An Insect Lover Builds an $18 Million Natural Pest Control Company

After setbacks and scandal, Pamela Marrone of Marrone Bio Innovations is staging a comeback developing alternatives to dangerous pesticides.

Colleen DeBaise By Colleen DeBaise

Editor’s Note: This is part of our Good on the Ground series, profiling women entrepreneurs who are addressing social issues in innovative and inspiring ways.  by Sue Williams.

 

This time, Dr. Pamela Marrone’s timing may be just right.

It has not been an easy journey for the Davis, California, entrepreneur, founder of Marrione Bio Innovations Inc., a publicly traded company that develops natural pest-control products as alternatives to controversial pesticides. But now, as industry giant Monsanto continues to be assailed by charges that its popular Roundup weed killer causes cancer and harms honey bees, “the markets [have] finally caught up with me,” Marrone says, adding for emphasis: “Yay!”

An enthusiastic entomologist by training, Marrone has built a career killing pests without poison. In 1995, she launched her first startup, AgraQuest, pitching 100 investors before raising $60 million in venture capital. And then, some exceptional misfortune: She was scheduled to go on the road Sept. 12, 2001, to market its initial public offering — an event derailed, of course, by the terrorist attacks. Instead, she took money from new investors who ultimately “did a takeover of the company” and wiped out her stake. She says she didn’t reap any windfall when Bayer bought AgraQuest for $425 million.

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Undeterred, she got going on Marrone Bio, naming it after her father, an energy efficiency expert who influenced her career path. He died a week before she started the company in 2006. And then finally, success: She took Marrone Bio public on Nasdaq in 2013, ringing the bell with her mother by her side and raising $57 million.

A year later came another major setback. The company’s head of sales was indicted for fraud, and the Securities and Exchange Commission sued. Marrone was forced to lay off half her staff and pay $17 million to settle the matter. Her company teetered on the brink before converting debt into equity this past February and raising $30 million from new investors. “It was hell,” Marrone says. “It was hell.”

The Road Back

Today, Marrone’s company is recovering and “biologicals” — crop-protection products, derived from natural materials — are a rapidly growing sector in agriculture.

Unlike sprays made from synthetic chemicals, which attack the nervous system of insects or other mammals, biologicals “work only on the pests and don’t kill the lady beetles, lice wings and so forth,” she says. Biologicals are developed with natural products known to stymie that particular pest; for example, it might be a particular fungus that infects only locusts.

“Nature is remarkable that way, and so if you look hard enough or know what you’re doing, you can find these things,” Marrone says. “They can be extracts of plants or they can be bacteria or fungi, and they can be very specific on what you’re trying to kill.”

Investors and entrepreneurs like the sector, in part because natural-product development is shorter and less costly than that of synthetic chemicals. Not to mention, the tide is turning in terms of public sentiment. “Chemical pesticides are under increasing scrutiny from consumers and regulators, concerned about stress upon the environment and residuals in the food chain,” Spencer Maughan and Kieran Furlong of VC firm Finistere Ventures wrote last year in the industry news publication AgFunderNews. “There has been a flurry of excitement surrounding biological crop protection over the last few years.”

Marrone Bio has launched seven products in the past 12 years, which are primarily marketed to farmers in California, the Pacific Northwest and the Southeast. Last year, annual revenue was $18.2 million. A top seller is Regalia, made from giant knotweed extract, which farmers can spray on crops. “It boosts the plant’s immune system,” Marrone says. “It stops diseases like powdery mildew, which is that dusty white stuff you see on your roses.”

Not to say there aren’t hurdles, not the least of which is educating skeptical farmers about biologicals, which typically don’t work as quickly as chemical sprays. “We’re a science-based company, so we gather a lot of information to show that the products work,” she says. “We do grower trade shows and we have webinars.”

And there is serious competition: Hot startups include Indigo Agriculture, which uses microbes to improve agricultural output and recently raised $250 million from investors. A long-time player in the bio-agriculture space is Certis USA, now owned by Japan’s Mitsui. Right now, “it’s a race,” says Marrone, who believes she is the only public company exclusively in biologicals. “The good news about that [is] I’ve been perfecting it my whole career.”

Inspired by Dragonflies

Marrone grew up in Connecticut, on a 40-acre property with a pond. She recalls spending hours “looking at the pond life and the dragonfly nymphs and the water beetles and trying to identify them.” An early memory is her father treating a gypsy moth invasion with a chemical pesticide — and unwittingly killing lady bugs, lice wings and honey bees. Her mother, a lifelong naturalist, “tracked me out and said, ‘Pamela, look at what your father did,’ and she was just so mad,” Marrone says.

The budding entomologist studied at Cornell University, eventually getting her Ph.D. in the field at North Carolina State University. Her first job was at Monsanto, which in the 1980s developed natural products before pivoting into genetically modified seeds that resist its own Roundup herbicide. Marrone left in 1990. “I was more interested in the natural stuff,” she says.

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After a 5-year stint at Novo Nordisk’s biopesticide unit, Marrone felt “suffocated” by corporate policies and conceived the idea of AgraQuest. “I started in literally a little garage here in Davis,” she says, raising $500,000 in seed money from friends and family. She took a course at a Silicon Valley law firm on how to raise VC money, “dialing for dollars” to raise cash. Between her two startups, “I have raised a lot of money, over $200 million,” she says. “I am always good at selling the company in terms of the pitch, in terms of exciting people about the future.”

And that future, she believes, is here. “We are at the tipping point” in terms of bioagriculture, she says, and the recent spate of bad legal news at her former employer Monsanto is only helping. For its part, Monsanto vigorously defends Roundup, and even Marrone believes its main ingredient, glyphosate, doesn’t cause cancer. “Why pick on glyphosate” when other weed killers that contain the chemical 2,4-D are much worse, she says.

Marrone routinely wears insect-themed jewelry — say, a ladybug necklace and matching earrings — to convey her passion for her work. That belief in her vision has sustained her at times when “I just wanted to roll up in a ball on the couch” and do nothing. “This is the long game,” she says. “We’re changing agriculture to be more sustainable in the long run.”

Read Full Transcript

PAM Probably the happiest time in my career was taking the company public. Because now everyone could buy stock in a company that was developing natural products that are more sustainable for the environment and can provide farmers with better return on investment.

TEXT Pam Marrone – Founder + CEO – Marrone Bio-Innovations,
Davis, Calif.

PAM Marrone Bio-Innovations develops natural products for controlling pests as alternatives to toxic chemicals. We've discovered new species of bacteria that control pests and plant diseases.

PAM SOT This is a bacteria we discovered from a rice field in northern California.

PAM And we have perfected the process of efficiently getting a product from discovery through to the commercial marketplace.

TEXT Pam grew up in rural Connecticut.

PAM My mom, she’s a lifelong naturalist and she knows the scientific name of every plant in the universe. She got me interested in entomology and I spent hours by the pond looking at the dragonfly nymphs and the water beetles and trying to identify them.

TEXT Pam graduated from Cornell University with a degree in entomology in 1978.

TEXT Five years later, she got her Ph.D from North Carolina State University.

PAM I became very interested in the holistic way to control pests rather than knock them dead with a toxic chemical. The chemical insecticide works on the nervous system of the insect as well as the nervous system of mammals, so that’s why it’s toxic to people. So that’s why controlling pests in a holistic way is really important.

TEXT After grad school Pam was hired by Monsanto.

PAM Interestingly, Monsanto said, “We’re going to move away from our toxic legacy of parathion and Agent Orange and we’re going to develop something completely new, and we want you to start up a whole new unit looking for new ways to control pests without the use of toxic chemicals.” And I go “Woo hoo! This is exactly what I want to do.”

TEXT After 7 years Pam left Monsanto when it changed focus to modifying crops genetically.

TEXT In 2006 she started Marrone Bio-Innovations.

TEXT She raised $70 million in start up funding.

PAM We compete with large companies through innovation and being faster and more nimble. Our products are derived from nature in two ways. We can find them from plants or we can find them from microorganisms.

PAM SOT Once we discover something, we have to show that it’s not harming crops. So this is a new version of Grandevo and this is spinach, I take it? Spinach and radish, cucumber.

PAM Our products are primarily used on what we call high-value fruits, nuts and vegetables. So grapes, wine grapes, table grapes. Leafy greens. Your lettuce mixes.

TEXT In 2013 Pam took her company public and raised another $56 million.

PAM It was an astonishing and important milestone. I actually had my mother come to the bell-ringing ceremony and her sister, and that was such a thrill for her to see that. There's so few companies that go public.

TEXT But the excitement collapsed a year later.

TEXT Pam’s head of sales abruptly resigned.

TEXT He was charged with exaggerating income and sentenced to prison.

PAM It was hell. The Securities and Exchange Commission investigated and it cost us $17 million and I had to lay off almost half of the employees in order to afford this. Why did we make it through? I had a chief financial officer, bless his heart, and a general council who were so dedicated to this company and our mission, along with a team of employees who helped me along the way. That’s why we’re still here today.

TEXT The company is recovering.

TEXT It has 100 employees and 7 products on the market.

PAM SOT About 25% of the leafy greens on the coast are grown organically.
-Does that mean you have 25% of the market?
-I would say on leafy greens, probably, yeah.

TEXT The market for natural pesticides is huge and growing.

PAM California is the best adopter of the biological technology, it is our best market. And even then we’re finding there are a lot of growers who are afraid to use these products because of the risk. “Oh, it might be riskier. Do they work as well as chemicals?” So we gather a lot of information to show that the products work, and then it’s our job to help educate the farmer on how to make them work on their farm.

TEXT In 2017 Marrone Bio-Innovations had $18.5 million in sales.

TEXT Pam tries not to let the pressure of the stock market cloud her
mission.

PAM Every quarter, we have to report our financials. But this is the long game. We’re changing agriculture to be more sustainable in the long run, so this is not a quarter to quarter thing. And also, bugs don't respect quarters and the weather doesn't care whether the quarter, our quarter is coming or not. Belief in the mission and vision is why we’re still here today and that’s why I would do anything to keep this company going.

Posted: October 9, 2018

Colleen DeBaiseAn Insect Lover Builds an $18 Million Natural Pest Control Company