5 questions with Noubar Afeyan

Noubar Afeyan, managing partner and CEO of Cambridge, Mass.-based Flagship Ventures, was visiting Washington, D.C., last week to pick up an honor on behalf of portfolio company LS9.

The South San Francisco-based company, which has raised more than $40 million in VC funding from Flagship Ventures, Chevron Technology Ventures, Khosla Ventures and Lightspeed Venture Partners, last week won the Presidential Green Chemistry Challenge Award in the “small business” category for its technology to produce hydrocarbon-based biofuels and chemicals.

Afeyan spent a few minutes last week on the phone with PE Week Editor-at-Large Dan Primack just after the awards ceremony wrapped up.

Q: What, from a business perspective, did this award mean to LS9?


The award is recognition of substantial innovation in making a greener version of chemicals and fuels. From a business standpoint, that’s precisely what LS9 has enabled—allowing our partners to use sugar as the starting raw materials for fuels rather than petroleum.

Q: It’s called the Presidential Green Chemistry Challenge Award. Was President Obama himself there to deliver it?


No, but there were a lot of Obama Administration people around. Lisa Jackson [administrator of the Environmental Protection Agency] presided over the ceremony and signed the award plaque. Obama’s chief scientific advisor, John Holdren, was here and read a message from President Obama.

Q: One stumbling block for VC-backed biofuel companies has been obtaining enough project finance to build production facilities. How is LS9 handling that aspect of the business?


This is a multi-step process, and we’re very engaged in forging partnerships. We have one with Procter & Gamble, and on the fuel side have a smaller one with Chevron. These sorts of arrangements lower the barriers to funding. It’s almost a catalytic approach to funding.

Q: Have you talked with any others?


We’ve obviously had discussions with banks, but partnerships are our primary approach. This award also should help get us in front of large strategic partners, particularly when you consider that the other winners this year included Dow Chemical and BASF.

Q: Have you learned any lessons from the VC-backed biofuel companies that have come and gone before you?


I wouldn’t so much say lessons, so much as that we approached this deal with the view that capital would be a scarce resource. Nothing we’ve seen so far makes us think that we were wrong in that assessment.

Time will tell if our strategy of pursuing partnerships over large funding rounds is the right way to approach things. It’s worked for us on biotech investments, and do think it will work here.