum-based plastics.
Cup carved from rhino horn, China, Qing dynasty, 1644–1911 AD. Image by Daderot, sourced from Wikimedia Commons
You went through IndieBio’s accelerator program. Why did you decide to apply to IndieBio?
I wrote the application when I was travelling in Vietnam trying to learn more about the market for horn. We applied to be part of the inaugural IndieBio class. Before them, no accelerator was really focused on early-stage synthetic biology startups.
How did you get in?
We were lucky. We wrote a good application but probably not the best. IndieBio was looking for novel applications of synthetic biology outside of human health and we were working in that niche.
How has IndieBio helped you?
I’ve founded other startups but always in IT. I learned about biotech at IndieBio. We were able to rapidly develop some prototypes using the lab space there. One of the biggest benefits is the communal lab space. It’s so hard to set up or even rent high-end lab space as a small entity. We also benefitted from all the mentorship and access to potential investors.
Pembient raised money by issuing cryptocurrency, PembiCoin, in exchange for future product. Why did you decide to raise money that way? How did you organise the offering?
Under US securities law, you can’t sell unregistered equity to the public. We aren’t interested in selling equity, we’re interested in selling eco-friendly horn. We don’t have the pilot system for producing horn ready yet — that will be established over the next couple of years and requires equity investment. However, we thought we could presell horn even though it doesn’t exist today, like how people buy products for future delivery on platforms like Kickstarter. Tesla does the same through its pre-order program.
We thought that by using a decentralised ledger (Ethereum), instead of using a standard crowdfunding platform like Kickstarter, we could control the whole process. We sold coin that is linked to horn. One PembiCoin is linked to 1 gram of future horn. People who bought the coins can hold them or trade them until 2022 when we will take delivery of the coins and give horn in return.
You founded several previous startups before co-founding Pembient. What did you learn in those startups that helped you with Pembient?
Not to be afraid. In modern life outside of a startup, everything happens in a linear progression. It’s not like that in a startup. Things change very quickly, especially in a high-growth situation. Periods may be stressful and you have to be ready for non-linear events. Working in a non-startup environment doesn’t prepare you for the psychological changes that can happen very quickly in a startup. It’s often a drought followed by a flood.
What has been your biggest challenge and how did you overcome it?
We have lots of technical challenges. I think the largest are the regulatory challenges. Tied up in that is the opposition from conservation groups. I’ve come to learn that conservation is a big tent containing lots of people with lots of viewpoints. Some conservationists believe there should be no trade in wildlife products and they are unwilling to make any distinctions between whether the product is derived from wildlife or not.
The Convention of International Trade in Endangered Species of Wild Fauna and Flora (CITES) writes international guidelines that become national law to protect endangered species. They will discuss biosynthetic alternatives to wildlife products at upcoming meetings. We are working with the Cellular Agriculture Society, a non-profit out of Harvard dedicated to advancing cellular agriculture, to make sure that biotechnologists have a voice at these meetings.
What do you think is the biggest challenge facing the life science industry?
Economics is one of the biggest. A lot of promising technologies fail because they cannot produce at a price that competes with existing technologies and industries. For example, there have been two big pushes to develop alternative clean fuels and both of them took in billions of investment dollars but failed to develop and market products that could disrupt the oil and gas industry. It’s very hard to overturn an existing industry.
What makes someone a good startup CEO?
There’s no right way to be a CEO. I think a lot of it is the interaction between the person and the problem you are addressing. Not every person is right for every problem.
I’m an introvert, and I think a lot of introverts assume they won’t be a good CEO. That’s not true. CEOs do need to be adaptable, but find a problem and build an organization that will work for you.
Anybody could be a CEO so long as they have enough ability to self-reflect.
Do you have any other tips for new entrepreneurs?
Nowadays you should try to leverage an accelerator. They are good at what they do. When I first got involved in startups, there weren’t accelerators. At first, I was sceptical of accelerators because I don’t like social proofing but, in life sciences product development, costs are so high that it makes sense to have somebody help you. Accelerators also help you learn all the things that need to happen around your tech and your core discovery to turn it into a product.
The practice of writing the application for an accelerator is not too onerous and will help you think about your business. If you are rejected, think about why, refine your idea and update your application. Keep doing it. This discipline of refining your idea may be more valuable than the accelerator program itself.
Read more tips from life science entrepreneurs in ‘How to Start a Life Science Company’ available on Amazon in paperback, eBook and kindle-friendly eBook.
Originally published at www.lifesciencestartups.com.
