AIM Interview: Riggs Eckelberry (Part 3)

March 29, 2010…This is the conclusion of the AIM interview with OriginOil’s CEO Riggs Eckelberry

Q: What is your elevator pitch to a potential investor?
A: We are going to see a massive transfer of energy production from petroleum to algae, which is a huge paradigm shift from a few big producers to everybody being a producer, and that paradigm shift will create trillions in wealth. That shift is going to be empowered by technology companies. OriginOil is one of the first, it has a tremendous amount of momentum as a technology company and a comparable small amount of funding for OriginOil will have a huge outcome for that investor because he’s leveraging that sort of catbird seat in the algae industry.

Q: Where are we going to be five years?
A: The industry as a whole will just be getting the actual scaled-up working systems. It’s going to take another couple of years for people to work out all the technology issues and another three years to actually build stuff. This is how long it takes, so I think in five yours we are going to see some real scale.

Five years from now it is our hope and plan to be embedded in those systems at some level, like one of the badges that you see on the computer that says AMD or Nvideo. We want to be one of the badges, that’s are goal. We believe we have the best end-to-end system, but we’re very happy if people think they have better growth systems but need help with extraction. Or if they have good extraction and need help with feed. We want to be intervening at a very versatile level and I think that will make us a very acceptable player for the industry.

LED stataic light arrays for a 200-gallon bioreactor.

Q: What are the biggest obstacles we’ll be dealing with between now and then?
A: I think financing. In the dotcom boom we saw all of a sudden everybody was blindly putting money into it. Until that happened, it was hard to get anything done, and I think we’re at that pre-stage. And that’s because we are pre-business model. We are at 1992. I remember my friend Sky Dayton back then. He was a very young man, still in his late teens, and he was trying to start Earthlink. He started with angels, and he was with angels for a long long time. And even as Earthlink grew and started making money, they still had investors doubt the future of what he was doing. Well, he proved them wrong and it was a huge win. But back then in 1992,3,4 it was very hard to get financing, and that is the number one thing that has to mature.

To back up that, we need really good ROI models. We put a lot of effort behind that. We have a prominent modeling firm that is helping us to create these highly usable financial and production models that can be focused on applications, like wastewater, ethanol support, or the waste industry. We presented this model this past year at the National Algae Association. It was very crude at the time, but we showed them what we had and some of our conclusions which, for example, said that you’ve got to go vertical. And we showed something like a 22% increase in the bottom line just from going from a standalone to a wastewater environment. We’ve continued building that and we’ve said, for now, we’ll give people access to it. Come under NDA and we’ll give you the run of the model. Ultimately we want to find a host for that model and to start to share it more widely.

The key to financing is that if Wells Fargo believes your business plan, behind your business plan, besides you mortgaging your house, has got to be a working production model that shows them that algae can do what you are claiming. So, we’ve spent a lot of energy on that and it’s probably the single most important thing that is going to reinforce the financing of those systems.

Q: What is the biggest opportunity in algae that people may not realize at the moment?
A: Well, what’s good about algae is its versatility as a fuel. The saving grace for algae, unlike switchgrass or canola or whatever, is that it has a lot of uses. Up until algae, somebody like a biodiesel refiner had been stuck with only a fuel model. Well if he now has a captive algae plant, then he can start creating a mix, supplying it for plastics, for solvents, shellacs, functional proteins, and fuel. It right-sizes the biodiesel refiner’s model. It helps the ethanol manufacturer’s model tremendously. So I think people will discover that algae has this versatility.

Entrepreneurs are going to enter this space and go, “Hmmm, I can actually have an algae plant in this town and produce biodiesel for this community right here.” So, a lot of the early consumers of green energy are going to be targeted by these early entrepreneurs. Another thing that is going to happen is that algae is going to grow behind the scenes. A lot of it is not going to go into people’s cars, it’s going to be attached to big industrial polluters, and so their flue gas is sucked up by the algae, the algae gets gasified right back into the kiln. It never leaves. That fuel is never even refined, really. It’s just gasified in the lowest possible carbon chain, CH4 and burned. That kind of thing is going to happen a lot, where it’s going to be behind the scenes, helping waste energy, manure feed lots, and so forth. All these things are going to be really invisible, but these will be the big gains.

Showing the separation column

Q: Will there be businesses built around collecting algae that gets generated from these facilities as well?
A: No. There will be a lot of onsite reuse. A feedlot, for example, is already taking manure and making it into methane and CO2. They are taking the methane and using it and getting carbon credits, but the CO2 side is being vented. There is an add-on sale. There’s a system integrator selling into that marketplace the add-on sale of an algae box that sucks up the CO2. Now you’ve got a very rich livestock feed, or energy source, created right on the premises. It’s about reuse. You don’t ship it out. The big first generation of algae production is going to be for this in-house closed-circuit usage.

Q: You said you have 500 investors at OriginOil. Are you publicly traded?
A: We went public in March ‘08 and we were being traded in early April. We are a bulletin board stock and we have tremendous support from 500 or so of our closest friends, and I think we’ve sort of become the poster child for a lot of people of an algae investment. Now it’s our job to perform on that.

Q: What’s OriginOil’s longterm goal?
A: You don’t design a company to be acquired. In the Internet dotcom days I kept landing in companies and then four months later they’d be sold. Headhunters hated my resume and thought I couldn’t keep a job. Our design is to keep building the company as a pubic company and ultimately end up being one of the tent poles of the industry as a technology player.

Q: What is your current message to the industry?
A: At this point, it’s really to look for collaboration. We are increasingly collaborating with players. I think the smartest people in the industry are figuring out ways to work with each other, break past those barriers with intellectual property, of course. Those can be overcome. And find ways to do projects and to start serving each other and become each other’s customers. The earlier we can do that, the sooner we’ll get out of the silos, and the faster we’ll move.

Q: Where is the US in the world algae arena?
A: In my opinion, the US is far ahead on technology. What we have got to be aware of is that technology travels and the 800 pound gorilla is China. And I always say there’s only one greater danger than going to China, and that’s not going. We really need to be aware of what’s happening, because China is the big locomotive for renewable energy. India as well, but I think China has a more unified capital base, so they’re able to move faster. India has perhaps a more accessible society, and people have more freedom to do things. I think we’ll see both jockey in different ways.

Q: What about development restrictions?
A: Algae does not have a lot of restrictions. It’s a benign crop, it’s not going to hurt anybody. And so I think we’ll see an opportunity, like the Internet did, for it to race ahead of government, where a lot of people will be making it and then what do you do? We’re going to see a lot of action from China, from India, but the US is going to be a very strong player. A lot of people in America want another entrepreneurial opportunity. In this economy, guys who were building houses are now saying, “What do I do now?” —A.I.M.