Super-Scale, Hoosier-Home’d, FRBO’d, Big Ferma: The Digest looks at Liberation Labs

Last week, Digest editor Jim Lane sat down with Liberation Labs CEO Mark Warner for wide ranging discussion about the challenges and opportunities in building and operating commercial-scale fermentation facilities, in light of Liberation Lab’s astonishing success in capital raising of late. 

So, it’s a story of capacity, and scale. Imagine a race-car driver who just can’t get a big enough ride. That’s been the story of synbio. Nothing wrong in the cockpit, the chassis is too tiny, and not built for racing.

Changes are afoot. Here, we see a company serving the advanced food sector, amongst other sectors, while seeing advantage in its US location for a manufacturing approach which has its cost rooted less in labor, where the US is not competitive, but rather raw materials such as dextrose, where the US is a cost-competitive leader.

You could think of it as home brewing, because they’re making it on home shores. Yet, that’s about the only homely thing about Liberation. It’s as big as they come, ambitious as all get out, and making tracks after a slowdown caused by the glacial pace we continue to see in financing innovation. Following the discussion, Aidan, Aileen and the Digest AI team looked deep into the interview, our recent storylines, and analyzed the company’s story. Their overall assessment:

Mark Warner explains his company’s focus on contract manufacturing for various products, including food and pharmaceutical intermediates, emphasizing the importance of cost-effectiveness and strategic location. He underscores the difficulty in securing funding, highlighting a preference from investors for proven teams and operational facilities. The conversation touches upon the need for more emphasis on biomanufacturing in federal support, currently skewed heavily towards R&D. Mark uses an analogy of Coca-Cola syrup without bottling plants to illustrate the current imbalance, advocating for a more balanced approach between research and manufacturing investment. The discussion includes insights on site selection, capacity, and potential products for the company’s facilities.

What are the five most interesting and important aspects to the Liberation Labs story?

• Financial milestones Liberation Labs has secured $50.5 million through a convertible note, bringing its total deployable capital to $125.5 million. This includes funding from new and existing investors, equipment financing, and a USDA Loan Guarantee.

• Construction and operational targets Liberation Labs is in the late stages of constructing its first commercial-scale biomanufacturing facility in Richmond, Indiana, with operations expected to begin in 2025 and full capacity online in the first half of 2026. However, construction had been paused for a period of time due to funding delays, but has now restarted.

• Manufacturing approach Liberation Labs is focused on precision fermentation to produce bio-based materials for various industries, including food and industrial products. Unlike other facilities designed for a single organism or product, Liberation Labs is being built as a contract manufacturer to handle a range of processes. The company is also trying to copy the pharmaceutical model of contract manufacturing.

• Filling a market gap Liberation Labs aims to address a crucial supply gap for biomanufacturing in the U.S. market, providing scale and cost-effective solutions for consumer packaged goods (CPG) companies and other manufacturers. Liberation Labs has non binding Letters of Intent for close to 300% of their capacity.

• Experienced team Liberation Labs emphasizes the experience of its team in building and running commercial-scale fermentation facilities, setting it apart from other companies in the field. The company’s focus is on the design, construction, and operation of manufacturing platforms, rather than technology development.

How did Liberation Labs raise $50 million at a time when it is so difficult to finance operations?

• Commitment to construction Liberation Labs started construction with a committed investor group, which demonstrated progress and separated them from competitors who had only been discussing construction for years. According to Mark Warner, beginning construction gave them credibility.

• Financial structuring Liberation Labs strategically pieced together financing that was roughly half non-dilutive. This included a $30 million equipment finance mechanism and a $25 million USDA BNI loan guarantee. The fact that it wasn’t a complete equity build was attractive to investors.

• Investor confidence Investors had an underlying commitment to biotechnology and the necessity for manufacturing. The investors also believed in the Liberation Labs team’s experience in building and running facilities. Mark Warner noted investors are realizing that manufacturing requires a different skillset and people with experience.

• Filling a market gap There was a compelling belief that a wave of bio-manufacturing is coming and there is a need for it.

• Team experience Investors were attracted to the fact that the Liberation Labs team has experience building and running facilities.

What makes Liberation Labs a project for here and now?

• Filling a critical supply gap Liberation Labs is working to address a supply gap for biomanufacturing in the U.S. market by offering cost-effective and scalable solutions for consumer packaged goods (CPG) companies and other manufacturers. Mark Warner indicated Liberation Labs has non-binding Letters of Intent for close to 300% of their capacity.

• Strategic timing Liberation Labs was founded just as venture capital was declining. Despite the challenges of fundraising in a difficult environment, the company secured $50.5 million in funding, demonstrating its attractiveness to investors even during financial uncertainty.

• Experienced team Investors are realizing that manufacturing requires a unique skill set held by people with experience, and Liberation Labs emphasizes its experienced team in building and running commercial-scale fermentation facilities.

• Favorable location The Richmond, Indiana site was selected from ten national sites because it possessed existing infrastructure, including electric power, natural gas, water supply, and wastewater treatment capacity. The location also allows for cost-effective manufacturing due to reasonably priced dextrose and power.

• Government support While the company has had little direct federal support, it has acquired a USDA BNI loan guarantee. Mark Warner mentioned a need for a sense of urgency on the federal side to support bio-manufacturing.

• Alignment with market trends The company’s focus on precision fermentation and bio-based materials aligns with the increasing demand for sustainable and cost-effective alternatives in various industries. Mark Warner noted every major CPG has a microbial program, and many big multinationals have seriously engaged with Liberation Labs for capacity.

• The problem of scale up Mark Warner said the biggest obstacle in the industry has been cost. He added that products are not being made at a large enough scale and low enough cost for wider acceptance.

What does the future later in the 2020s look for companies that do contract manufacturing — will Liberation expand capacity? 

• Growing demand: There is “consistent and growing demand from startups, large multinational corporations, and governments alike”. Also, Liberation Labs currently has non-binding Letters of Intent for close to 300% of their current capacity.

• Focus on cost: The biggest obstacle in the industry has been cost, and Liberation Labs is trying to solve this problem with large scale manufacturing.

• Strategic expansion: Liberation Labs is considering expansion in the U.S., the Middle East, and Australia, and is doing site selection. The company plans to take multiple projects through FEL 2 to FEL 3 engineering to have a bankable project ready when the off-take agreements are in place.

• Capacity expansion details: Liberation Labs has plans for a potential expansion to a site “six, seven times larger” and is working on a feasibility study. The original plan was to expand to 4 million liters at each site. A larger facility would have about a 30% better cost structure.

• Timeline: Mark Warner estimates a three-year build time for expansions.

• Location advantages: Locating manufacturing in the U.S. can be cost-effective due to reasonably priced dextrose and power. The Richmond, Indiana site has existing infrastructure to support a 4 million liter capacity.

• Need for urgency: There is a need for a sense of urgency on the federal side to support bio-manufacturing. Mark Warner hopes to get across that there is a lot of effort out there, but it is mostly R&D, and that nobody is building anything right now.

Why Richmond Indiana, what’s special there?

• Existing Infrastructure: The Richmond site possesses all the necessary infrastructure, including electric power, natural gas, water supply, and wastewater treatment capacity, not just for the current 600,000-liter facility but also for the planned expansion to 4 million liters. Mark Warner indicated it was the best site he had seen in 30 years of site selection work.

• Cost-Effective Manufacturing: Manufacturing in the U.S., particularly in Richmond, can be cost-effective due to reasonably priced dextrose and power. The local power grid provides power at 7.3 cents per kilowatt hour, which is significantly lower than in Europe.

• Strategic Location: There are three corn wet mills within a two-hour drive of the site, providing a convenient source of raw materials. Also, a North Fork Southern main line runs by the site, allowing for potential rail access in the future.

• Expansion Potential: The site has the potential for a “six, seven times larger” expansion. The original plan was to expand to 4 million liters at each site. A larger facility would have about a 30% better cost structure.

Why are new contact manufacturing operations essential, when there are already idled old pharma manufacturing sites available. What does this new generation provide that’s special?

• Fit-for-purpose design New facilities are designed to be contract manufacturing sites from the beginning. This contrasts with older sites, where most manufacturing has been one or two runs.

• Focus on food and bio-based products New operations are designed first and foremost for food. Older pharma sites were never designed for food, and they struggle to make food products.

• Cost-effectiveness New sites like Liberation Labs can manufacture cost-effectively in the U.S. due to reasonably priced dextrose and power. The cost of power in Europe is much higher.

• Scalability New facilities are designed for large-scale production. Liberation Labs’ initial facility has a capacity of 600,000 liters with plans to expand to 4,000,000 liters. Mark Warner indicated that the whole reason to go to the bigger facility is that it has about a 30% better cost structure, so it allows larger scale products to be more economical.

• Experienced team New operations are run by experienced teams with expertise in commercial-scale fermentation. They possess the skills for design, construction, and operation of manufacturing platforms.

• Strategic location New facilities are located in areas with the necessary infrastructure and access to raw materials. Richmond, Indiana, was selected due to its existing infrastructure and proximity to corn wet mills.

• Pharmaceutical model: These facilities copy the pharmaceutical model of contract manufacturing, vs the old bioindustrial model of building single-molecule manufacturing sites. 

• Old is out. Older facilities may not be cost competitive, were never designed for food, and often are not designed for the flexibility required to switch between different bio-manufacturing runs.

Tell me about Liberation Labs in terms of the experience of their management team

• Experienced Personnel: The average person on the team has 15-20 years of experience.

• Been there, done that: The company prides itself on not being a group of recent graduates but rather individuals who have experience building and running facilities.

• Commercial-Scale Fermentation: Liberation Labs emphasizes that a significant portion of its company has experience running commercial-scale fermenters or fermentation facilities. Mark Warner indicated that you will find companies with hundreds of people in the space that don’t have anyone who’s actually ever done that, while half of Liberation Labs has done that.

• Familiarity with Competitors: Many team members have operated at or visited competitive sites like FermX, Olon, and Corden, giving them a thorough understanding of the industry landscape.

• Emphasis on Practical Expertise: Liberation Labs is focused on the design, build, and operation of the manufacturing platform rather than just technology development.