Paine Schwartz adds Elemental Enzymes stake to biologicals portfolio

Paine Schwartz Partners made an investment of an undisclosed size into Elemental Enzymes, a Missouri-headquartered life science research company that provides naturally occurring enzymes and biochemicals for commercial agricultural use.

Paine Schwartz’s early June investment drew from the New York-headquartered firm’s Food Chain Fund VI, which has an 20 percent allocation to growth equity investments, according to documents presented to the Rhode Island State Investment Commission last year.

Elemental Enzymes was established in 2011 and offers enzyme, peptide, protein and biological chemistry products designed to help support nutrient use efficiency, stress mitigation and pest resilience in commercial agriculture. The St Louis-headquartered company will have 17 products in market by the end of 2023 and expects to add another 115 new offerings by 2027.

Paine Schwartz managing director Steve Bierschenk told Agri Investor the investment is  a continuation of the New York-headquartered firm’s established focus on a $9 billion biological crop inputs market, which is growing at three times the rate of its traditional  chemical inputs counterpart.

“The reason it’s growing [the biologicals market] is due to unmet needs in agriculture of trying to solve complex problems like citrus greening, which is largely unmanaged, Asian soybean rust or abiotic stress. This company was started to solve those problems and go after those innovations,” he said.

Elemental Enzymes established an exclusive agreement with Corteva in August 2021 to supply fungicide capable of boosting protection from fungal diseases including Asian soybean rust.  In March 2021, it agreed to supply a peptide-based biochemical pesticide product well-suited to fungal and bacterial diseases like citrus greening to Nutrien Ag Solutions.

Bierschenk, who spent 18 years at Monsanto before joining Paine Schwartz in 2018, according to his LinkedIn profile, explained that because Elemental Enzymes’ products are designed to be used alongside traditional inputs, partnering with large suppliers of chemical products used in ag is a key component of the company’s strategy. He added that whereas Monsanto would often partner directly with early-stage start-ups developing innovative new products using its own capital, outside investors like Paine Schwartz play a role that is helpful for young companies.

“An investment in a company this size, having worked at a big multinational for decades, can sometimes get lost in a big multinational,” he said. “It’s going to get the time and attention, in our portfolio, to help this team be successful.”

Elemental Enzymes’ existing investors include University of Missouri affiliate Allen Angel Capital; Missouri-headquartered regional development vehicle Centennial Investors and the Citrus Research and Development Foundation, a Florida-headquartered non-profit.

Paine Schwartz’s existing biologicals-related investments include Texas-headquartered AgBiTech, which provides biological inputs used in row and specialty crops and Advanced Agrilytics, which provides data and analysis to help improve sustainability from its headquarters in Indiana.

Bierschenk said Paine Schwartz’s investment into Elemental Enzymes will help the company continue developing products that can help further establish the broader biologicals market.

“Quite frankly, we de-risk for whoever decides to be the next owners, whether that’s a large strategic, another private equity firm or even in a public offering,” Bierschenk said. “This business has a strong track record of development and if they continue to win in the marketplace and achieve growth, it’s going to be a company that’s going to be attractive for a number of potential next owners, including strategics or other financial sponsors.”

Paine Schwartz managed $4.8 billion at the end of 2022, according to a March filing. The firm has surpassed Fund VI’s initial target of $1.5 billion and has raised at least $1.6 billion into the vehicle through commitments from institutions including the Minnesota State Board of Investment, the Teacher Retirement System of Texas and the Connecticut Investment Advisory Council, among others.