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Innovate, Validate, And Collaborate: An Interview With Locus Performance Ingredients CEO Tim Staub
I’m excited to speak with Tim Staub, CEO of Locus Performance Ingredients. He joined Locus in 2020 after spending many years doing some innovative and startup-focused companies in the biotech and other spaces, and then a lot around chemicals and chemistry. We are going to be talking about Locus innovation, how Tim got into this business, and more.
Welcome to the show.
Thank you for having me.
You have had a varied career across chemicals and materials. How did you get into this space, and then what have been the key things about it?
There are a couple of things. One is I have strong views, which gets me fired once in a while. I’m being a little coy, but companies go through this valley of death in this industry, and you find out at the back end of the valley that it is not a gentle incline. It’s Mount Everest. It’s a sheer cliff, and if you are not a Mountaineer or you don’t have a team of mountaineers with you, it’s hard to scale that cliff.
This is my seventh startup. I started my career initially with 3M Company and then went back to business school and went to work for Monsanto. While I was at Monsanto, I became director of forestry biotechnology. I don’t want to take credit for it because others did a lot more work, but I was one of the folks who started a company called Arborgen, which is now the world’s largest forestry company. I went from that to another large company, Olin Corporation, which then spun into Arch Chemicals, which was after I left, was acquired by Lonza.
It was awful. It’s not that Olin was awful, but going back to a large company after having this entrepreneurial experience with Monsanto was difficult for me. I saw how passionate I could become and how much fun it was to work on something innovative and interesting and new age, and I made the decision to pivot. That was in October of 2000. I have not looked back.
I have done a lot of varied things. I ran a paint company for a few years, and then I went back into forestry biotechnology with a company in British Columbia, which Arborgen later acquired. Then, I bought a manufacturing company and semi-retired for a while, trying to hunker down in Richmond, Virginia, and raised my kids. That also was awful. Even though it was entrepreneurial, I was not on a team. It was not high-tech. It was not chemistry or biotechnology, so I came back into consulting mostly out of sheer boredom and found my way back in the industry. That was in 2011.
You needed to get back into the team environment and into maybe a more creative environment. Is that what you see with biotech? Is it the creativity?
Companies that thrive in the chemical industry are innovators.
It’s innovation. When I was at Kellogg getting my MBA, everything at Kellogg was team-based. I can’t recall, but it was too many years ago. There was a group of 3 or 4 of us, and we tried to pick a topic that was mundane because we were busy. We wanted to write an easy paper. It was an Industrial Economics course, so we picked polyethylene.
It’s not so boring.
I didn’t realize that. I thought, “Commodity resins. How complex can this be? Supply-demand, cost curves, and average costs. This is a slam dunk. I will be able to do this while I’m doing all my other work.” It was fascinating because I went back to when the predecessor to VP. I think it was ICI. I can’t remember. It had the first reaction. There was an accident where it polymerized overnight because they were not keeping watch of what was going on and then studied linear low density and high density.
I realized that the companies that thrive in that space and in general in the chemical industry are the innovators. The inventors of the technology and the companies that further innovated that technology to create competitive advantage fascinated me. That is what brought me into the chemical industry. I accepted a job with General Electric. They hire ten MBAs a year. They start with 900 and then they run you through the gauntlet and they ended up hiring ten. I had one of those jobs until I met a guy from Monsanto, and Monsanto swept me off my feet. From the office of the president of Monsanto Chemicals, I called the VP of HR for General Electric and told them, “I have changed my mind. I’m not taking your job to go work for Monsanto,” and it was the best decision I ever made.
There are always these serendipitous moments in our lives when we make decisions that take us on a path. It sounds like it has been a good path for you.
I have had many of them. I could go on and on. For this opportunity with Locus, I was consulting, which is what old guys do when you don’t have a job. I was consulting in the industry and had clients all over the place. I was working in contract manufacturing and fermentation. I was helping companies in San Francisco, Boston, Raleigh-Durham, and San Diego find places to manufacture things. I was guiding them through that valley of death.
I was at a conference in Des Moines, Iowa, and a guy that worked for me at that company I mentioned in Canada many years ago called my name. I had not seen him in a long time. I turned, and there was Paul. He introduced me to Andy Lefkowitz, who is the Chairman of the Board of Locus Fermentation Solutions, the holding company that sits over Locus Performance Ingredients. That Thursday, we had a cup of coffee and they told me what they were doing with modular fermentation, which we will get to, and that I had to see it for myself. I’m from Missouri, so I said, “Show me.” I jumped on a plane and came to Cleveland the following Tuesday, and Wednesday, I was working for him as a consultant. We started this company from scratch. It was an idea, and we launched it commercially eleven months later.
We signed this big Dow deal. It’s out in the press. It’s a global deal at Dow Chemical company in home and personal care. We are going to have our first commercial facility operational in Ohio in August 2022. Normally, when you build a large manufacturing facility, it takes 24 to 36 months, but with nodular fermentation, we can build in 6 to 9 months anywhere in the world where there’s water and electricity.
You have already said that you were consulting with Locus. Something makes you come out of retirement or jump into a CEO job, and that is not for the faint of heart. What is it about Locus and Locus Performance Ingredients that captivated you, and what’s unique about what they are doing in the market?
The first hook was technology. It was the ability to scale modularly to add capacity when you need it and not go build. I worked for Green Biologics. We built a 32,000-ton plant in Little Falls, Minnesota, to produce biobutanol and bio acetone, and then we had to wait for the market to catch up with us. It’s a high burn rate and it takes a lot of capital to survive, and ultimately, Green Biologics did. I had left by then, but the company failed. That plant is now with Superbrewed Food. They are making a food protein facility out of that.
I have seen this happen over and over again in the industry where to get your economies of scale, like in the chemical industry, scale comes with size and it drives you costly, but you got to get the volume, and in the industrial biotech industry, there are only two ways to do that. One is to cut these terrible deals called off-takes. They are doing us a favor by off taking our product. We have all this amazing technology that we have been working on for decades, and they are doing us a favor by giving us an off-take, or you got to save a bunch of money or raise a bunch of money to survive that period of time that takes to get to breakeven.
With modular fermentation, you can add it as you need it. You get to break even very rapidly, and then you can fund your growth with non-dilutive capital called debt. It’s a wonderful thing. I’m a P&L guy. I’m not a microbiologist. I’m not a chemical engineer. I hang out with them. I walked through that facility and I saw dollar signs because I saw the ability to get to break even very rapidly.
In the chemical industry, scale comes with size.
The other thing that I saw was that spark of teamwork. I interviewed a bunch of folks and selected 3 or 4 of them to be part of my original team. Andy gave me freedom because of our structure. We have this holding company structure in these six operating companies underneath the holding company to run my show and to build the team my way. We have put a lot of energy and effort into our core values, what our vision is, who we want to be, and what our BHAG is. I don’t know if you have heard of Big Hairy Audacious Goal.
It’s a phenomenal team, and that was one that got me. I was thriving as a consultant because it’s a unique space than I was in. This contract fermentation is complex because you have got to put the pieces of the puzzle together. Nobody has the DSP. You have to find somebody who has the fermentation scale and can do the final steps. It’s like putting a puzzle together, and I’m a connector in that space. I know everybody. This is my swan song. This is it. This is my last run, and I’m going to enjoy this until I’m ready to go do something else. I’m never going to retire. I’m just going to do something else.
It sounds like you have tried a couple of times and you have failed at retirement, so you have to keep finding your next swan song.
It’s true. I can play golf, but I find it excruciatingly boring. I like the company, but I don’t enjoy it, and I’m not wired for the sun as you can tell. I have ideas on what I’m going to do in my next life, but retirement is not for the faint of heart.
It’s interesting that you talked about scalability because the scale has been a real issue across all of the biotech and biosurfactants. At the end of the day, it needs to be more than a niche play because the customers, whether they be consumer products companies or industrial institutional surfactants companies, they need that scale to satisfy their customer requirements and their demand requirements and meet their own sustainability and other green goals. Scale is a huge issue in this industry and as we go through this process of greening the chemical industry.
You have reminded me of the other key thing that hooked me on the chemical industry and then brought me into industrial biotechnology, and it is collaboration. The more complex an industry and technology are, the more critical collaboration is. The only way to get through that valley of death is to have a lot of friends to show you the way. Otherwise, your corpse is in the middle of the desert or on the side of a cliff. We can never forget that it’s about them and not us. Our job is to make our customers successful.
One of the difficulties with biotechnology is that we often get so caught up in the technology that we start to think it’s about us and never about us. It’s always about solving pain points, solving problems, helping customers, bringing new technologies to market, and helping them build a competitive advantage. We started all this thinking originally that our surfactant is so efficacious that you could use less of it. Our original value proposition was to take this out, put this in a lot less, and we will be cost-competitive.
We have learned that that’s not a real value proposition. Our real value proposition is not just the performance of the formula. It’s the overall cost of the formula because this is not a drop-in. You got to start all over again. You got to reformulate and you got to create a formula that does whatever it is your existing formula does equal to or better, but then make it sustainable.
It’s interesting because one of the challenges I have seen throughout my career in chemicals, both in the industry and as a consultant, is this commitment and willingness to be able to get your customers to reformulate with your product. Everybody wants the “drop-in” and those drop-ins, unless you can create some other alternative values and there is a value that’s created elsewhere in that entire customer experience, you have got this view of it’s either a drop-in or I, the formulator, have to do a lot of work to make your product work for me. How did you overcome that hurdle? It is a hurdle to get companies to formulate your product.
The first thing we did was collaborate with some large companies and collaborated with a formulation lab. The second thing we did is we built our laboratory in Richmond, Virginia, so we have a very sizable, very expensive lab partly focused on the formulation. We created formulary guides as others do in the industry. We started from scratch and we looked for other bio-based products like Brontide. We came up with a really great micellar water makeup remover with Genomatica with their Brontide product.
What we are trying to do is not just bring our ingredients in and say, “Look at how great this is,” but bring a solution that says, “Here’s a starting formula.” You are giving them breadcrumbs, as what Greg Smith, my VP of sales marketing, calls it. You are giving them something to start with and you are showing them the way, but the interesting thing is because of the 1,4-Dioxane issue and, to a lesser degree, because of some industry concerns with the black eye that they get with palm-based chemistries, they are already reformulating, so our timing is perfect because we are bringing in a new opportunity.
We can never forget that it’s about our customers, not us. Our job is to make our customers successful.
What’s interesting about our sophorolipids is that they are multifunctional. Even though the original value proposition isn’t quite a fit, the current value proposition is a great fit. You can knock out 2 or 3 surfactants with one sophorolipid and then build around that with some other bio-based ingredients and end up with a product that outperforms your product, and we did it with that micellar water. We went right up against the leading standard. I don’t think it’s appropriate to call them out by name but Google it. You will know who we are talking about. It’s the leading standard for micellar water and we blew them away. We outperformed on every single test that we went upon.
This is a good segue into this deal that you talked about with Dow. It sounds like you have got a product that can reformulate and knock some existing products out of a formulation, and then you have announced a deal with Dow to distribute your products. How did that deal come about and what does it mean for you guys?
It’s huge for us, and it’s part of what I do for a living because when I came into industrial biotechnology, my real focus was business development. I’m a strategic thinker. I don’t want to overring that, but I looked at everybody in the industry. I dissected the industry and looked at their product offerings, how they went to business, the size of their sales forces, how many laboratories they had, and what their formulation capabilities were. I had a scorecard. If you can think of them, I assure you that I looked at them and then narrowed it down to about 6 or 7 that I thought were top candidates. I reached out and I started courting.
Others saw problems early on. Dow saw an opportunity, so to their credit, they helped us immensely by guiding us, like, “Can you improve the clarity? Can you reduce the odor?” They did not give us solutions to do that, but they asked, “Could we make these improvements?” We went back and made those improvements based on their feedback and our ability to demonstrate to them that we knew what we were doing technically, that we were competent, and that our manufacturing capabilities could pivot and address the issues they raised. It was very significant in terms of their confidence in our relationship. It took eighteen months. This was not an overnight thing. I don’t want to put words in their mouth, but it is a collaboration. It’s very transparent. We are very open with one another.
We are manufacturing products, but we are putting Dow’s name on the labels, so ultimately, it will be marketed as a Dow product to our specification, and then the structure of the deal is that they are an exclusive partner globally in home and personal care. We continue to pursue collaborations, paints and coatings in the case market, textiles, metalworking fluids, agricultural adjuvants, and other implications, but this is a pretty big opportunity for us. Now, we have to keep up because Dow has 7 or 8 labs around the world, quite a few sales folks, and superb distribution to get after those smaller accounts. It’s going to be a lot of fun.
This is a global deal, so this is going to create a global footprint for Locus PI’s products.
It is a global deal, and we were already global. We have already been working with distribution in Europe and the Asia Pacific. We have been sampling companies in Japan, Korea, Thailand, Malaysia, Indonesia and Australia, so we are pretty well connected, but we don’t have the resources, the outreach, the logistics skills, or the regulatory skills that Dow has. Being in a partnership with a company that has the resource base that a company like Dow has is meaningful. We can speed dial them and get some awfully good advice and avoid making mistakes early.
It’s an interesting David and Goliath challenge in the sense of how do you not lose. There’s always a risk when we talk about these major companies. Being a small startup and doing business with a major company can be awesome. It’s a huge, fantastic opportunity, but it can also be a little bit of a scary opportunity in the sense that you can get lost in that deal and not be able to stay true to your own business objectives, core values, etc. How do you ensure that Locus PI does not lose sight of who it is and what it’s about in the context of a bigger deal with a major company that has its own really strong brand, sense of identity, etc.?
I will answer it in two ways. One is collaborations are not feel-good exercises. It’s all about written goals, expectations and trust, and that requires a lot of communication. It’s a wonderful relationship. It’s a relationship of deep mutual respect and trust. We can do things that Dow can’t do and Dow can do things that we can’t do. We hold each other accountable and we talk frankly, but there’s also a contract behind this.
There are specific performance requirements in the contract for both of us. There is a governance structure built into the contract. This is what I mean by collaborations are not a feel-good exercise. Teamwork is not about feeling good. Teamwork is very process-oriented. It’s all about the goals of the company, how you cascade those goals, and how you link accountability to roles and responsibilities.
I love teamwork because I’m a process-oriented guy. It’s process-oriented, but folks who don’t believe in teamwork don’t see that. They just see it as, “Do your job.” The other thing I would say is this is not our only collaboration. It’s our only public collaboration. We have other collaborations and others in the work, but we haven’t announced others because they are not ready. Outside of Locus Performance Ingredients, our sister companies in Locus Agriculture, for example, has a great relationship with a company called Bluesource. It is a big global carbon trading company, and our bio-energy group has a deep relationship with a company called Creedence, which is the largest distributor in the Bakken.
This is our model. It sounds a little cutesy, and it’s not meant to, but our job as Locus is to innovate and then bring it to market and validate the value proposition and what the price point is, figure out what our cost of the manufacturer is going to be, understand what the margin spread looks like, and what scale does to bringing down that unit cost to get sold, and then, collaborate. It’s to innovate, validate, collaborate, find a big partner who can get you into the market sooner, and pull that discounted cashflow back to day one so that we are driving the net present value and shareholder value, and then pivot, rinse and repeat.
I’m assuming you guys are still going to continue to market on your own or will you primarily go to market through partnerships?
Teamwork is very process-oriented. It’s all about the goals of the company, how you cascade those goals, and how you link accountability to roles and responsibilities.
i&i, for example, is excluded from the Dow deal, at their request, I might add. We would have loved to have seen it in there, but they are not big in i&i. It’s not their core focus. Metalworking fluids, I mentioned. Paints and coatings are a big one. Particularly, dispersions. The sophorolipids are a great wetter and a good dispersant. For agricultural adjuvants, you do need regulatory. You got to get EPA FIFRA to be in that market, so we are working on that, but that’s a particular interest to us. It’s a long story again. I know I talk too much, but the size of sophorolipids affects their ability to perform. We think that there are unique applications and things like metalworking fluids or agriculture where we can bring additional value to the marketplace.
When you zoom in on any piece of metal with a microscope, what looks smooth is a mountain range. It just depends on scale. The same is true with lead. It’s not a flat surface, so if you can get down and help that wetting, allow the active ingredient, the fungicide, pesticide or whatever it is to perform more efficaciously, then you have a value proposition, and those are the things we are looking into. We are looking into industrial water treatment. There’s a range of opportunities, and at some point, you got to step back, prioritize, and then pick them off one at a time because it can overwhelm you.
It’s an interesting thing. You have got a lot of heritage in big companies, and you have been in the industry a long time, but as a new company, you have an opportunity to do business differently. Often, we say, “That’s what our business process is. That’s how we go to market. That’s what we do.” It affects what the customer, your supplier experiences and your employee experiences. Are you guys taking a different view? How maybe are you taking a different view in particular on the customer experience and customer value and how you engage and support those customers?
That validation step is important, and you never really lead. You just play a different role. Think about Dow, for example. Dow is a big company and they follow the old Pareto principle. I’m probably making this up, but twenty companies generate 80% of their profit, and the rest of the industry they send to distribution. There are all kinds of different distributors, as you all know. Some are good at innovating and showing technology, and others are milkmen and they make their rounds. They are like, “Here are the 27 products that I can sell you today.” We are focused on the early innovators or the early adopters.
Anyone who can formulate like the formulation labs, the contract manufacturers, the co-packers, as we call them, or those indies or small brands. You can launch a brand on Amazon and be a millionaire overnight in some of these cases. That’s where all the early innovation takes place, but we are also innovating with large companies. Most of whom are under NDA. These are the brands that you see on the shelf, and those collaborations will transition to our relationship with Dow, but we are working with Dow to try to figure out how we can help drive innovation into the marketplace and what role we can play.
It may not be with our own brand. It may be on behalf of Dow, but we are not going anywhere. We are going to stay out there, continue to validate, and then bring it back to our collaboration to say, “Here’s what we learned.” If Dow was on this call with us or if my friends at Dow were here, they would agree that we have done some pretty remarkable things that we brought into this relationship that has opened their eyes to the possibilities with these two molecules sophorolipids.
It happened in what seems to be a relatively short period of time.
That is the beauty of an amazing team. I love being the dumbest guy in the room. I know what I can do. I know what value I bring to the party, and most of it is strategy, collaboration, trust, picking good people, and making sure that we have true synergy so that when you put these teams together, it’s 4 plus 4 equals 16, and that’s where I spend a fair bit of my time. We are recruiting quite a few people, and these are critical roles in bioprocessing and bio-manufacturing. I have a massive network. I’m using that network. I’m not paying executive recruiters because I know exactly what I’m looking for, and it’s a needle in a haystack. When we make the announcement that we have found that role, you will know I found a needle in a haystack.
What’s next for Locus PI?
There are more of these deals. There are more successes in industrial markets or new markets. This would be maybe another business of Locus because we are finding out applications and opportunities in new areas we are entering. For example, this would not be with sophorolipids because part of what I did not mention is that Locus, the parent companies, are good at microbial discovery, and these are non-GMO. We don’t do any genetic modification. We are hunters. We find these organisms that can produce the metabolites that are of interest, or in the case of agriculture and animal nutrition, we are feeding the microbes, so in animal nutrition, we have an organism that dramatically reduces methane production in cows.
Depending on who you talk to, 8% to 16% of global warming comes from the emissions from cattle. Our whole mission as a company is to get the world to zero carbon to contribute where we can because we are not arrogant enough to think we can do it. We are not going to solve every problem, but we are 100% in this and we are looking at where our technology can do the best.
Going back to Locus PI, we are interested in other biosurfactants, so in the glycolipid family, there’s mannosylerythritol MEL-A and MEL-B. These are the mimics of human skin cells and particularly powerful surfactants in personal care and leave-on skin care applications. We are scaling that now. We have got a nice organism that can produce pretty high tiders of MEL, but the devil is in the details.
The trehalose lipids are on our radar. That’s another glycolipid, but we are also beginning to work on lipopeptides in particular. Lipopeptides are interesting because surfactant is what we want, and because these are microbes, it’s a bell curve. You get bits and pieces of other things. You want to drive your productivity. You want to peak at surfactant, and then you want to purify it out to get as much pure surfactant as you can. That one’s probably still two or three years off, but we have got a project working on surfactant, and then we are also working on interesting derivatives of some of these technologies where there’s only so far you can go with the fermenter.
This is what’s interesting to me as a guy who spent the first half of his career in the chemical industry and the second half of his career in industrial biotechnology. They are coming together. It used to be over on this side. The biotech world was always slamming the chemical world because they were the enemy, but they are not the enemy. We are all human. We are in this thing together. There’s only so far you can go with fermenter purification, but now, if you can react that to create a new molecule by bringing synthetic chemistry, you can create entirely new platforms of technology, and that’s what we are after in our Richmond, Virginia lab.
This has been a lot. You guys are doing some great work.
You should see what happens inside my head.
I can only imagine. You have shared a lot, so I appreciate this. I have enjoyed having you here on the show, and I know others will enjoy learning from you as well.
It’s my pleasure. I’m happy to do it again whenever you want.
Thanks for joining the show, and thanks to all the readers. Like, share, follow and continue tuning in.
This episode is sponsored by Palmer Holland.
About Tim Staub
Tim Staub is the Chief Executive Officer of Locus Performance Ingredients, an operating company of Locus Fermentation Solutions, LLC. Locus FS is a global leader in biosurfactants based in Solon, Ohio with three operating companies: Locus Agricultural Solutions, Locus Bio-Energy Solutions, and Locus Performance Ingredients (LPI). LPI is focused on providing high-quality biosurfactants, including sophorolipids, MEL-A and MEL-B, lipopeptides, and phospholipids, for formulation chemistry solutions in home care, personal care, CASE, and industrial applications.
Tim has been an entrepreneur, executive and consultant in specialty chemicals and industrial biotechnology for 30 years in CEO, COO, SVP and other senior-level roles with a number of chemical and biotech firms. From 2017 – 19, he was CEO of Fermentum, Inc., a bio-foundry fermentation company, and from 2011 – 17 he was Global Vice President of Business Development for Green Biologics (and its predecessor company, Butylfuel Inc.), a biobutanol and acetone company.
Tim was previously President and COO of CellFor, Inc., a Vancouver, BC-based forestry biotechnology firm, and Director – Forestry Biotechnology for Monsanto, where he was a founder of Arborgen – the world’s leading forestry seed company. He worked in various roles over his career at Monsanto, including sales, general management, and procurement in the chemical division. He was sales and marketing director for Arch Chemicals’ (now Lonza) antimicrobial business unit, focusing on personal care, home care, and industrial markets. He started his career in field sales with 3M Company.
Tim earned a B.S. degree in industrial management from the University of Illinois (Champaign-Urbana, IL) and an MBA from Northwestern University (Kellogg – Evanston, IL). He is a graduate of the Center for Creative Leadership and a U.S. Navy Veteran. He lives in Richmond, Virginia with his wife Susan, within driving distance of their six (soon seven) grandchildren, four daughters and one son.