SG’s biodegradable plastic maker RWDC raises $133m in Series B round

Photo by Ishan @seefromthesky on Unsplash

Biodegradable plastic maker RWDC has raised $133 million in a two-stage Series B funding round co-led by venture capital firm Vickers Ventures, energy and resources player Flint Hill Resources, Switzerland-based pension fund CPV/CAP Pensionskasse Coop and Interogo Holding-linked fund International SA, the biotech company said in a statement Tuesday.

The round also saw the participation of existing investors Eversource Energy’s pension fund Eversource Retirement Plan Master Trust and venture capital investor WI Harper Group.

“This investment will help us significantly increase our production capacity so that we can meet needs of brand owners,” Daniel Carraway, co-founder and CEO of RWDC, said in the Tuesday statement.

The funding will be used to expand production capacity by adding a facility in Athens, Georgia, by repurposing an idled factory.

Plastic waste has grown to a global scourge. Around half of all plastic was designed to be used just once, according to the U.N., which said around 300 million tonnes of plastic waste is produced a year and more than 8.3 billion tonnes of plastic has been made since the 1950s.

RWDC previously raised a total of $35 million from investors including Vickers Venture Partners, EverSource Capital and WI Harper Group, according to Cruchbase data.

Dr. Lim Xinhong, director and analyst at Singapore-based venture capital (VC) firm Vickers Venture Partners, told DealStreetAsia recently that based on the amount of interest RWDC has seen, he wasn’t concerned about the difficulties of convincing large fast-food chains to change their packaging.

“Even while deciding to make the investment from the earliest days, we had seen evidence that they were able to get things in place that would enable them to scale,” said Lim, who has a doctorate in Developmental Biology from Stanford University.

“They have already sold customers and customers have been running many production trials with the material and have reported very satisfactory results,” Lim said. “The demand and the pricing that they’re using is validated by the contracts that they’ve already signed, some with the world’s largest brand owners in the fast-moving consumer goods [and] in the food and beverage businesses.”

Lim said the demand was the reason RWDC was raising more capital.

To be sure, creating a biodegradable plastic alternative, getting it accepted by large-scale businesses and scaling up production is no mean feat.

Chandan Joshi, Asean consumer industries leader at EY, said consumer and retail companies face multiple hurdles to adopting biodegradable plastics.

Companies sourcing from third-parties may already have long-term contracts in place with suppliers which can’t meet new environmental needs, he said via email. In addition, producing the new packaging on their own would require changes to capital equipment and production, as well as likely being costlier, he added.

“Even if they are able to implement these changes and absorb the costs to their business, the safety and quality of their new packaging and processes will need to be re-certified,” Joshi said.

Edwin Seah, head of sustainability and communications at Singapore-based industry sustainable-advocacy group Food Industry Asia, told DealStreetAsia recently that a problem with many sustainable plastic products is that often, designers don’t work with the end-users, such as fast-moving consumer goods (FMCG) players to meet their needs.

“Does [an alternative package design] hold up for a liquid, frozen food? Does it hold up in certain temperatures or does it hold up in different distribution contexts?” which may vary widely between developed and emerging markets, Seah said. “The innovation comes up because there’s obviously a problem. There are a lot of good-intentioned people and innovators. But we need to then link up with industry who are using it to ensure that the innovation or the design and the scalability is going to happen.”

RWDC has been involved in FIA’s circular materials lab, Seah said, adding “We consider them a material solutions provider.”

Zhaotan Xiao, president for the Asia Pacific at RWDC, explained to DealStreetAsia in February, that the company produces polyhydroxyalkanoates, or PHA, as a biodegradable biopolymer from fermentation of plant-based oils – even rancid ones – or sugars. The by-product of the fermentation process is a high-quality animal feed, he added.

PHA’s profile for biodegrading is similar to cellulose, he said.

PHA has around 150 types, all food-grade, which can be used for different applications, such as bottles, cup lids and even as a biodegradable dispersion coating for paper, Xiao said, noting the coated paper is recyclable. He added the company is a business-to-business producer of resin pellets and won’t be making packaging directly.

Xiao noted that PHA is no longer under patent, but that RWDC’s “secret sauce” was trade secrets around scaling up production of resin pellets. The pellets can be used in clients’ existing production, Xiao said.

“We work with our clients to find out what they want. And we design the right formulation for the resin,” he said. To be sure, there are limits to PHA’s uses: Xiao noted that it likely can’t be used for products which contain microbes, such as probiotics.

Construction of 25,000-tonne a year production modules in the U.S. had been expected to begin this year, with production to begin in late 2020 or early 2021, he said at the time. But in March, he added that whether the 4,000-tonne production scheduled to come online in the second quarter would depend on whether contractors would be able to come back to work. He also cited uncertainties over some government programs the company had expected to use.

FIA’s Seah noted the difficulties of creating a fully biodegradable plastic, with “marine degradable” offerings sometimes working in the Atlantic Ocean and not the Pacific Ocean due to temperature. Xiao said field tests done with its PHA formulation in the Atlantic Ocean showed marine degradability.

This reporter used one of RWDC’s straws in kombucha and then left it in two separate houseplant containers for more than two months. It’s remained a straw, although the results were obviously not very scientific and didn’t offer much of a real-world simulation. The first house plant subsequently died, although the reason is unknown, while the second plant remains healthy.

In an email, Xiao noted consumer potting soil is generally sterilized and contains no microbes, and small pots may lack sufficient microbial growth for biodegradability; he added it would usually take around four months to have visible degradation in Singapore soil.

Xiao said that if PHA-based plastics end up in the ocean, marine animals who accidentally consume them would be able to digest it.

RWDC has its two founders: Roland Wee, who specializes in designing manufacturing systems, and Carraway, who has experience developing PHA and in developing biopolymer resin.

Editor’s note: This article was updated on May 7 to include additional comments from Zhaotan Xiao, president for Asia Pacific at RWDC, on PHA plastics’ biodegradability in marine environments, and on why it may not break down in houseplants. The article has also been corrected to indicate PHA likely would be unsuitable for use with products containing microbes.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.