After the 2021 public biotech market shakeup, life science investment dollars may be shifting. The past few years have seen a crowded investment market, with both veteran life science investors and new opportunistic investors getting in on the groundswell, especially in the case of IPOs.

In 2021, many of these transient investors cleared out when the bottom finally dropped out. While this investor exodus has been tough for pre-clinical and Phase I startups hoping to go public, steadfast VCs and other biotech investors have the flexibility and wherewithal to weather the froth coming of the IPO market . Comparing 1Q22 to a year earlier is revealing: only nine came in the first three months of 2022 versus 33 IPOs in 1Q21.

So, how will investors wield this new-found freedom? Some signs point to early-stage opportunities as a good destination for their dollars.

Demand for biotech IPOs still weak

One factor pushing investors away from later stage biotech is compressed exit opportunity – either through acquisition or IPO. The fervor for biotech investment carried over from 2020 drove the overvaluation of biotechs going public at all technology stages, leading to a poor post-IPO performance from 2021’s public crop. This trend has shaken confidence in the ability of biotech IPOs to yield returns and has caused all except dyed-in-the wool biotech VC investors and strategics to hang back. While there

is a continued supply of biotechs at the age and stage to go public (approximately 75 companies have SEC registrations ready), there is simply not enough demand for those IPOs currently.

While companies considering an IPO do not all necessarily boast technologies in advanced clinical trials, there is certainly a correlation between technology maturity and propensity for IPO. As a result, those in late-stage clinical work with technologies closer to market may feel the pressure of a slumped IPO market more acutely than less mature firms, primarily because of their cost structure.

With the XBI still leveling out at about half its highwater mark of a year ago, investor confidence in the biotech market will take time to recover. So, it may be a while before capital flows back into public biotech markets to enable the consistent exit environment of last year.

Though the valuations won’t be as lofty as in 3Q21 without the “crossover” or pre-IPO investors, late-stage biotechs can nonetheless seek financing from seasoned VCs, eager to put their money into more reasonably priced deals, and fund the significant

C-rounds needed to support these larger, more mature biotech firms.

Late-stage acquisitions few and far between

The other exit path for late stage biotechs, acquisition by big biopharma, is showing very little activity currently. At the J.P. Morgan Healthcare Conference in January 2022, big pharma such as BMS, Novartis, Pfizer, and Roche indicated their preference for smaller, ‘bolt-on’ deals with small- to mid-size companies rather than large, capital-intensive M&A deals. Smaller deals allow big biopharma to leverage the target’s unique expertise, whereas value added from large, late-stage biotech acquisitions may be not as substantial because of acquirer overlap with the target’s skills.

Moreover, the hawkish tone of the FTC since 2021 has indicated that the coming years could see increased scrutiny on large deals. While the Pfizer completed the acquisition of Arena Pharmaceuticals,  the waters of large-scale acquisitions remain untested. These factors may make the ‘exit via merger’ route harder to come by for a large share of later stage companies..

Could VCs and strategic investors shift focus upstream to earlier-stage biotech?

Given biopharma’s currently small appetite for late-stage acquisitions, the focus on earlier-stage biotech is coming from both strategic investors and life science VCs. And that’s not a bad thing, as it will avoid putting more pressure on the large number of biotechs that went public in 2021 whose shares trade below their IPO price. An investor shift toward earlier-stage, private-market opportunities where those companies remain private longer will give public biotech markets time to recover. Meanwhile, companies spending time to create real, milestone-based value, will be in a position for an exit either via industry acquisition or through a solid, facts-based IPO story.

Moreover, looking backwards to early-stage companies could help investors find more potent contenders to face the now-crowded startup scene. The IPO enthusiasm of 2021 weakened the winnowing process for biotechs and led to an environment with too many companies, with similar, poorly differentiated technologies. Backtracking to earlier stage opportunities could help investors find technologies with the potential to leapfrog the current generation rather than ones providing only incremental improvements.

Rising interest rates could interfere

While a new focus on earlier stage companies seems to be a natural shift, factors like current events and high inflation, which add uncertainty to the market, may intercede. Investors expect the Fed to push interest up rates several times over the coming months to fight inflation, projecting interest rates six more times over the year. These higher interest rates work against longer term, riskier investments while pushing investors into safer markets. However, the magnitude of this effect on current markets is unclear as of yet.

Takeaways: Early stage biotechs could be the winners of 2022

Despite the difficulties of 2021, life science investors are fueled up and ready for

another round. Already in the first quarter of 2022, VC funding reached almost $8 billion, which is higher than all of the last three quarters of 2021. Many of these funds are explicitly set for new venture creation or early stage technologies, such as Atlas Venture’s recent $450 fund geared toward generating new biotechs from existing and new creators. Other players are also making their plays in the early-stage biotech market – including corporate VC such as Fujifilm, which has set up a small new fund of $60 million explicitly for early-stage companies and in modalities like cell therapy.

With the intensity of the current market downturn, factors pushing investors towards earlier stage companies are also strong. Namely, the lack of exit opportunities for later stage companies, either by IPO or acquisition, could cause capital to shuttle rapidly up pipeline. The recently churned market may yield exciting opportunities to a fresh generation of early-stage tech in 2022.

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Last month saw the publication of WIPO’s new bi-annual IP report, entitled “The Direction of Innovation”. The report is packed with insights, bringing a combination of powerful observations that really hit home backed by data-driven analysis that look deeply into how and why innovation flows.

A key perspective of the report points to the split of economic benefits which go to society (social benefit) vs. returns to private sector investment (private benefit). Spoiler warning: a clear example is the lightning-paced work occurring from the time Chinese scientists sequenced and released the mapping of the SARS-CoV-2 virus in January 2020, to Covid-19 public vaccinations – barely a year later. While many may point to big pharma’s eye-popping profits, the WIPO report shows that the quantifiable portion of the economic benefits to society are roughly 900x those of the revenue earned by the private sector!

The best laid plans… how global crises affect innovation ecosystem participants

On 7 April 2022, WIPO’s IP and Innovation Ecosystems Sector (IES), hosted a short conference to present summary findings of the report, accompanied by a lively panel discussion. Marco Alemán, head of WIPO’s IES, introduced the key concept of how dependent major innovation outcomes are on the influence of each participant in the ecosystem: nations, institutional scientific and engineering research, and private sector investment. However, major events beyond the control of public policy makers shape outcomes, usually via crises, such as war, pandemic and natural disaster. Those crises have enormous impact on research and innovation outcomes. Look at how penicillin development rose in direct response to battlefield infections.

Reflecting academia, industry & government, panel’s views on setting of the direction of innovation

In introductory remarks and presentation of the panelists, Dr. Carsten Fink, head of the IES Department of Economics and Data Analysis, provided illustrations of the change in pace and focus of innovation since the industrial age. As society made its lunge forward in technology in the 20^th century, it did so in recognizable big waves, i.e., engine/transport > pharma > ICT > digitalization, today.

And some funny things happened on the way to the IP forum. A most recent example is digital-related innovation: it has grown 172% faster than all patents over preceding five years.

Lively panel discussion

Introducing themselves and their work, each panelist drove home the reality of innovation acceleration. The panelists included Victor Aguilar, Procter & Gamble’s Chief R&D and Innovation Officer, Dr. Xiaolan Fu, Professor and Founding Director of Oxford University’s Technology & Management Centre for Development, David Kappos, Partner at Cravath, Swaine & Moore, and former Director of the USPTO, and Caroline Ylitalo, Division Scientist at 3M. Here a few items that resonated with me:

Views from academia, industry and public sector

• Dr. Fu highlighted the case of under-the-radar innovation taking place in developing economies, and how digitalization is changing adoption patterns into and out of LDCs. But it’s not only permeability and diffusion that are changing, it’s also about the impact on labor and the growth in services from disembodying know-how and delivering expertise digitally.
• From the corporate side, 3M’s Caroline Ylitalo spoke of major challenges and trends we face as society. She highlighted the impact of crisis and the opportunities they may arise from it, shown in the surge in demand for N95 masks, and visible also in the utility gains from the digital world’s access to masses of technical information, along with the advent of ideation tools and collaboration platforms.
• P&G’s Victor Aguilar drove home the point of digitalization’s impact for P&G’s goal of improving life, ranging from AI’s contribution to retailing optimization, to its role in designing smart toothbrushes, and to the increasing importance of identifying relevant innovation arising outside P&G.
• Cravath’s David Kappos highlighted how dependent the realization of huge economic output and the delivery of the benefit to society are on making sure ecosystems’ participants do what they do best (per their respective missions)
  • Private sector develops suitable commercially defensible applications,
  • Inventors and their institutions need access to the tools – including collaborative networks – to help convert their innovative insights into invention disclosure and products
  • Governments alone needs to provide money and structure of well-reasoned incentives to grow and make accessible the bounty of fundamental research;the private sector’s need to provide returns to owners makes investment in basic research prohibitive.

Public and private motivations: even if not aligned, good neighbors enable a productive existence

The role of government policy and its ability to create a fertile bed of fundamental research is a topic receiving significant attention. And well it should. Thoughtful and economically supportive public policy for fundamental research can produce huge big social benefits. Once they’re convinced of the business potential prospects, the private sector gets busy converting discoveries from a trove of basic research into commercialized inventions. That’s not all, as “de-risked” innovations come into focus, industry dramatically increases its share of development expense.

Beginning in the 1950s, the space race led to the creation of NASA in the US and its enormous role in driving aerospace research and creating in the process a rich network of public-private collaboration. Sponsored research was involved of course, but government purchases of innovation-based products from the private sector – there was no other buyer – were also a critical factor in clearing a path to commercialization of those space-age inventions.

Enormous productivity flowed from that inventive output which created social benefits many times those of the gains for the private sector in a broad array of fields, such as energy storage, photovoltaics and nuclear energy.

The grand challenges facing us and the need to pay attention to the direction of innovation

As the world faces climate change, ongoing food insecurity, the need for higher levels of education and the preservation of privacy rights, to name some big ones, government can play an important role. While the public sector can’t do a great job of predicting private sector winners, it can do things to even out the playing field through incentives, such as by purchasing from innovative smaller firms willing to take the risk of developing emerging technology.

There is so much inside this report, I am moved to invoke lyrics from OMC’s 1995 hit single, How Bizarre, but with a twist: you don’t need to “buy the rights”, WIPO grants you a free readership license, so download their great Intellectual Property Report 2022: The Direction of Innovation – and enjoy its valuable insights.

BTW, keep an eye out for a future SeedSprint blogpost where we’ll get more into the weeds on a topic WIPO cares a lot about: increasing the efficiency of the critical interplay between innovation-seeking large enterprise on one side, and technology providers on the other, i.e., institutional intermediaries such as TTOs, along with risk-taking micro and SMEs (MSMEs) in the private sector.

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If the atmosphere of the pandemic is feeling somewhat optimistic after years of tumultuous ups and downs, the tenor of Biotech financing is feeling rather the opposite. While 2021 broke records in biotech IPO and private investment markets, it left many disappointed by the aggressive cool-down following the February peak. With a steady downward trajectory for the XBI, the S&P index for Biotech, leaders at emerging biotechs, established pharmas, and life science VCs have had to change strategies to face the challenge. Now, with some distance from the bubble of 2021 and the first quarter of 2022 over and done with, it’s time to evaluate how the biotech markets have been faring.

Recap of 2021 biotech capital markets

2021 started out strong with a record-breaking total of IPOs and an unprecedented number of early-stage biotechs going public, with many not yet able to provide clinical data. This frenzy was fueled by high demand for IPOs and rewarded crossover investors with high returns over short turnover times. This steady string of successes compelled even investors traditionally interested in less risky ventures to turn their attention to biotech.

Large early-stage crowd at the IPO door 

A dearth of M&A deals by large pharma companies accompanied this IPO craze, despite pharma giants purportedly holding ample cash. The lucrative IPO market and inflated valuations pushed smaller biotechs and large pharmas away from more traditional M&A partnerships and collaborations.

This rush to list brought a crowd of insufficiently de-risked companies to the public markets, causing a disappointing run for XBI. In total, 80% of 2021’s biotech IPOs ended the year below their initial offering price, signalling investor flight and sapping demand for IPOs. With the bubble of investor enthusiasm for biotech financing burst, startups and fund managers moved to reevaluate their strategies for the coming months.

Little clinical data, similar indications

The early IPO plan pursued by many biotechs in 2021 needs revision for those looking to go public in 2022. The poor performance of 2021’s batch and the tightening availability of capital has made IPOs a much more difficult process. Only five biotechs have had IPOs in Q1 of 2022, and of those only two are currently trading above their listing price.

The aftermath of 2021’s frenzied IPO market are cut-down valuations for biotechs and increased pressure to show value through concrete milestones. Moreover, the 2021 biotech IPO surge brought with it a glut of similar technologies for similar indications, frustrating investors who were seeking differentiated offerings for their money.

Tourists flee, layoffs, but VC & industry at the ready

Investor hesitation in biotech markets is now reflected in a recent rise of layoffs in biotechs, such as at Zymeworks and Passage Bio. The CEO of life sciences executive search firm Slone Partners recently told Fierce Pharma that layoffs seem more prevalent at public biotech companies, underscoring the direct impact of the market-wide decrease in investor confidence in the real strategies of public biotechs.

Despite the flight of investors from last year’s poorly performing market, life science-focused VCs have maintained a deep purse to invest in new biotech startups and technologies. Atlas Ventures recently announced a new $450 million fund, targeting new venture formation. Frazier Healthcare also announced a fund of $987 million to invest in novel biopharmaceuticals in a range of maturities.

Slow down the race to the IPO gate, get concrete milestones in order

According to some biotech leadership and VC managers, emerging biotechs are likely to stay private longer in lieu of the abridged IPO timeline of the last few years. While the enthusiasm of crossover investors has waned with the demand for IPOs, the reshuffling of VC and startup strategy may be a beneficial correction in the long run.  

Perhaps most interestingly, large pharma companies are in a strong position for transactions for the remainder of 2022. The lofty valuations for emerging biotechs in 2021 proved difficult for pharma, evidenced by low M&A activity which consisting primarily of small acquisitions rather than large deals.

Slight uptick in M&A 

In 2022, M&A deals have seen a small uptick. So far, major deals include UCB taking over rare disease biotech Zogenix and AbbVie acquiring neuroscience-focused Syndesi Therapeutics. Furthermore, giants like Pfizer have ample cash on their books and have stated their willingness to spend it on deals. Though yet to play out, such prospects are no doubt on the minds of many.

In addition to the IPO hangover, the slow return of M&A activity may also stem from uncertainty in the regulatory environmentsince March of 2021. At that time, the FTC announced a ‘working group’ to the include European, Canadian and UK competition authorities to create a framework for analyzing pharma mergers, triggered by a spate of deals and high drug prices. However, the FTC recently allowance of  Pfizer’s acquisition of Arena Pharmaceuticals may resolve some lingering concerns holding up similar transactions.

Seasoned investors have plenty of dry powder for clear milestones

Despite a tough couple of quarters since the 2021 cool-down, biotech stakeholders are changing strategies to weather the current market. Many committed investors see the increased scrutiny and focus on milestone-realism as a healthy voice for the true value of biotechs, rather than the overexuberance that led the overbought market of 2021.

Though unclear how long the climb from the 2021 sell-off will take, seasoned life science investors and leaders see this as a temporary blight.

The post Beyond the IPO: biotech market update post 2021 sell-off appeared first on seedsprint.

At the 2021 AUTM Annual Meeting last month, we attended a session called “Flex Your Soft Power: Impact From Social Science.” The panel featured three speakers: Professor Julia Black, Chair of ASPECT and Strategic Director of Innovation at London School of Economics and Social Science; Melanie Knetsch from the Social and Economic Research Council; and Cristoph Groller, Managing Director of Grogen and Koller.

During the talk, the speakers explored the importance of Social Science research, some of the difficulties in commercialization, and introduced emerging groups that are bridging Social Science research and businesses. 

What is ASPECT?

ASPECT is a growing network of organizations working to encourage collaboration between academics and businesses and apply Social Science research to private and social enterprises. The organization seeks to encourage research collaboration and build partnerships between academia and industry. Currently based in the UK, ASPECT has many notable members including the University of Oxford and the University of Bristol. ASPECT is rapidly expanding its activities and funding to make Social Science research more accessible. Global expansion is next on the agenda.

Why Social Science Research is Just as Important as STEM

Although ASPECT has taken on some similar projects as STEM research groups do, there are some important distinctions. There is a common misconception that Social Science is the light version of STEM. In reality, Social Science research tends to be smaller, and market competition is greater. However, this is just the start of a long list describing the difficulties of having Social Science research acknowledged compared to STEM. 

This is where ASPECT steps in. Social Science researchers can use ASPECT as a tool to overcome hurdles in getting their work noticed. ASPECT pools resources and experiences. The effect enables members to benefit from scale and network effects. 

Social Science and business engagement: the UK context

The Economic and Social Research Council (ESRC) is one of the nine councils that make up the UK Research and Innovation body. ESRC aims to unlock the potential for collaboration between Social Science and business. 

Through conversations with the ESRC community, Melanie Knetsch noticed some challenges. For example, is it ethical for Social Science to help businesses profit? What is the added value that Social Science can bring to businesses? How do we adapt tech transfer offices (TTOs), typically designed to be a “STEM point of entry,” to conversations that also suit Social Science research? 

Ms. Knetsch then started thinking about Social Science commercialization in terms of “business readiness levels.” She based the readiness levels on the business model, ethical considerations, adoption, and tools needed to implement the project. Considering these business readiness levels further enforced the importance of integrating Social Science into business to streamline innovation. 

Exploring “business readiness levels” for Social Science then brought Knetsch to the question of what added value the ESRC can provide as a funder. Currently, the ESRC has identified “bringing awareness of Social Science” as one of its areas for improvement. In pursuit of this goal, ESRC is working with university professionals and TTOs to broaden engagement with businesses, foster partnerships, and recognize strides in Social Science innovation through the Impact Prize program.

ESRC hopes to become a global leader in Social Science-business partnerships. In the end, they hope these endeavors can propel Social Science innovation to a new level. 

Unleashing the Impact Power of Social Science and Humanities

As a society, we have excelled at rapid innovation in the past hundreds of years. We have created new technologies and solved problems that we once only dreamed of. At the same time, rapid change often goes unchecked. The true impact of technology is hard to measure. Social Science has the potential to measure this impact.

There is a growing call to action for academics in Social Science, Humanities, and the Arts to demonstrate their societal impact. Many of them think positively about what they can do with their academic work outside of academic circles. For example, Social Science researchers in Germany recently developed methods for lessening the discrepancy between female startup founders (15% of total startups), and female students at higher education institutions (59% of the student body). 

At SeedSprint, supporting the diverse and international community of innovators as they take their research from the lab to the marketplace is at the heart of our mission. We are thankful for the opportunity to learn from organizations like ASPECT and the ESRC about how we can achieve diversity and inclusivity in innovation across sectors. 

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Last year, we wrote about Microsoft’s ambitious climate pledge to reduce their environmental impact through their partnership with Alaska Airlines and SkyNRG, a global leader in sustainable fuels. Could General Motors be leading the environmental sustainability movement in the auto industry?

Carbon Neutral by 2040

At the end of January, GM announced that they will only produce electric vehicles by 2035 and be completely carbon neutral by 2040.  This shift was made a day after the Biden Administration signed orders that prioritize dramatic cuts in U.S. carbon emissions, especially in transportation. Its new 2040 target to zero out carbon emissions is 10 years shorter than the company’s previous goal of 2050.

The company plans to spend over $27 billion in the next five years to introduce 30 electric vehicles, including an electric hummer pickup Truck which GM expects to start delivering to customers this year. It also expects the majority, if not all, of its luxury Cadillac cars and SUVs sold globally to be EVs by 2030.

The announcement made by one of the world’s largest automakers will lead to big changes in the auto industry, which employs around one million people in the united states, more than any other manufacturing sector by far. 

What does this mean for the auto industry?

A sudden shift towards electric vehicles could lead to job losses in related areas. Electric vehicles currently account for around 5% of sales. Since they don’t require transmissions or oil changes, conventional service stations would have to adapt to new fueling methods once they become the new norm. Electric vehicles also require fewer workers to make.

However, Dane Parker, GM Chief sustainability officer, reiterated that electric vehicles will benefit the economy in many ways: “We know there are hurdles, we know there are technology challenges, but we’re confident that…we’ll overcome those challenges, and this is a business model that we will be able to thrive in the future”.

At the moment, three of GM’s U.S. plants are planning to produce electric vehicles. “This transition is one that will protect all of our futures and will help us create a future that will benefit not only the planet but the people,” Parker claimed.

The future of zero-emission transportation technologies

Transportation accounts for 40% of U.S. carbon emissions. GM’s shift from gasoline-powered internal combustion engines to electric-powered vehicles could be exactly what we need to reduce this impact.

GM has partnered with supply truck maker Navistar, a Hydrotec fuel cell maker, and shipping company J.B. Hunt Transport to test cleaner energies. Internal combustion engines powered by hydrocarbon fuels could lead to reducing transportation emissions in specific areas such as long-haul trucking.

When other large corporations inevitably follow GM’s suit, a new door opens for a future with cleaner transportation. Only time will tell what larger changes this will bring to our everyday lives!

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In this installment of ‘Emerging technology startups profiled on seedsprint,’ we explore startups using green chemistry to make chemical processes more sustainable.

So what is green chemistry? Green chemistry aims to increase atom economy and reduce hazardous materials in chemical manufacturing. Modern takes on green chemistry integrate the concept of the circular economy. If you aren’t familiar with this term, the circular economy seeks to use renewable resources as inputs and keep non-renewables from leaving as waste.

Here are some exciting green chemistry startups integrating these eco-friendly principles that you’ll find on SeedSprint!

(1) DexLeChem (Berlin, Germany)

DexLeChem is developing sustainable synthesis processes for chiral fragrance and flavor products. The company reuses chiral catalysts and optimizes separation in aqueous solutions. By making these changes to the process, the extensive extractions needed for racemic mixtures are decreased and the process becomes more efficient. In the end, DexLeChem’s processes are cost-and-time effective and produce ecologically sustainable chemistry solutions. View SeedSprint profile.

(2) P2 Science (Connecticut, USA)

P2 Science spun out from Yale University in 2011. The company develops proprietary green chemistry technologies with a focus on ‘process intensification’ meant to mimic nature’s chemistry. Their PIOz™ Ozonolysis, PICE™ Continuous Etherification, PIOx™ Oxidation, and PIRe™ Reduction technologies convert feedstocks to flavor, fragrance, and cosmetic chemicals. Typically, these chemicals are derived from petroleum. Luckily, P2’s green chemicals provide a great alternative. They are renewable, safer, and more cost-effective than their petroleum-derived counterparts. P2 recently launched a new bioderived ingredient for hair, skin, and deodorant–what will they come up with next? View SeedSprint profile.

(3) Aequor (California, USA)

Dispersants, cleaning agents, and other biocides are essential consumer and agricultural products. However, these important chemicals are traditionally made using toxic manufacturing processes. As an alternative, Aequor has developed a line of non-toxic cleaners, cosmetics, dispersants, medical device coatings, and drug candidates. In addition to their sustainability, Aeqor’s chemicals are antibiofilm and antimicrobial. The company offers a diverse product line and services that have the potential to elevate the sustainability of industries from agriculture to consumer products to veterinary medicine. Since Covid-19, Aequor’s microbial testing team has been busy helping businesses improve their cleaning protocols so they can open safely. View SeedSprint profile.

(4) Zymtronix (New York, USA)

Zymtronix’s novel technology increases the quality and efficiency of biocatalysis reactions by immobilizing enzymes on metallic metasurfaces. After being entrapped on the magnetic matrix, enzymes have increased catalytic activity and are protected from environmental conditions. They can then be extracted and reused. Zymtronix’s technology is currently being used to fight agricultural pathogens, make industrial chemistry more sustainable, and screen chemicals for human safety. We can’t wait to see what’s next for the company! View SeedSprint profile.

(5) Virent, Inc (Wisconsin, USA)

Virent, a subsidiary of Marathon Petroleum Corporation, is commercializing its patented BioForming® technology. The technology transforms plant sugars from feedstock into a variety of hydrocarbon products. Virent uses Life Cycle Assessments to optimize their use of resources and diminish the production of air and water pollutants and greenhouse gases. Virent’s BioForming® technology is currently being used to produce renewable fuels to take the place of petroleum products. View SeedSprint profile.

Green chemistry companies like those on SeedSprint will develop some of the most crucial innovations to ensure the health of humans and the planet. By combining ecologically and economically sustainable principles, these developments will propel us into a more renewable future.

Keep an eye out for future installments of ‘Emerging technology startups profiled on SeedSprint’ to discover more game-changing ideas and technologies!

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Last week, Microsoft announced that it is partnering with Alaska Airlines and SkyNRG, the global leader for sustainable aviation fuel (SAF), as part of its effort to reduce carbon emissions.

More sustainable business travel

Through the new partnership, Microsoft will buy SAF from SkyNRG to fuel its employees’ business travel on Alaska Airlines. To start, the agreement will apply to business travel between California and the company’s global headquarters in Washington State. Microsoft plans to expand the agreement to apply to other routes.

Traditional aviation fuel is refined from petroleum, while SAF is produced from sustainable resources, like waste oils, feedstocks, and even carbon captured from the air. SAF reduces carbon emissions across its lifecycle. To date, SkyNRG has helped over 30 airlines around the world reduced their carbon footprints — but the partnership with Microsoft and Alaska Airlines is different.

The new partnership is the first of its kind in the United States and has the potential to become a model for other companies to reduce the environmental impact of their business travel.

10 years to “carbon negative”?

And Microsoft isn’t just trying to reduce its carbon footprint. Earlier this year, the company announced its goal to become “carbon negative” by 2030. This is more aggressive than common corporate climate pledges like “carbon neutral” or “net zero”, which indicate the company is removing an amount of carbon dioxide from the atmosphere that is equivalent to their current emissions (or that they are preventing such an amount from being emitted in the first place). 

By contrast, a “carbon negative” Microsoft would mean that the company effectively removes more carbon from the atmosphere than it emits. Microsoft has stated that by 2050, it hopes to remove enough emissions to account for all the carbon released due to Microsoft activities since the company’s founding in 1975.

Environmental sustainability has been a major focus at many large corporations over the past few years, and climate pledges are certainly not new. Still, Microsoft’s targets are among the most aggressive of any large corporation to date. 

Investing in carbon reduction and removal technologies

In addition to reducing the carbon footprint of its business travel, the company has created the Climate Innovation Fund to help aid in its mission to become “carbon negative.” The fund will invest $1 billion of Microsoft capital to accelerate the deployment of emerging technologies that facilitate carbon reduction and removal over the next 4 years.

Will other large corporations follow Microsoft’s lead and make similar climate pledges to become “carbon negative,” and how will they get there? Only time will tell, but we’d love to hear your thoughts in the comments!

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