BIOFACTORY

Idea

Introduction

BioFactory aims to reinvent Anaerobic Digestion (AD) for dairy farming.

We specialise in the use of AD technology for micro-scale applications to produce cost effective on-site energy generation from waste streams which reduces greenhouse gas emissions. BioFactory has identified a significant market gap for the introduction of its product in UK dairying, which based on our calculations, has an estimated market size of £600m - £2bn. The product enables smaller farms to reap the benefits of AD which they are currently unable to do with existing market solutions. BioFactory has also had significant interest from overseas markets and other livestock sectors for the product, which will be addressed after exploiting the dairy market gap.

BioFactory has developed the technology through two full-scale pilots and is now gearing up to complete its first commercial sales. By containerising the solution, BioFactory has developed a low cost, modular and scalable solution ideally suited to dairy farms.

Substantial accomplishments to date

BioFactory has invested £929,000 in the research and development of its product Micro AD Farm. BioFactory has been effective at securing grant funding for this, limiting shareholder dilution through this critical period, with only £270k of equity raised.

The Company launched following an Engineering Masters Project which had conceptualised the technology. Equity and grants funded the initial development and[CB1] validation. BioFactory's technology achieved 140-160% increased output versus the industry standard.

Welsh Government grant funding was then secured to expand the technology to a full-scale system for the diary industry. An independent board of industry experts validated the technical design in November 21, to enable the system to progress to the procurement/manufacturing stage. The first full-scale pilot plant was installed in Wales in March 22 and validated the product in a farm environment.

InnovateUK and private investment was used to deploy the second-generation pilot in Somerset in October 22. This pilot provides an essential test bed and comprehensive operational data. It is also used as a sales demonstrator, with visits so far including key farming groups and milk co-operatives.

BioFactory is currently in contract negotiations for its first commercial sale. After presenting the solution at the Low Carbon Agricultural Show in February 2023, the Company now has over £15million of sales enquiries from farmers, validating the product-market fit.

Monetisation strategy

BioFactory will manufacture the product and directly sell it to farmers, executing on the sales pipeline the Company has developed. BioFactory will also look to provide annual maintenance for the system under a separate agreement.Sales will be underpinned by partnerships with asset finance companies who provide farm financing for the equipment purchase and BioFactory has already engaged with several in preparation. This is a well utilised model for funding farm machinery purchases, and suits customer needs.

Initial deployments will be used as sales demonstrators, and locations are being identified for the next two system sales that will optimise farm engagement for future sales. Partnerships with key customers will support steady growth and market acquisition.

BioFactory will implement a rental model after EIS restrictions have expired, reducing customer barriers and increasing recurring revenue. Approaches from overseas partners shows interest for internationally licensing the product, which will be exploited from 2025.

Use of proceeds

BioFactory is raising funds to provide working capital and operational costs to support its first two commercial sales over the next 12 months. These sales will validate commercial traction, a key requirement for further investment.The profit on the sales will be reinvested in operational costs, in preparation for expanding commercialisation from Q2 2024 following a further funding round. Key hires will also be made in 2023 to expand the engineering team in preparation for growth.

If the round overfunds (up to £1.1m), the Company will accelerate the commercialisation by six months to bring forward delivery on the sales pipeline. To effectively do this, key hires will be made such as a COO and further expansion of the engineering, operations and finance teams. The Company will also expand its manufacturing capability by moving to larger premises.