Executive Summary

Synthetic biology can be used to advance so many facets of the world today, from agriculture and biomanufacturing to groundbreaking cancer treatments and medicines, to fashion and information technology. As the science continues to evolve, the scientists, engineers, and designers themselves need to focus our efforts on creating local biological solutions to meet global needs. But what we can’t forget is to take a step back and look at the world as a whole. Not just how does anyone latest advancements better human life, but what are the footprints we are leaving behind? How does what we develop ultimately affect the world, from insects and plants to animals and aquatic life? While the full potential of synthetic biology continues to develop, we as a community must join together to make sure we don’t lose focus on the global impacts of our collective capacities. How can we best help not only humans but also the rest of the planet? (The Synthetic Biology Strategic Research Initiative)

Erwinions is a startup business whose objective is to eradicate the damage caused by the bacteria Erwinia amylovora, a bacteria attributed to causing millions of dollars losses on a yearly bases. As a solution, we developed a biocontrol that doesn’t affect the microbiota when introduced, preserving the ecosystem, while doing its job. Biocontrols are an efficient and cutting-edge that can bring great success, as it can ease the plague. Our team is composed of Biotechnology undergraduates, and our product consists of a genetically modified strain of Erwinia Amylovora. This modified bacteria has three exogenous genes (aiiA, yhjH and epsE), which eradicate four main virulence factors (exopolysaccharides formation, motility, biofilm formation and system type 3 secretion). Moreover, the bacteria will not have the capability to infect the tree but will compete for natural Erwinia Amylovora space and nutrients. Therefore, it will serve as a biological antagonist control against fire blight.

This product aims to replace the common treatments that are used to quell the damage caused by this disease: antibiotics and chemicals. Also, it will reduce costs on losses and operation for treated and infected trees. The economic sector of fruit growing, and more specifically of apple production, is of interest in Mexico and internationally; in 2011 Mexico broke its previous record of 630,500 metric tons, a level that represents a growth of 4% in relation to the previous year. Our market research shows us the following key points:

• The use of chemicals and antibiotics in the treatment of fire blight is somewhat effective, but it decreases with continuous use which itself makes it more expensive. Big producers, such as “La Norteñita”, are looking for an innovative and effective solution for this disease.
• Due to the excessive use of antibiotics, bacteria are becoming rapidly resistant to them.
• A significant profit, represented in great savings and greater yield can be generated through the use of biocontrol; leaving on the side the bioaccumulation in the crops caused by the excessive use of chemical elements and antibiotics.

Therefore, Erwinions was created with the following goals:

• Reduce the ecological footprint left by chemicals and antibiotics, as well as combating bacteria without affecting the native microbiota.
Stop the spread of antibiotic resistance in bacteria.
• Cut down on costs of long-term.
• Put forth the knowledge of biocontrols as an eco-friendly solution, for bacterial disease.

Erwinions is the only company that aims to use genetically modified E. amylovora to be used as a biological control against the fire blight disease in Rosaceae crops. This product will be patented, and we will continue enhancing our product through feedback, according to the farmer thus; giving personalized attention which is a mark of difference from our brand. This report will show the outline of our Business Plan, and how we plan to develop our product as well as how to incorporate it into the market.

Costing

In order to evaluate the viability of our proposal, it is necessary to carry out a detailed analysis of the costs of production and the investment required to successfully develop our project. We defined the price of our product in $800 MXN, which ranges between different prices from our competitors.

Monthly fixed income

Based on the components of our financial projection, we determined the monthly fixed costs. We considered that our company is in a searching for financing and investments, therefore we took into consideration renting most of the facilities and technological devices in which we will focus to continue with the manufacture of our final product, the main reason for this is the fact that we can't afford the equipment. We included all expenses that would be generated when having workers, and those from basic services, such as water, electricity, and gas. Our budget is summarized in the table below.

Variable monthly costs

Variable monthly costs For these costs, we are considering everything necessary for the production phase, promotion, and commercialization of our product. Commissions destinated to the commercial houses responsible for distribution and also initial promotions or free samples, which will help farmers in checking the effectiveness of our product.

As a conclusion on the viability of this investment, the profit of the investment should be calculated. Assuming that each product already packaged is valued at $ 800 MXN, you will get an investment return of 75% in the first year of production, with a gross profit of "X" in a year.

Product Concept & customer

Global food industry and security today are vulnerable due to massive growth of human population, climate changing will place huge demands on natural resources, the emergence of new virulent pathogens that had antibiotic or pesticide resistance, and demands from increasingly discerning consumers for chemical-free, sustainably produced food products that ensures a yield improvement on less cultivable land space. Bacterium based biological control agents are used as part of an integrated management system, which promotes sustainable agriculture. Based on the method of using the power of natural biology to reach a desired result in the field there is an effective solution to bridge societal, growth needs and allow farmers to be productive and environmentally conscious.

Currently, there is an extensive range of products used as biological controls that offer alternatives to different problems that afflict farmers, especially fruit growers from Mexico, the United States and the rest of the world. However, all of these alternatives that are currently in the international market share the same disadvantages; having a very low-efficiency level and prices out of reach, making the investment not profitable, speaking of millions of dollars in the case to control the incidence of the fire blight on apple trees.

These are some reasons why our value propositions are not only focused on providing a solution with high efficiency to control this disease but also offers a greater survival of biological control into the plant of interest at a lower price in which it is normally found for sale.

Customer

Through extensive interviews we have done with experts and people involved in apple breeding, leading Latin America apple market such as “La Norteñita”, it was found that our initial hypothesis, which established that any farmer/company with fire blight incidence would buy our product, would change due to the fact that only people with moderate-high incidence would be interested in acquiring it. Unfortunately, they do not have a completely effective solution that will eradicate conclusively the infection of Erwinia amylovora. We verified not only our hypothesis about our customer pains and gains but also all the needs, signs and conditions of our archetype.

An archetype is the last person or group standing at the end of the process of looking for a person who has all the needs you cover with your product. The market segment we intended to reach is really concerned on eradicating the fire blight, it also has a moderate-high incidence of fire blight on its crops. This section is looking for a 100% effective solution at a relatively low price which could be at the same time friendly with the environment, the quantity of crops owned by this sector is quite a few.

Product

It is important to mention that our minimum viable product (MVP) was developed from the value propositions obtained after a thorough market study. Taking advantage of all of those situations where the customer is not satisfied when using other products available in the market. Our product is a biocontrol that combats the fire blight which is caused by E. amylovora, comprised of a genetically modified strain of Erwinia amylovora which was already mentioned in the executive summary. These were introduced to the bacteria by chromosomal insertion using the CRISPR/Cas9-gRNA complex. Based on this, our proof of concept for biocontrol with the same bacteria, by completely eliminating its pathogenicity, was validated, because this bacteria would act in favor of the decrement of wild Erwinia population. We can use as an example the mosquito of malaria, which was used as SIT(sterile insect technique), that are specific species and environmentally non-polluting method of insect control that relies on the release of large numbers of sterile insects. Sterile-release methods are based on the distribution into the environment of large numbers of sterile insects. These insects compete for mates with their wild counterparts; a wild female that mates a sterile male will have no viable progeny or fewer than she would otherwise have had, and so the next generation of the target population will tend to be smaller than it would otherwise have been. If a sufficient number of sterile insects can be released over a sufficient period of time, the target population will decline and collapse.

Marketing competition

Market

Our product is planned to target the market of biological products, specifically in the biological control industry. A market analysis of the Dunham Trimmer International Bio Intelligence showed a global biological control market in 2017 of $2.8 Bn of dollars and forecasted a growth to $11 Bn of dollars by 2025. The compound annual growth rate (CAGR) was calculated to grow 16% between 2015-2025. Our product can be considered into the biocontrol agents in agriculture, the most important market of the biocontrol agents that is reported to be about 1680 million in 2015. The market of biological control products can be segmented in different ways by type, target pest, crop application a geography. Focusing about type segmentation, our product is part of the biopesticides, specifically in the microbial-bacteria part. This segment is the one with most demand in the world, biocontrol of microbial market is growing faster as both small and large companies, and it is expected to grow nearly 60% of the market through 2025, approximately 6.6 Bn of dollars.

Our product is classified in different ways depending on the segmentation of the biological control market, for example, in geography we are in the Latin American region, according to the Dunham Trimmer analysis, the Latin American region is experiencing the fastest growth in the biological control market, in spite of this, nowadays the strongest region in the biocontrol market in North America, having in 2016, 38% of the global share. Finally, the crop application in our product will be in the section of vegetable and fruits and our target is a micro-organism. The growth of this market is attributed to high cost of agrochemicals and their negative impact on food quality and environment compared with biological control products that are considered as ecologically sustainable and safe crop protection solutions.

Microbials growing faster as both small and large companies invest in microbial discovery and development. Investors see a great opportunity to invest in biocontrol companies because of the rapid growth of this market. Investing in this market could be a great opportunity to increase the industrial production as it is one of the most reliable markets nowadays.

Marketing competitors

Although no significant events are projected to impact market growth, development of new technologies, especially in the area of microbial products could stimulate market growth. These new technologies are being implemented in order to get better and more efficient biocontrol products, this means that the market is going to evolve quickly. Our product not only aims to fulfill all the gaps that those products from our competitors can't achieve but also to improve those results from the ones that are commonly used nowadays. Since our product is a biocontrol, it can be fitted into the bactericide market, a market that has strong and experienced competitors that keep improving their products in order to keep the sales high. The impact of regulatory changes in the USA or other lead countries could be an upside factor to promote the market growth.

We analyzed our direct competitors based on the characteristics of the products they offer, specifically focusing on the unmet customer needs. Our product has the objective to fulfill these needs, having more advantages than those of our competitors.

The first product analyzed was the Bordeaux mixture, a mixture of copper(II) sulfate (CuSO4) and slaked lime (Ca(OH)2) used as a fungicide and bactericide. The environmental impact lasts longer than other similar products. In terms of phytotoxicity, the Bordeaux mixture leaves a salty deposit, has a high pH and it is more phytotoxic than other products, the phytotoxicity increases in cold and wet environments. It is important to mention that this mixture is not compatible with most pesticides which makes its preparation difficult because of the longer time it takes to prepare and also requires more knowledge and safety equipment. The first product by BIOferm, Agri-Mycin which is a protectant bactericide designed to combat difficult diseases such as fire blight in apples, pears, tomatoes, peppers, celery, and tobacco. The main disadvantage of this product is that it needs to get mixed with other chemicals, rising in a considerable way the investment of the agricultor. Another product by BIOferm, Blossom Protect is a biocontrol product used for the prevention of fire blight. Beneficial microorganisms outcompete the fire blight pathogen for space and nutrients, blocking the site of fire blight infection. This product could be considered one of our main competitors, but the product has an exclusive sale only in the United States. An alternative product from Adama is Cuprimicín 500 hyper, it is a fungicide, bactericide, and mycoplasmicide of the group of the preventive in mixture with antibiotics, that acts as a control of diseases caused by fungi, bacteria and mycoplasmas. This product has a great distribution in Mexico but has some disadvantages as a high level of toxicity to fishes and bees, therefore the effects have a short duration lacking long-term effectiveness. Bayer, one of the major companies in the market, comes with its product SERENADE® MAX, a biological fungicide, natural product based on Bacillus subtilis strain QST 713, formulated as a wettable powder, for the control of diseases caused by fungi or bacteria in crops. This fungicide works better as a preventive use, it can be used in presence of the disease but only if combined with antibiotics or other chemicals. Do not apply SERENADE® MAX when raining, against wind or during periods of strong wind. It is phytotoxic in some crops and should not be mixed with other fungicides. Some of these products work better than others but lack on something else, the main objective of our product is to become the best biocontrol product in the market, fulfilling all the needs and being environmentally friendly with a long-term effectiveness that many agricultors want.

Pathway to commercialization

Erwinions is growing fast thanks to the prestigious entrepreneurship program, nationally recognized in Mexico, implemented by Nova Orión High Impact Business Incubator to identify the best way to commercialize our product seeking to solve those problems that afflict the fruit growers. Once we have obtained our genetically modified bacteria, through which we will ensure the inhibition of its virulence factors, we will carry out the industrial process that will help us to obtain a commercial product. To achieve this, it is necessary a start-up capital or investment to lost funds. For this reason, the team went to different companies that desperately seek a solution to this disease, such as "La Norteñita", which would invest to make our prototype a complete success and ready to be released. The marketing strategy for the launch of the final product will be based on selling volume to this company, which has 2,600 ha. Once the other fruit growers notice that a company with such high prestige buys our product, everyone else will do it too. During the development of the project, Erwinions has generated a network within the fruit community and the biotechnology industry in its early stages, obtaining big amplitude in the agricultural market. The revenue stream model will be the percentage of profit for each product sold.

Business model

Synthetic biology has recently been at the center of the world’s attention as a new scientific and engineering discipline that allows the design of biological systems or devices, as well as improving cellular components that already exist in nature.

Through widespread interviews, we have sought to validate our business hypothesis with the purpose of generating evidence of the needs, pains, and gains of our customers as well as the proposals they can come up with, these last ones commonly called value propositions.

Once we finished the stage of interviews, we have been able to identify all the key pain points of our customers, not only their hassles and worries but also their mechanisms of action against this pathogen.

Throughout this process, our initial hypothesis has been constantly changing until we reached a point where we obtained coherent parameters. At this point, an important tool was implemented to generate this data, Canvas. The de facto tool used to describe the activities of new start-up businesses using the Lean Method and existing businesses as well as proposed new business transformations. Most pitches for start-up investment use this model for the key points, to illustrate prospective investors.

Based on the business model canvas, we split our business model into seven parts:

After a long process in which we identify all the key factors of our customer segment supported by Canvas tool, we verified the three key pains of most of our customer segments within the agricultural community are:

1. High prices of antibiotics related to fire blight
2. Low efficiency of products on sale
3. The time lapse in which the product is active is relatively short.

Our archetype interviews clarify the pains felt by our customer segments, these interviews were our key factors to determine the value propositions of our product as well as the acquisition of the knowledge of what we intend to solve with our product which are the last 3 pains listed at the beginning.

In order to ensure the viability of our product, a session with the major leader of apple production and distribution in Latin America “La Norteñita” took place, we discuss and got into the same argument; the high efficiency of a product and a profitable investment are the most important keys to get into the industry.

Business Environment

Erwinions as a startup is responsible to set up a series of short-term, medium and long-term objectives, in order to take into consideration those problems that arise during these periods of time and achieve a solid company with a vision for the future.

This is the reason why a STEEPLE offers an overview of various external fields. It is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Ethical. You can get a practical insight into each of these factors. These elements can affect your business. So, carry out the analysis and take fitting measures.

Team Members

Our team is composed of entrepreneurial students of Biotechnology Engineering, with the support and mentoring of 3 specialists in the area of entrepreneurship and business. The three of them, besides acting as inspirational teachers, also work in the Orion Technology Park; which, according to the UBI Index (University Business Incubator), is considered in the Top 10 of the best business incubators in North America and the best in Mexico; incubator in which we are working to establish Erwinions as a consolidated agro-biotechnology company.

The first of them is Luis Almanza, who with more than 5 years of experience in entrepreneurship, has been training us with all the tools and knowledge necessary to start our business.

During the validation process of ideas, market research and all the deliverables that the incubator asks us to base our project well, Claudia Ortega is who has been guiding us at every step.

And Raúl Lizarraras, who has managed Chihuahua to position 3 consecutive years in first place among more than 3,000 teams for the Entrepreneurial Challenge with Human Sense; he is the one who supported us with the filling of judging forms and who has been training us in how to give a good pitch to explain and sell our project better.

Team Mentors Profiles
Luis Almanza

Having a degree as a system computational engineer, with two master´s degree in administration and in information technology project management. He is the Entrepreneurship Director at Tec de Monterrey Chihuahua, Entrepreneurship Coordinator at Orion Technological Park & Co-Founder at Orion Startups.

Claudia Ortega

Having a Ph.D. in academic sciences and organizational knowledge, she is a convenor in entrepreneurship in the business and humanities school of the Tec de Monterrey Chihuahua. She was the dean of the postgraduate school of the Tec de Monterrey Chihuahua.

Raul Lizarras

Having a master's degree in marketing and a certification by the INADEM, he is the coordinator of Coworking Tec, professional speaker and professor in entrepreneurship.

Funding

Milestone

Our key milestone until the launch of the final version of our product, mainly focus on a series of technical and economic validations. Where feedback to our product and subsequent development of the business model through different customer interviews will shape the way and our ability to raise investment funds either through some financial support or through pre-sales. Then, after getting seed capital, our product is ready to launch in August 2018, which will generate a flow of income to continue growing as a company.

Funding strategy

The most viable financing strategy to launch our product in the market in 2018, as shown in the image above, will focus on applying to different programs addressing a specific issue, held by the government agencies such as CONACYT (National Center for Science and Technology). The purpose of these programs is granting funds and financing projects, with an estimate of one to three million pesos for activities directly related to research on scientific and technological development. In case this strategy does not work, it is planned to be an intensive pre-sales program to potential clients, which will provide us with commercial validation and financial support. Once we reach our equilibrium point, exemplified in point 4 of the image, we will seek private investment so we can expand our production capacity to meet market demand.

Exit strategy

The exit strategy of this new company will be considered only if an appropriate offer is submitted. In a posterior stage, it is anticipated by the team that the offers probably proceed of companies that their products are established agricultural supplies in the world market such as Bayer or Innovak. With the finality of saving time and thousands of dollars in the investigation, improvement, and development of new products, this kind of companies searches for the most viable alternative to maintaining as the top markets companies and investing in a big amount of money in investigations with a product ready for the market.

Nevertheless, if the offers do not fulfill our expectations, we will follow the business model to our company, as such we propose previously. Due to we trust that the earnings at the moment of commercializing our product will be enough in addition to the investment funds or loans, we can invest in equipment and build our own facilities where we will continue researching to continue solving serious problems in the agriculture fields.