Innovation at work: Iowa State’s entrepreneurial ecosystem helps two energy startups set their paths

AMES, Iowa – By chance, the founders of two energy startups aiming to commercialize campus discoveries enrolled in Cohort 14 of the Iowa State University Startup Factory.

During the fall ’23 semester, they attended two-hour sessions on Tuesdays, one-hour workshops on Thursdays and weekly one-on-ones with an assigned mentor. Starting with the assumption that the founders knew little to nothing about starting a business, discussions began with definitions of a startup and eventually got to finance, marketing, law, intellectual property and the like.

The founders wrote commercialization plans for their companies – Rise Energy and Upcycling+. Both are startups that aim to produce liquid fuels and other valuable products from underused biomass or waste plastic. Those plans included a market summary, thoughts on overcoming barriers to entering the marketplace, financials and an 18-month roadmap.

They developed and rehearsed a five-minute pitch, in business-speak, for prospective investors, grant programs or competitions.

Peter Hong, the director of the Startup Factory, and Hannah Kirkendall, the program’s manager, covered many of the sessions with the founders. But they also brought in experienced entrepreneurs and other experts who shared their knowledge and sometimes their business networks.

Hong, speaking just after a recent workshop discussion of market sizing, said the Startup Factory is “founder driven.” Founders advance at their own pace as they “cross over from technology to business.”

“The Startup Factory looks at what they need to know to move on to the next commercialization milestone,” Hong said. The next milestone could be deciding to actually start a business or applying for funding from the federal Small Business Innovation Research program or making a pitch to potential investors.

A basic lesson for all the founders, according to Hong: “Don’t just find great science. You also need to find economic impact.”

Along the way to those discoveries, Hong said the Startup Factory and all the programs within Iowa State’s Pappajohn Center for Entrepreneurship are prepared to be trusted partners to the founders and their companies.

“We’re a sort of concierge to the entrepreneurial world,” he said. “Our founders never really graduate. We’re always there for them. The reality is we don’t see the Startup Factory as the end.”

Rise Energy

Jordan Funkhouser placed a foot-long strip of Hilton Coliseum basketball flooring on an office table. There were smooth and finished floorboards on the top, a rough particle-board subfloor on the bottom. It was a scrap from the sale of 1-foot souvenir squares of Hilton Magic in 2023, when the basketball court was replaced.

On top of that strip, Funkhouser placed two samples of what happens when that flooring gets the Rise Energy treatment.

One jar held thick, black bio-oil. Another held slivers of charred wood called biochar.

He also had a third jar full of basketball flooring chipped to the rough shreds that can be fed into a pyrolysis reactor for some thermal deconstruction of biomass. (“That is really clean feedstock,” Funkhouser said of the basketball floor.)

Those three jars are what Rise Energy is all about. The company started by three staffers in Iowa State’s Bioeconomy Institute is using a unique pyrolysis technology they helped develop to convert most any kind of biomass into a liquid oil for energy and a solid char for fertilizer.

Those three staffers are Tannon Daugaard, a research engineer for the university and chief technology officer for the company; Funkhouser, a research scientist for the university and chief operations officer for the company; and Ryan Smith, a senior research manager for the university and chief executive officer for the company.

They’re taking a whim of an idea from mentor and co-director of the Bioeconomy Institute, Robert C. Brown, to crank up the oxygen inside a reactor. Brown and his research group had worked for years to develop a thermochemical process called fast pyrolysis that heats biomass without oxygen to produce bio-oil and other products.

As it turned out, adding oxygen to the reactor burned up a little biomass, but also efficiently produced the energy and heat needed for pyrolysis. And it didn’t hurt the yield of bio-oil.

When Brown told a venture capital group about the technology, the investors suggested starting a company. Brown encouraged the three researchers to consider making the leap into business.

After countless sessions of the Startup Factory, I-Corps, the Venture Mentoring Service, the Go-To-Market program – all affiliated with Iowa State – and other business-development programs, Rise Energy is taking shape as a company. It, for example, won second place and $25,000 in 2024’s John Pappajohn Iowa Entrepreneurial Venture Competition.

“The process has really helped us focus, stay on track, commercialize and innovate,” Funkhouser said.

But challenges remain.

“I would say the biggest technical challenge for Rise Energy is scaling the technology,” Daugaard said. “Rise Energy is going to take the next step and scale the technology to a commercial size.”

Iowa State researchers have long worked with a pyrolysis pilot plant at the BioCentury Research Farm west of Ames. That plant can process about half a ton of biomass per day. Rise Energy wants to build and test a demonstration plant that processes 15 tons per day.

That, of course, takes money. Smith and Funkhouser said they hope to start making pitches and asking for investments later this year.

The company’s founders give what Smith calls the “ISU startup ecosystem” major credit for advancing them this far in the business world.

“This is a blessed place to start a company based on Iowa State technology,” Funkhouser said. “This is really a startup- and entrepreneurial-focused university.”

Upcycling+

One advantage that Rise Energy has leveraged is an existing pilot-scale reactor to test ideas and de-risk technologies.

That’s something the co-founders of Upcycling+ are building toward. But that takes dollars.

“We’re actively raising funds to accelerate scale-up from our large reactors,” said Aaron Sadow, the David C. Henderson Chair in Chemistry and a scientist with the U.S. Department of Energy’s Ames National Laboratory. “It’s a competitive space, but we’ve had positive momentum – our technology has been well received in grant programs and pitch competitions, and we’re building strong partnerships with public and private stakeholders.”

The company, for example, won honorable mention honors at the 2024 John Pappajohn Iowa Entrepreneurial Venture Competition.

The technology the co-founders developed on campus takes a mix of everyday waste plastics (including grocery bags, candy wrappers, milk jugs and toys), turns them into solid pellets, runs them through a reactor where they’re exposed to heat and catalysts, and harvests the resulting fuel or chemicals. (See video.)

Th company’s diesel fuel has already cleared an important technical milestone: Upcycling+ successfully produced fuel that meets the ASTM D975 international standard for diesel, demonstrating compatibility with existing engines and infrastructure. The team has also tested samples in off-road equipment to begin validating real-world performance.

The company can also produce sustainable aviation fuel, known as SAF.

“Our process converts widely available plastic waste into a drop-in alternative to kerosene at a cost-competitive price point,” Sadow said. “Rather than competing, we complement biobased SAF pathways by providing a scalable, waste-derived solution to help meet growing fuel demands – without needing incentives to be viable.”

Three Iowa State researchers have been working on the plastic-to-fuel technology since 2018. They are Wenyu Huang, a professor of chemistry and a faculty scientist for the Ames National Laboratory; Sadow, who also directs the federally funded Institute for Cooperative Upcycling of Plastics based at the Ames National Laboratory; and Akalanka Tennakoon, a postdoctoral research associate and the company’s chief technology officer.

Working together, the researchers and their groups found the key catalyst. They’ve tested it on a gallon-scale reactor in Spedding Hall on the Iowa State/Ames Laboratory campus. Now it’s time for a bigger test.

Upcycling+ is charting a phased scale-up, with plans to build a pilot facility that can eventually produce up to 1,000 gallons per day. The company has hired engineering firms to help design  scaled-up systems and has started conversations with investors and public agencies to support the next phase of development.

“The full development process – from pre-pilot testing to engineering design – will require significant R&D investment,” Tennakoon said. “But we’re taking deliberate, staged steps, including a smaller-scale unit to validate continuous operation and product quality before committing to full pilot deployment.”

The idea Upcycling+ would like to test is building, and eventually marketing, smaller-scale reactors that could convert the plastic waste of a city into fuel that could be used in the city’s fleet of trucks and machinery. The company has established partnerships with several Iowa communities, including Ames and Fort Dodge, to explore localized deployment of the technology.

Team members aren’t looking to build huge, industrial refineries that cost $1 billion and require shipping in plastics and shipping out fuel.

“Our value proposition is putting plants where the plastics are,” Tennakoon said. “Transportation is expensive.”

As they work to develop efficiencies in their technology, Huang said Upcycling+ reactors could be profitable for cities and towns, even at small scales and without subsidies.

So now the company is making its pitch: “Transforming Waste, Fueling Sustainability,” as it says on its website.

“Even though we have huge confidence in our technology, it’s still a risk externally,” Sadow said. “It’s innovative enough that we still need to demonstrate it. But Iowa State has provided all this support to get us to the point where we can start to make our case.”

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