Isabel Vercauteren | Aphea.Bio

What prompted you to start this business?

Isabel Vercauteren: Aphea.Bio was started up in response to new scientific insights and technological developments, on the one hand, and the demand for greater sustainability in the agricultural industry, on the other. It has been known for quite some time that some micro-organisms have a favourable effect on crop growth and/or health. The idea of developing crop protection products based on micro-organisms is, therefore, not entirely new in itself. The new scientific insights and results obtained at the Flanders Institute for Biotechnology (VIB) laid the foundations for the launch of Aphea.Bio. Farmers have relied on chemical crop protection products for a long time, but many of these have currently come under pressure due to excessive toxicity or loss or activity and, as a result, the development of resistance. This is why the spotlight is being trained on alternative crop protection products such as biostimulants and biological control agents: a market that has been growing strongly, year after year (>13%), and for which a global market value of over 12 billion euros is forecast by 2022. Aphea.Bio is an R&D company developing superior products for a more sustainable agriculture based on novel, naturally occurring bacteria and fungi. Aphea.Bio can count on a strong team of scientists and technical experts led by Steven Vandenabeele, CSO. The entire development process takes up quite a bit of time. First, we identify the organism, and then we cultivate it. This is followed by tests performed in the greenhouse. This pipeline is continuous, and takes up around two to three years. The next step consists of field trials. We also experiment with the various product formulas. The last phase involves the registration process, which takes two to five years to complete, on average.

How difficult was it to raise the start-up capital?

Isabel Vercauteren: It took approximately ten months to raise the necessary capital of 7.7 million euros. Considering that this was an investment in a start-up in the field of Research & Development – which is, after all, a high-risk investment – it took time to persuade investors with venture capital. Being able to present a strong business plan was of crucial importance. In the end, we managed to put together an outstanding consortium of investors, which includes V-Bio Ventures (lead investor), PMV, Agri Investment Fund, VIVES, Qbic II, Gemma Frisius Fund KU Leuven, Group De Ceuster and VIB.

The government-owned independent investment company PMV, (Participatiemaatschappij Vlaanderen) and Flanders Innovation & Entrepreneurship (VLAIO) were also prepared to join us right from the start by financing 1.5 million euros in shares and 1.3 million euros, respectively. What made these partners of the first hour decide to join you?

Isabel Vercauteren: Allow me to quote our investor PMV. On the one hand, PMV believed in the social added value. On the other hand, the investment company anticipates that the sale of the venture, in the long term, could produce a tidy sum. Although Aphea.Bio is only a starting company, it became clear straight away that this is a unique opportunity. Flanders played a pioneering role in biotechnology, and we can be proud of our knowledge. We are one of those small companies that will be doing some wonderful things in this field and is in the vanguard of innovation. This is all happening here, and we can justly take pride in this development. To quote PMV, the company enjoys investing in young, starting companies such as ours, and helping them grow. Even if an investment like this also means uncertainty and taking a risk. Some investments go awry and some turn into amazing success stories. It is not without reason that financiers like PMV provide venture capital. VLAIO was also an obvious choice. The agency provides support to Research & Development projects for innovations that play a key role in the realization of a business case that can strengthen the company. This can also be read on the VLAIO website.

You have institutional investors (PMV and VLAIO, linked to the government) on board, as well as private players. Are there any differences with regard to emphasis?

Isabel Vercauteren: Not only were we able to raise the necessary capital with the above-mentioned consortium, but it has also brought us a wealth of expertise. Of course, every party has its own, specific rationale. The Aphea.Bio’s investors’ consortium’s greatest strength is that we have investors that are rather technology-minded, but also operate close to the market and have close ties to the agricultural industry.

Isn’t negotiating with so many different partners rather difficult?

Isabel Vercauteren: I do not experience it as such. The investors’ consortium is highly complementary and very constructive. After all, we all want the same thing: to make sure that Aphea.Bio becomes a success story.

Return on investment is always a priority for private equity players. Is this something you can concur with?

Isabel Vercauteren: Yes, but this is equally important to Aphea.Bio. Competition is strong. So, if we aim to play a prominent role in the field of alternative crop protection products and wish to remain ahead of the competition, we will need to focus on return on investment each and every day. This is why we are adhering to a strict business plan, in consultation with our partners. Bringing this product to the market is very expensive. This also means that the private equity players are pushing us to focus on cost efficiency. But this is common sense, right?

How independently can you operate?

Isabel Vercauteren: We have approved a solid business plan, together with our investors. Progress with regard to this plan is explained in our executive board and adjusted where necessary. We have also made clear agreements and defined milestones. The plan nevertheless allows us to operate highly independently with regard to the day-to-day management of the company.

Private Equity/BVA
Author: Karel Cambien