Matrix Genetics Pursues the Algae Fuel Dream in the Lab, Not With Big Steel Tanks, Giant Ponds

5/12/11Follow @xconomy

Margaret McCormick has been dreaming of ways to make microorganisms do big things since her grad school days in biology at MIT. Years later, the scientist-turned-venture capitalist is now in a position to act on those dreams as CEO of a Seattle-based startup called Matrix Genetics.

The idea is about as big as startup visions get: engineering single-cell varieties of algae to become the workhorses that crank out commercial quantities of oil.

“I’ve always been fascinated by the power of single-cell organisms,” McCormick says. “There is so much unlocked potential for them to help us solve big problems.”

McCormick, one of the featured speakers at next week’s Xconomy event on alternative fuels, has led this quiet effort for the past three years inside Seattle-based Targeted Growth. While Targeted Growth grabbed headlines with hybrid camelina seeds that it turned into jet fuel for Boeing planes, McCormick and her team of a dozen scientists plowed away behind the scenes at something they believe has much bigger long-term potential.

The work has been focused on modifying one of the relatively simple genetic strains of algae, known as cyanobacteria, to produce more oils. Now that some critical early tests have been passed, McCormick says this effort is spinning off into a company of its own, which she believes can compete with a couple of the big names in the business of modifying algae strains for fuel. That includes Craig Venter’s Synthetic Genomics (which has a partnership with Exxon Mobil) and Cambridge, MA-based Joule Unlimited.

These are still the earliest of days for Matrix as a company. The company is made up of a team of 12 scientists, eight of them with Ph.Ds, housed inside the Institute for Systems Biology. Jim Roberts, a professor at the Fred Hutchinson Cancer Research Center, and Fred Cross, a professor at Rockefeller University in New York, are a couple outside advisors who have played a key role, McCormick says. So far, Matrix has five patent applications filed, with more to come, and it is on the fundraising trail, with a goal of nailing down its first $10 million to $15 million, McCormick says. But even at this very early point in the company’s development, McCormick says she has already had some preliminary talks with oil companies that she hopes could lead to technology licensing deals over the next couple years.

Roberts, who’s close to the project, has some bullish things to say about its progress. “The future of Matrix is very bright,” he says in an e-mail. “Our progress surpasses other companies that are also interested in developing cyanobacteria as an oil-producing organism, such as Synthetic Genomics and Joule.”

Exciting as it may be in the lab, it’s still quite a long way from being applied in the business world. The global energy and transportation market is staggering in size, worth an estimated $7 trillion a year, and Matrix Genetics has no illusions that it will take over a big chunk of it by itself. The business model depends on making important discoveries for turning cyanobacteria into oil factories, and then licensing the technology to big oil companies that have the money and expertise to refine, distribute, market and sell the energy products. Matrix, at this point, is sticking to its basic science, and isn’t banking on raising a huge amount of capital that would be required to build up its own commercial infrastructure.

“We believe the return on investment for us will be in the genetics. Our expertise has always been in the genetics, and we don’t have the team that will be needed to build out the entire value chain,” McCormick says.

The history of how this came about is pretty interesting. Targeted Growth, a company that’s been around more than a decade, has a lot of experience in using knowledge of genetics to boost crop yields. As years went on, and oil prices went up, Targeted Growth got more interested in applying its ag/bio know-how into making plant-based feedstocks for renewable fuels. Camelina seeds seemed like a good bet, given they can produce oils without competing for acreage with food crops on the best agricultural soils. Targeted Growth used traditional hybrid cross-breeding techniques, which farmers have used for thousands of years, to come up with seeds that boosted oil yields by about 10 to 15 percent per year, McCormick says.

The constant search for higher-yields in camelina, however, has its limits, especially when you talk about the scales required for fuel production. Traditional breeding techniques might be able to give rise to another 40 to 50 percent yield increase before hard-core science really has to step in, and use molecular assistance technologies to retain certain desired traits in new offspring, or splice in new snippets of DNA, McCormick says.

Even then, camelina doesn’t have the potential of a fast-dividing organism like algae. The Matrix team, which includes scientists from Merck, Stanford, and the University of Washington, gravitated about three or four years ago to cyanobacteria for a few reasons, McCormick says. The genetics of cyanobacteria are simple. Unlike higher organisms like leafy plants and animals, the cyanobacteria cells have no nucleus. The DNA is more accessible, and more malleable than in higher organisms, she says. Since you’re starting with a simpler template, that makes it a bit easier to get a grasp of the molecular pathways that cells follow through various life processes like growth, division, and death. The Matrix team found some kindred spirits at the Institute for Systems Biology, who were also interested in using cyanobacteria to learn more about the activity of whole “systems” within the cell, not just one gene or one protein in isolation.

I wondered what has actually happened to make it feasible for this kind of work to go from basic science to a company. The first step, McCormick says, was to show that it could modify the organism to produce different kinds of lipids that can be converted into useful oils. The second was when Matrix showed by making genetic modifications, it could produce “many-fold” improvements in lipid yields, she says. The third step was when it developed tools for modifying cyanobacteria so that engineers can do more than just come up with different lipids, but other kinds of products, too.

It’s possible that the cyanobacteria could be grown inside fermentation vats and fed a diet of sugars, or grown in outdoor open ponds that rely on photosynthesis. That’s a critical business question, but Matrix hasn’t really crossed that bridge yet. McCormick said those are the kind of questions that will be worked out “downstream,” with partners who specialize in those kinds of capital infrastructure questions. Matrix, for now, is staying focused on its roots in the lab, working on strains of cyanobacteria that can modified for different purposes. McCormick definitely gives off a vibe of excitement, but she also is careful not to overpromise about what Matrix can do about the world’s climate change and energy problems.

“We definitely have the path forward for how we can take a scientific dream and turn it into a commercial reality. It’s really exciting,” McCormick says.

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