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Biotechnology Hopeful Encounters a Few Speed Bumps |
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Lindsay Street, Charleston Regional Business Journal
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Wednesday, 28 November 2007 |
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Failure is an option for many startup companies, and one South Carolina-based biotechnology company hoping to capitalize on shrimp shells has endured everything from a hurricane to hesitant investors.
While footing is still uncertain, principals of the fledgling business believe they see a clear path ahead.
AgraTech International, founded in 2000, aims to work with chitosan, a substance found in crustacean shells that has a number of potential commercial and biomedical uses. The company, initially rooted in agriculture, had hoped to capitalize on the abundance of waste generated by shrimp processing plants along the Gulf Coast.
But the devastation in Louisiana wrought by Hurricane Katrina in 2005 forced Richard DeMarco, company president and CEO, to locate his new business in South Carolina.
Nontoxic and hypoallergenic—properties that make chitosan safe for use in food, pharmaceutical, medical and cosmetic applications—it can be used as a crop enhancer, a petroleum replacement for some plastics and as a coagulant in bandages because of its molecular structure. It is used in water filtration and in some circles as a way to rid the body of dietary fat.
DeMarco encountered his second obstacle when he realized South Carolina has shrimp but lacks an element that was key to his business model: shrimp processing plants.
Without any such processing plants, AgraTech had no cost-effective way to produce chitosan. So DeMarco decided his company would also go into the shrimp processing business, giving itself a supply of raw material and perhaps helping the industry that would provide the basis for that raw material.
Reworking his initial business plan, DeMarco established a new mission of processing locally caught shrimp into frozen, ready-to-eat meals and using the refuse to manufacture chitosan for research and development.
Though DeMarco and his company executives, President Greg Ensign and Vice President Joe Bristow, saw the shrimp processing as a natural step to solving the biotech’s problem, it has made attracting private investments more difficult because of the past failures of shrimp processing plants in the state.
“Any time that there has been a history of failures, an investor is going to hesitate,” said Andrea Marshall, executive administrator of Charleston Angel Partners, a local venture capital firm.
Moreover, most venture capitalists consider food processing to be a “lifestyle business” that does not generate quick returns for investors, Marshall said.
In the wake of negative investor feelings toward shrimp processing, the company has fought to stand out from the state’s previous failures. The new plan is to create “value-added” shrimp products, such as popcorn shrimp and coconut shrimp.
Despite a brief investor hesitation, the shrimp processing proved beneficial, Ensign and DeMarco said. In addition to creating the raw product for the biotechnology manufacturing, research and development side of the company, the processing side of the business provides a revenue stream that was missing in the first business plan, Ensign said.
To reflect the business’ new focus, AgraTech changed the name of its South Carolina operations in May to S.C. Shrimp Processing & Biotechnologies Inc.
Production of chitosan will begin after construction of the plants in fall 2008, but full-scale research and development will be slower to come.
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