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Northeast TN company very successful in securing SBIRs

By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.

Small Business Innovation Research (SBIR) grants are an important financial life line for many start-ups, and one of Tennessee’s most successful competitors for these all-important dollars is Renewable Algal Energy, LLC (RAE).

Founded in January 2007, the Johnson City-headquartered company has won three SBIR awards from the U. S. Department of Energy – one in each of the three SBIR phases. Total amount of the federal grants is $3.8 million.

In a recent interview with teknovation.biz, RAE President and Chief Executive Officer (CEO), Jeffrey S. Kanel, Ph. D., described a firm founded on the common interests of the 10 members of the LLC that is rapidly approaching an important milestone – delivering product to one of its target markets.

Kanel led the formation of RAE after a career that included 20 years with three corporate giants – Eastman Chemical Company, Dow Chemical Company and Union Carbide Corporation. He also started other companies and developed technologies that extracted ingredients from cranberries to treat urinary tract infections, one that produced a dietary supplement to help address macular degeneration, and another that extracted beta-carotene from algae.

When he considers his latest venture, Kanel cites several distinct advantages that he believes RAE has.

“Our team has more than 420 years of experience in commercializing chemical technologies,” he said. In fact, one of the reasons the company is located in Johnson City is because “a number of the members retired from Eastman,” Kanel added. Other LLC members reside in Arizona, Ohio, South Carolina, Utah and West Virginia.

A second “differentiator” is RAE’s focus on commercializing technology, not just doing research. The company intends to make microalgae a robust and economical source for nutraceuticals, animal feeds, renewable fuels, and other valuable products. “We’re not interested (solely) in receiving grants,” Kanel said. His described RAE’s SBIR focus as the “complete story of taking technology and providing a clear path on how you commercialize it.”

“We have people with skill sets in every area to take algae and convert it to make these products,” Kanel said, adding that the management team includes “senior corporate executives with Fortune 500 companies.”

RAE has operated a 20-gallon per minute pilot plant in Arizona for the past three years where the team worked to validate the company’s technology. Kanel said the pilot plant “significantly reduced the risk for investors” going forward. As far as locating it in Arizona, he had a simple explanation – “you can grow algae year-round,” something that is not possible in Johnson City.

Next up for RAE is construction of a “semi-works plant,” also in Arizona, that can operate at a rate of 200 gallons per minute. Kanel describes this as a “logical scale-up” in which RAE will further “minimize the technology risk” for investors by implementing a full automatic process control system. “It’s huge,” he said.

The “semi-works plant” will be operational by the end of 2012 and intends to run 24/7/365. While the LLC self-funded the construction of its pilot plant and used SBIR monies for research and other activities, the last $3.0 million of the total $3.8 million in SBIR awards has helped towards construction of the new semi-works plant.

“We don’t ask the government to invest if we are not willing to do so,” Kanel proudly states.

He added that the “semi-works plant” will be of sufficient size to begin producing microalgae for dietary supplements as well as feedstock oils for biofuels development. RAE has already announced two nutraceutical products that will start shipping in the second half of 2012. They are “Full Spectrum Algal Oil” and “Algal Protein Isolate.” In addition, RAE has announced a strategic marketing and sales agreement with B&D Nutritional Ingredients, Inc. for the continental U.S.

Kanel is already planning for the next step in RAE’s product development – biofuels and other products derived from microalgae. An LLC member who lives in Mexico has consolidated 5,000 acres on the Gulf of California as well as permits needed to start this venture that will include construction of key algae processing units operating at 2,000-gallons per minute at the facility.

“We will be producing biofuels and other products at this plant at a much reduced cost,” Kanel said.

Even as RAE looks at Arizona and Mexico as places to construct plants, it remains committed to Johnson City as its corporate headquarters and R & D center. That’s good news for the region.


Tom Ballard

By Tom Ballard, Chief Alliance Officer,
Pershing Yoakley & Associates. P.C.

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