In this episode of the McKinsey on Start-ups podcast, McKinsey senior editor Daniel Eisenberg speaks with John Bissell and Rich Riley, co-CEOs of Origin Materials, a California start-up that has developed a proprietary technology platform to help a wide variety of companies produce their products or goods without the materials they use contributing as much (or at all) to climate change. An edited transcript of their conversation follows.
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Daniel Eisenberg: Hello and welcome to McKinsey on Start-ups, I’m Daniel Eisenberg.
The scope and severity of extreme weather events seems to be increasing exponentially these days, with the devastating impacts of climate change and global warming never far from our minds. Yet for all the attention this existential threat to our planet rightfully receives, the myriad causes of it don’t always get the focus they warrant. While the well-known use of fossil fuels for energy produces more than half of global greenhouse gas emissions, another, less well-known source is responsible for a sizeable portion of the problem: the materials traditionally used to make all manner of both consumer and commercial goods and products in our world, which today account for close to half of emissions. On this episode, we talk to John Bissell and Rich Riley, co-CEOs of Origin Materials, a more than decade old start-up that is on a mission to solve this urgent environmental challenge.
Origin took a major step forward in its scale-up journey earlier this summer when it went public via a SPAC (Special Purpose Acquisition Company) merger. With demand across industries growing for its sustainable, carbon-negative materials technology platform, the company is entering rapid growth mode.
John Bissell co-founded Origin Materials in November, 2008, and has served as its CEO and a member of its Board of Directors since inception. Bissell has extensive experience in R&D, engineering and business development in the chemicals industry.
Rich Riley has served as co-CEO and as a member of the Board of Directors of Origin since October, 2020. Riley has been an investor and an advisor to Origin since 2010.
John and Rich, thanks so much for joining us today.
Let’s start with the overarching question: What do you guys view as the mission of Origin Materials?
John Bissell: The mission is to take the materials that make up all of the physical stuff that humanity uses to exist in the world, to take all of that into a sustainable future.
The physical goods of our species are so ubiquitous that we sometimes forget about them. We think about energy. We think about all the other stuff that we do. But this stuff that makes it up is so important and constitutes so much of the impact that we have in the world.
And if we don’t do a better job making that stuff more efficiently and with a lower carbon footprint and with sustainable resources, we’re just not going to get there. That’s really the mission of the organization, to make materials, physical goods, more sustainable.
Daniel Eisenberg: How do you view that mission playing a bigger role in society as companies around the world are committing to achieving net zero climate impact in the coming years?
Rich Riley: We’ve seen enormous awareness globally with governments, companies, individuals all realizing that climate change is real. We’ve got to reduce our CO2 emissions, we’ve got to transition to sustainable practices, and the role we play is to help companies achieve their net zero and sustainability goals.
Half of their emissions footprint comes from power and transportation, which are what get a lot of the press and a lot of investment and a lot of awareness. There’s the other half that comes from the products that are made that creates fully half of the emissions footprint. And that’s where we help—to reduce the carbon footprint of those materials and products.
Daniel Eisenberg: Is part of the mission in some sense to give more visibility to this critical component that doesn’t get enough attention?
Rich Riley: Oh, absolutely. I think a lot of people don’t realize there actually are alternatives to petroleum-based materials. We’re driving awareness and helping people understand that $1 trillion worth of products are made each year that need to make what we call a once in a planet transition away from fossil-based to sustainable feedstocks.
Daniel Eisenberg: John, let’s talk briefly about the origins of the company. Tell us about the journey from a piece of technology at UC Davis to your successful recent SPAC transaction.
John Bissell: I think a lot of that journey is characterized by what Marc Andreessen calls the “idea maze”.1 And the idea maze for materials hasn’t really been navigated from the ground up in a long time.
This isn’t precisely true, but I think of the last major chemical start-up as Dow Chemical. The world in the early 1900s was obviously very different than the one that we’re living in right now. A lot of the materials companies were built in a totally different ambient environment. A lot of the same principles do apply now, but in a different ambient structure of talent and technology and geopolitics and drivers. Nobody cared about CO2 footprint or climate change in 1906. But people do a lot now.
As we’ve discovered in the tech industry, it’s really difficult to take an old legacy company and adapt it to a new environment. It’s a lot easier actually to build a new one from scratch in that new existing environment. So a lot of what we’ve been doing is figuring out what are the logical conclusions to draw when you’re building a company that has the technology we do to reduce the CO2 footprint dramatically of the materials that are being produced. How do you get to the right scale to have an impact from the starting point of, as you said, a technology that was pulled out of a university instead of doing it in-house at a really, really large chemical company?
Daniel Eisenberg: Rich, you’ve been an entrepreneur in multiple places. What in particular inspired you to take on this challenge at Origin?
Rich Riley: My relationship with Origin started over ten years ago when I was introduced to John and realized his incredible entrepreneurial passion and mastery of chemistry could change the world. I became an investor and an advisor and invested more along the way. For much of that time, the company was really focused on the technology and there wasn’t a lot of value for someone like myself to add, other than telling John he’s doing a great job.
But over the last year, it became clear that the technology was proven, that the customer demand was exceptionally strong, and that the customer needs to have these materials faster than previously planned. As a result, we needed to go out and raise a lot of money and scale up the company quickly, and really connect those two dots between proven technology and enormous customer demand.
So it was a great fit for me to join John, to really enable him to focus on what he’s best in the world at, which is advancing this technology, and have someone like myself come in and help take a lot of other things off his plate in terms of scaling, fundraising, administrative stuff, commercial relationships, and some of the strategic stuff.
As an entrepreneur, I’ve always been attracted to disruptive, world class technologies that have the potential to do a lot of amazing things. And then to work to commercialize those and help them scale.
Daniel Eisenberg: Speaking of pivotal moments in the company’s journey so far, what do you anticipate will or might change in the organization following the SPAC and this new structure going forward?
John Bissell: There’s been a lot already starting to happen. One is tightly linked to what Rich was just talking about, which is this scale difference. Until relatively recently, our internal logic was, “how do you do this in measured, cautious, frankly overly conservative steps?” because we were proving all of the different components as efficiently as we possibly could. What’s changed about that really is the environment. As Rich said, there’s just an enormous amount of demand.
There’s probably a separate, entire podcast discussion to be done someday on the relationship between existential risk to human society and COVID. How the pandemic made human beings understand that perhaps there was more risk in the world than they had realized. I think that has been reflected in the way that the world is approaching climate change. We’re seeing companies finally make decisions—just a tidal wave of infrastructural decisions—around the way that they consume goods and energy and materials.
That scale change obviously has caused us to change the way that we operate. We have access now through this SPAC process to more capital than we had before. And the orientation is much more towards executing quickly and effectively.
While efficiency is always important, the most important thing is getting it done on time at the right quality and scale for our customers and for the world, frankly. And I think that’s a dramatic change that we’ve seen over the last 18 to 24 months.
Daniel Eisenberg: Looking forward, Rich, what do you see as the principal operational challenges that Origin might face over the course of this scale up journey?
Rich Riley: To tie it to your last question, a pivotal moment was on Friday when we had the experience of opening the NASDAQ and raising hundreds of millions of dollars. That really takes the company to the next level of financing, stability, and just reality, which is important when you’re trying to attract talent.
We’re on a materially different foundation than we were even a week ago. In terms of going forward, it’s attracting that key talent, continuing to bring on those key partners, whether they be customers or engineering firms that are going to build these plants for us or other parts of our supply chain.
It really is execution. We’re fortunate to have the tailwinds that we’ve been talking about, whether it’s customers being pressured to find solutions and purchase the kind of things that we’re selling; financial institutions trying to find ways to lend into companies like ours; or talent looking to move over to the future of materials and be part of transitioning the world.
The challenge for us will be to execute and stay focused and deliver.
Daniel Eisenberg: How do you approach working with established players in the industry?
Rich Riley: We’re very confident in the exceptionally proprietary nature of our technology and what we do. That really lets us be pretty open and explain how we do what we do.
It allows us to really view every other chemical company as a potential partner, and not a competitor, which is great. So we get excited to meet with chemical companies. We’ve partnered with several of them.
This is where we’re a platform company. These intermediates that we make can go on to make an enormous range of end materials. In fact, we think it’s over $1 trillion.
For a lot of those, we want to partner with someone else to get to that end application. One example is we partner with Solvay, a leading European chemical company, to build on top of our intermediate products, apply their technology, apply their go-to-market, apply their relationships in the automotive sector, to where our materials end up inside the engine in a very high-end, automotive component that’s very high-value to our customers. And we love partnerships like that.
Daniel Eisenberg: It sounds as if you don’t have to deal much with it now, but has there been any point earlier where you had to overcome any misunderstanding or hesitancy from established players who didn’t initially know what to think or accept you as a partner in the space?
John Bissell: It’s an interesting question. As I said earlier, there haven’t been a lot of chemicals and materials start-ups that have successfully made it to scale over time. Most of these organizations don’t have much of a start-up muscle, they have a Fortune 100 company muscle. That’s the way they understand how to interact. And that manifests differently depending on whether you’re talking about a customer or another chemical company.
But that’s actually been one of the things that has influenced our organizational development in a lot of ways, being able to engage productively with a lot of these larger, more mature companies. I don’t know if I’d say it’s fully on their own terms, but certainly closer to their own terms.
“Misunderstandings” is probably not the right word. I would say it’s almost like you have to learn how to speak the same language. As an organization, we’re focused on speed and execution and bringing a new thing into the world. And a lot of these companies have been around quite productively, in some cases for centuries.
Aside from just scale, the mindset that comes from an organization that is centuries old versus an organization that until recently wasn’t even a decade old is just very different.
On top of that, chemical companies are some of the most capable companies on earth. They have deep expertise in an enormous number of areas. And they have sophisticated ways that they bring that expertise together.
So in order for us to be able to engage in all of those different areas meant that we had to have a pretty sharp game before we could have really useful conversations. I think we figured that out. But it’s a meaningful hurdle to play in the big leagues with these kinds of companies. Much of what we think of as modern business, and the modern economy, was built by chemical companies or petrol-chemical companies. They’re almost the incarnation of the global economy of the last 50 years, 100 years, in all of the different areas. And that’s something that I really enjoy. But it took some real skill and development and time to figure out how to engage with companies like that.
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Daniel Eisenberg: Rich, speaking of complex relationships, I am wondering how you navigate the relationships involved in multiple generations of investors, leaders, partners, as you continue to scale.
Rich Riley: Well, we’ve just gone through a big transition, which will continue in the shareholder front, although our existing shareholders didn’t sell in the transaction. And I hope they will be shareholders for a long time. We have a new board now, which we’re really excited to work with, former CEOs, chief sustainability officers, people with a wide variety of experiences that we think can be really helpful in helping us scale and think through important strategic decisions.
On the partnership side, we’ve more than doubled our orders during this SPAC process over the last several months. We have also moved into new industries, including apparel, construction, and automotive, where we previously only had consumer goods partners.
We’re continuing to add new companies and new industries. To what John was saying, whether it’s those companies or chemical companies, they’re all changing really quickly too. We also have to tell ourselves that just because a certain company a few years ago may not have thought this was a priority, that doesn’t mean they don’t think it’s a priority now. We’ve got to keep evolving with our team, with our investors, with our customers. One of the great things about having grown up as a start-up, which we pride ourselves on, is our adaptability and ability to evolve with the world around us.
Daniel Eisenberg: John, the environment for your technology wasn’t always as receptive as it is today. You’ve worked for more than a decade on this business with many significant hurdles. How did you manage to persist with your goal and your vision?
John Bissell: As you mentioned, the environment has not been consistent for climate change and climate technologies over the last decade.
In terms of persisting despite numerous obstacles, I think there are a couple of components common to any entrepreneur, and others were perhaps a little bit specific to this space. But for me, the first really important thing is truly believing in what we’re doing. And that what we’re doing matters.
I live in California, where we have had and are continuing to have incredible wildfires, especially in the last few years. You often can’t go outside because of the smoke. It’s pretty intense, and it’s a very physical manifestation of climate change.
One of the things that I have thought about—and I have a particular memory of this—is someday having to sit across the table from my son or my grandkids or whomever it is that that I care about. The idea that I would look around at all the devastation wreaked by climate change and say to them, “I don’t know, it just got really hard so I stopped trying to fix it.” I can’t imagine having to have that conversation.
There is this unbelievable problem, almost the problem of our generation. My team and I have a real ability to try to stop this, or at the very least, significantly mitigate it. And there’s very, very little in the world that is not worth sacrificing in order to try to attempt that.
There’s another part that’s important to realize too, which is perhaps more local and more tactical. Whenever you’re in this situation, the people around you matter a lot, you have made a commitment to them.
Those are the two strong drivers for me to push through just about anything that’s difficult in this business.
Daniel Eisenberg: Rich, the conventional wisdom historically has been that investors like start-ups with capital-light business models. But you guys obviously have to build large factories, which is clearly a huge focus going forward. What would you say to other entrepreneurs in capital-intensive start-ups who might face investor caution or skepticism?
Rich Riley: Some problems require solutions that require a lot of capital, and this is one of them. To entrepreneurs with capital-intensive businesses, I would say not to be discouraged by that fact, but to be realistic about it. I think it affects how you choose your investors; you need to make sure you have investors who recognize the amount of capital that’s going to be required. And what the development of the company’s likely to look like.
But it’s all that more satisfying to have gotten there with the capital intensity. And once you’re there, it creates quite an advantage because it’s harder for others to match what you have done, which makes the rewards potentially that much better.
In our case, we will use a lot of capital. We think we’ll achieve incredibly high rates of return on that capital. In a lot of ways, the more capital, the better, and the more returns.
While I’ve started several software companies that required no capital, a lot of the change we want to see in the world and the problems we want to solve require capital-intensive solutions. It would be a shame if all of our talent and venture dollars and risk capital flowed only to capital-light opportunities.
Daniel Eisenberg: As people think more about the really huge problems we face, do you have a sense if that conventional wisdom about investors’ preference for capital-light business models is shifting at all?
Rich Riley: I think so. If you look at some of the electrical vehicle and battery technologies, there’s been enough examples of capital-intensive businesses that have gained a lot of investor dollars and attracted valuations that I think it has changed.
We’re also seeing funds now explicitly created to go after the hard parts of decarbonization, which frequently requires a lot of capital and a lot of time.
But I would encourage anyone who’s going into it to choose your investors carefully, choose people who’ve been through that process themselves and are heads up on what that journey’s likely to look like. It is different than some of the capital-light businesses in terms of development time and obviously the need to continue raising larger and larger amounts of capital.
Daniel Eisenberg: As the company has started to scale and enter a really new transformational phase, are there any people who were not willing or able to make the shift? And how did you handle this?
John Bissell: There’re a couple different things baked into your question. One is, do people scale in the sense that do they have the skills necessary to continue to operate in a leadership role at the next scale of the company, or the next developmental phase of the company?
There’s a second part of that, which is if they don’t have that skill set that’s required for the next level of development and/or operational scale of the company, do they stay or do they go away?
For us, generally, people’s skill sets are still extraordinarily relevant, whether they take on the next level of leader or not. Leading a ten-person team is very different from leading a 50-person team, or leading a 200-person team. Whether on the technical side or in business areas such as sales, marketing, or operations, we have people who are deep in their area of expertise, in addition to having leadership and managerial capabilities. And so their technical depth or their operational depth continues to be relevant even as the company gets larger. They may not continue on as a member of the senior leadership because that’s just not where their core skill set lies—it lies in some other spot in the organization. I can’t think of a time where somebody was no longer relevant at the company.
Also, I’m not sure that this is discussed in the entrepreneurial world as often as it probably happens, which is that start-ups are incredibly intense. With a long development cycle like this, there are people who just get tired. People are constitutionally different and not everybody is constitutionally suited for several decades of very intense development. And so we’ve had people who either take on more of an individual contributor role or step out of the company as a result of, frankly, just the fact that it’s a long haul, and there need to be baton passes just from an energy perspective as well.
Summing it all up, we’ve had unbelievably high retention. I haven’t looked at the numbers recently, but I think our voluntary churn rate is less than two percent or something like that over the last ten years.
Generally speaking, people are here and they’re here to stay. They want to contribute and they believe so much in the mission that sometimes they’re going to break themselves. Sometimes, in fact, pulling back the reins is important so that they last the entire race.
Daniel Eisenberg: You talked a bit about the change in the environment over the past 12 to 18 months and the rapid acceleration of what the company’s going through. I can imagine that could be challenging for folks who have been used to one pace for a certain amount of time.
John Bissell: Honestly, our team has been waiting for this kind of running room, let’s call it. I think it comes from being mission-focused, in which case you want to achieve the objective as quickly as you possibly can. It feels a lot better and a lot more natural to just go really fast.
Daniel Eisenberg: Certainly, it’s a good problem to have to rev up for an accelerated business environment. As both of you have been part of this journey for the last decade, are there parts that have been either easier or more difficult than you had imagined.
John Bissell: Lots of things in both directions.
Daniel Eisenberg: Anything particularly notable? I’ve had folks who say, “Well, nothing easier, but I can come up with a long list of things that were more difficult.”
John Bissell: I think that a lot was harder. Let me just get that straight out. But there’s something about the gestalt of the journey. Maybe “easier” isn’t the right word, but it was more “possible” than I expected, honestly.
Back in 2008 or 2009, when we were really starting the company up, I never thought concretely about exactly what is it going to look like when we get there? I explicitly didn’t think about that too much. It was more about about focusing on and driving towards what it needs to be than trying to predict what it is going to be, if that makes sense.
Rich Riley: What I would add is we’ve been regularly pleasantly surprised on the development of the technology. Even when times were hard and fundraising was more challenging than it should’ve been, I felt like there was always good news on that technology side.
One of the hardest things is that ten years ago not a lot of people were talking’ about “decarbonization.” Unfortunately, when it takes ten years to develop a core process like this, you’ve got to start before the world knows it needs this solution. As a result, the world’s not necessarily as ready to fund this kind of solution. It’s harder to attract talent to take the risk to work on this kind of thing. So I think that was the challenging part of the journey. But it’s made the company quite scrappy and nimble.
Daniel Eisenberg: You talk about the technology development. Is there any advice either of you would give to early-stage entrepreneurs looking to go down a similar path of trying to commercialize a novel technology at scale?
John Bissell: I think there’s a delicate balance between understanding what’s possible and understanding what your vision is. Being an engineer, I think of it as the thermodynamic result, what’s possible thermodynamically. There’s no perpetual motion machine. I didn’t create mass somewhere. There’s not a black box where magic is happening in what I’m trying to do. As long as I don’t have that, you can go after something pretty aggressive.
Sometimes people forget that you have to make sure there’s not a black box with magic happening. I think being grounded in that is really important so that you’re not chasing unicorns. On the other hand, how can you be grounded, but also open-minded enough and ambitious enough that you can do something that matters, that’s not just incremental?
Rich Riley: I would just add two thoughts. One is to really have a north star. From the time John started, he wanted to make sure he was cost competitive with the fossil-based alternatives and not assume green premiums or that there was going to be some other form of magic in terms of the world can overpay for these things.
And the other is to not take shortcuts. A great thing that John and the team did was develop a core chemical platform and not go for some quick win with some niche application that might have been popular at that moment or with that customer. I’m sure it was a more challenging journey because of that. But that’s why we are where we are today.
Daniel Eisenberg: What kind of innovations, technical or otherwise, can you guys foresee in this space as we continue to plot our way towards the net zero future?
John Bissell: I think there are a couple things that are at play. One is that we’re going to see convergence in the materials that we use as a species.
We now care a lot about end of life for the material, and end of life is greatly advantaged by having a smaller number of materials. We’ll need to have products that can be decomposed or deconstructed down into a couple of different fundamental materials so that they can be recycled or dealt with in the most appropriate way. That’s going to drive us towards materials like PET (polyethylene terephthalate), glass, aluminum, and steel, trying to use just those fundamental components as much as we possibly can. And then there’s going to be other stuff, for critical functional advantages, that layers on top.
As a species over the decades, we’re going to see this drive towards a smaller number of lower carbon materials, all of which are operating at larger scales because those materials meet some of the really critical constraints. By bringing our technology platform to the world, you’re taking something that is already non-toxic, extraordinarily recyclable, and performs well, and then you’re making it carbon negative. I think we’re going to see that also happen with cement and glass and aluminum and probably high density polyethylene and a couple of other materials. But it’s going to be a handful of these instead of like now, where there are hundreds of different materials being used on a regular basis.
Then ironically I think we’re going to see more distribution of production. We have extremely centralized production right now, driven by the economics of oil and fossil materials. So the Ghawar oil field in Saudi Arabia is such an enormous scale of supply that you automatically start to consolidate all of the supply chain and value chain downstream. I think that when we’re looking at all of these other technologies, including ours, that are carbon negative or low carbon, and we start engineering for that, we’re going to see much more distribution in production, which is also good for the resiliency of the supply chains. We saw through COVID that there was a bunch of damage to the supply chains because they were very concentrated in very specific ways and they relied on really complicated networks of distribution and production. And I think that what we’re going to see is something that’s much more robust over time.
Daniel Eisenberg: Well that long-term perspective seems a good time to wrap things up. I want to thank John Bissell and Rich Riley of Origin Materials for taking the time out to have a really thoughtful conversation today. I also want to thank our great McKinsey on Start-ups production team—Molly Karlan, Polly Noah, Sid Ramtri, Myron Shurgan, and Katie Znameroski.
And finally, thank you, as always, to our listeners. We hope you’ll return for future episodes of McKinsey on Start-ups.
