FROM ENTREPRENEURS

10 STORY Green Earth
Institute UTEC

Creating a Recycling-Oriented Society with the Power of Biotechnology

CEO Green Earth Institute Co., Ltd. CEO and Managing Partner, UTEC

PROLOGUE

Biorefineries are attracting attention as a technology that contributes to carbon neutrality, a worldwide issue. Biorefinery is a technology that utilizes the power of microorganisms to produce chemicals from biomass, a renewable resource. Green Earth Institute Co., Ltd. (GEI) is a company that produces compounds from inedible biomass -- coffee grounds, corn stalks and leaves, etc. --Tomohito Ihara, CEO of GEI, and Tomotaka Goji, CEO of UTEC, who have been focusing on this technology since before GEI was established, talked about their vision for the bioprocessing industry and how it can help solve the problems facing our planet.

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SECTION01 : Turning biomass going to waste into something that benefits the Planet

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SECTION01

Turning biomass going to waste
into something that benefits the Planet

GEI is a startup born out of the Research Institute of Innovative Technology for the Earth (RITE). Biorefineries are a hot technology that is being actively researched and developed around the world, but what are the strengths of GEI's technology?

Goji:
Could you describe your business again?
Ihara:
GEI's mission is "to nurture green technology and coexist with the earth. And our green technology is biorefinery technology, in which biomass is converted into sugar, which is then taken up by microorganisms and converted inside their bodies to produce chemicals. Biorefinery itself is not a special technology. For example, rice biomass is fermented by microorganisms to make sake. However, when making a certain chemical product, it is not always possible to find microorganisms that can conveniently produce only that product. Therefore, biotech companies around the world are now researching technologies to efficiently produce the desired chemical by recombining genes and other means.

Perhaps our unique feature in this context is that we have the technology to use inedible biomass as a feedstock. Currently, bioethanol is made from corn and sugarcane. While these are biomass and carbon-neutral, they can cause food problems because they are made from edible materials. In contrast, GEI is developing a process that uses waste materials such as corn stalks and leaves, sugarcane pomace, and coffee grounds as raw materials. In other words, it not only lowers CO₂ emissions, but also contributes to the realization of a recycling-oriented society.
Goji:
GEI uses RITE-developed corynebacteria and the RITE bioprocess, a process that can ferment both types of carbon contained in inedible biomass, and also uses an anaerobic reaction, which produces the desired chemical without using oxygen energy for its own growth. reaction. When I first heard about the technology from RITE, I was very impressed with the innovation and said, "Let's build a company together.” Twelve years have passed since the company was established. How is the current situation?
Ihara:
Looking around the world, there are other biorefinery startups that are doing genetic modification. However, simply creating good microorganisms is not enough for commercialization. GEI has an advantage in commercialization technology, and has already commercialized amino acids and is developing bio-isobutanol made from used clothing. We have already commercialized amino acids, and have made bio-isobutanol from used clothing which was used as jet fuel for JAL airplanes. It is safe to say that GEI is at the forefront of commercialization.

SECTION02 : No one was more qualified for the job.

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SECTION02

No one was more qualified for the job.

Upon the establishment of GEI in 2011, UTEC invested 5M JPY. At the time, there was no management members in the company. Goji, who was looking for a suitable candidate, had his eye on Mr. Ihara from early on.

Goji:
Mr. Ihara was my senior whom I admired during my days at the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry). When the so-called Public-Private Exchange Law was enacted in 1999, Mr. I hara was transferred to Recruit Co. as the first step in this process. After returning to METI, he retired in 2005 and moved to the private sector. It was sensational because at that time there were very few people transferring from the government to the private sector.
Ihara:
Before the Public-Private Exchange Law was enacted, I studied abroad and did research on intellectual property. When I returned to Japan and was thinking about doing work related to intellectual property, the Public-Private Exchange Law was enacted, and I was transferred to a department at Recruit Co. After returning to Japan and working there for two years, I decided that I wanted to do business in the private sector, so I moved to Recruit Co.

The turning point came in 2011. Koichiro Gemba, then Minister of State for Strategic Affairs, who I had known during my time at METI, asked me to review energy policy with him, and I became a planning coordinator at the National Strategy Office. That was when I was contacted by Mr. Goji, who said, "I have established a company called GEI and would like to discuss with you.”
Goji:
Biorefineries are a business closely related to the national energy policy. Since Mr. Ihara was in charge of energy and environmental policies such as green industry, I was eager to explain the project to him. However, GEI had just been established and had no management. I admit that I was explaining the business to him with an motive hoping that one day he would become the CEO one day. Mr. Ihara was an expert in this area and was also well versed in green policy. There was no one more qualified for the job than him.
Ihara:
You have contacted me again soon after I resigned from the Cabinet Secretariat following the change of government in 2012. I had been saying in the National Strategy Office that "from now on, the green industry needs companies that can compete domestically and internationally," but I decided to take on the challenge of being in a position to make that happen, rather than just saying it.

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PROBLEM

When Mr. Ihara joined GEI, there were seven members at GEI, including researchers from RITE and an administrative staff. There was no one to drive the business, let alone CEO to run the company. Even though GEI was an R&D start-up, there was an urgent need to expand the organization.

SECTION03 : IPO would have been difficult without recruitment support.

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SECTION03

IPO would have been difficult
without recruitment support.

Mr. Ihara joined GEI while the company's business was still in its infancy; how did UTEC add value and get the company off the ground?

Goji:
Can you tell us about what have impressed you in terms of UTEC's value add activities?
Ihara:
After I joined in 2012, I first increased the number of researchers to strengthen research. I had experienced business practice during my time at Recruit, so I took care of the business side for the time being. However, I was almost an amateur as an CEO. If I had any questions, I would immediately go to Mr. Goji for advice. To be precise, Mr. Goji always pointed out to me that I was wrong before I consulted him.
Goji:
At that time, our offices were next to each other in the same building. So, we were in close communication, and even though Mr. I hara was my senior at the government office, I did not hesitate to show up and offer my opinions.
Ihara:
Mr. Goji’s advice on hiring was especially helpful. We were considering hiring a CFO for the IPO, and at one point we were close to settling on someone because of the imminent schedule, but Mr. Goji said, "It is better not to rush into hiring someone who is not the right person for the job. Since Mr. Goji had experienced numerous IPOs, I decided to follow his advice. As a result, I met the current CFO, Mr. Ryuji Urata. It was also Mr. Goji who introduced Kaoru Ito, who had applied to UTEC and had IPO experience as a consultant. Ito is currently an executive officer and CBO and was a key player in the IPO. Without these recruiting support from UTEC, the IPO would have been difficult.

Of course, the financing aspect was also very helpful. Before we went public, we had raised a total of about 3,000M JPY, of which around 500M JPY came from UTEC. What was even more important than the amount was the fact that UTEC brought all the investors together. Japanese investors are very risk averse, and in many cases, they are willing to invest only after a lead investor can lead the investment round. As the lead investor UTEC allowed all the other investors to join the round.

FINAL SECTION : Leveraging the strengths in the biorefinery field to become a leading company in the industry

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FINAL SECTION

FINAL SECTION

Leveraging the strengths
in the biorefinery field
to become a leading company
in the industry

GEI went public in December 2021. How will it continue to grow? We asked them to share their outlook.

Goji:
IPO was not a low hurdle.
Ihara:
That was what we were told by the audit firms and securities firms in the beginning. Mr. Goji join us in discussions with the auditing firms and securities firms.
Goji:
I spoke passionately about the how Japan needs a company like GEI in the public market, not just about how the company can achieve its business plan. And of course, the reason GEI was able to go public was because of the business performance it achieved, such as the steady increase in sales. What are your future plans after the IPO?
Ihara:
GEI has been developing its biorefinery business with corynebacteria under license from RITE, but in the future, we are also looking to utilize E. coli, yeast, and even completely new bacteria. Our goal is to become a leading company in the biorefinery field. We would like to expand our business by leveraging our strengths in this field and develop new business models. We believe that this will lead to solutions to the problems facing the earth.
Goji:
Finally, could you also tell us your expectations for Japanese VC?
Ihara:
In the U.S., there are many investors who would take risks and show interest in startups that no one has invested in yet. Perhaps I should not say this from the standpoint of having raised money from VCs, but Japanese VCs are notably cautious comparing to U.S. VCs. Among them, UTEC was the first to take a risk and leadership in the investment rounds. However, there was a time when UTEC had to lower their value evaluation for our company because we could now achieve sales growth. I can only express my gratitude to UTEC for their persistence in supporting us until we went public. If more VCs like UTEC are established, the ecosystem surrounding start-ups in Japan will become even better.

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