US government layoffs rattle chemistry start-ups

Chemistry start-ups are scrambling to adjust their plans after layoffs at US government agencies and delays in federal funding have thrown obstacles into their paths. Many entrepreneurs also worry that uncertainty about the US government’s commitment to emerging chemistry technologies will stifle progress.

The trouble for the agricultural technology start-up Pheronym started almost as soon as President Donald J. Trump took office. The company, which is developing pheromone-based crop protection products, was expecting a payment under a Small Business Innovation and Research (SBIR) grant from the National Science Foundation (NSF) by the end of January.

Right before the grant should have come through, the Trump administration said it was freezing all federal loans and grants. A few days later, Pheronym cofounder and CEO Fatma Kaplan got an email saying the payment had been canceled.

Pheronym was counting on the funding to help scale up pheromone production. Kaplan immediately reached out to scientific collaborators and investors to strategize about the next steps. Then the company caught a break. A court order blocked the funding freeze, and Pheronym managed to secure its SBIR funding, albeit later than expected. Kaplan breathed a sigh of relief.

The feeling didn’t last long. The following week, several US agencies, including the NSF, the US Department of Agriculture (USDA), and the Department of Energy (DOE), started laying off employees. Pheronym was planning to work with the USDA to conduct field trials. Kaplan contacted her collaborator at the USDA and learned that two postdoctoral researchers who were going to help carry out those trials had been fired.

With the growing season quickly approaching, Kaplan doesn’t have time for a plan B. She’s hoping the USDA will be able to regroup and conduct field trials with fewer employees.

"The USDA does a really great job. We have credibility, our technology has credibility, because we have third-party trials," she says. "Now it's all up in the air."

While rushing to resolve the problems with field trials, Kaplan was also in the midst of applying for a supplement to her SBIR grant, which requires matching money from private funders. She says the supplement would have been a major step toward commercialization. Before she could submit the application, the NSF program director managing her grant told her that he had been fired in a February layoff that eliminated about 10% of the agency’s workforce.

The NSF told Kaplan that it would assign her a new program director. But Kaplan says program directors were stretched thin before the mass layoffs. She’s worried that a new director juggling a larger number of grants won’t be able to review her application quickly.

Even if funding and resources do eventually come through, Pam Marrone, the founder of multiple agricultural technology start-ups and a Pheronym adviser, expects the turmoil to have lingering effects. She says programs like the SBIR grants are essential for companies with promising technologies that are too risky for private investment. If the recent layoffs cause delays in the SBIR program, Marrone worries, venture capitalists will be slow to invest in new technologies, and innovation will stall.

“All businesses and business leaders want certainty and stability,” she says. “Nobody does anything or makes investments when there's chaos, uncertainty, and lack of stability.”

The NSF didn't answer specific questions about how the layoffs would affect the SBIR program, but a spokesperson referred C&EN to a website noting that the NSF is still accepting SBIR pitches. The USDA did not respond to questions about the agency's ability to collaborate with start-ups. In a press release, the agency says it's “pursuing an aggressive plan to optimize its workforce by eliminating positions that are no longer necessary.”

Some start-ups have had an easier time. After hearing about the layoffs, Solomon Ssenyange, CEO and co-founder of the greenhouse gas monitoring start-up RedNOx, contacted the USDA to check on his company’s SBIR grant. So far, the grant is safe.

A spokesperson for Niron Magnetics, which was awarded a DOE grant in December to develop magnets without rare earth minerals, says the company has seen delays in grant processing in recent weeks but expects its DOE funding to move forward.

Jeremy Patt, chief technology officer of the lithium extraction start-up Summit Nanotech, says changes at the DOE have delayed the final negotiations for a grant his company was awarded in December. “I think they’re just trying to figure out what the lay of the land is,” Patt says. “They’re in a quandary, trying to figure out the new rules of engagement.”

While the DOE grant is a welcome accelerant for Summit, Patt says it’s not critical for the company’s success. But for younger companies that rely heavily on government funding, such delays could be an existential threat, he says.

Laura Lammers, CEO and founder of the mining and fertilizer waste recycling start-up Travertine, says the layoffs and funding issues haven’t caused immediate problems for a DOE-funded project her company is wrapping up. But she says the changes have generated confusion about what government funding for new technology will look like going forward.

For example, Lammers says some DOE funding opportunities still contain language from the Joe Biden administration, which asked companies to describe a plan describing how the project would benefit the communities near their projects. Lammers worries about submitting that information to the DOE under the Trump administration, which wants to stop using these plans. “There’s so much uncertainty that it’s hard to put together a compelling proposal,” she says.

As the DOE cuts its workforce, Lammers is also concerned about the viability of programs that support the commercialization of new energy technologies, such as the Loan Programs Office and the Office of Clean Energy Demonstrations. Travertine is starting to plan its first commercial plant and was considering applying to those programs for support. Given all the uncertainty, Lammers says she’s focusing more on grants available through individual states or other countries.

“Start-ups are on a very short funding cycle,” she says. “Even relatively minor . . . pauses or periods of uncertainty can have big impacts on decision-making.”

Derrick Flakoll, a policy analyst at the research firm BloombergNEF, says the DOE appears to be balancing two policy priorities. He points out that the Trump administration hopes to make energy cheaper by investing in fossil fuel production and advanced nuclear and geothermal energy. At the same time, the new administration is trying to cut spending through layoffs, which could hamper the DOE’s ability to achieve those goals. “It is not clear which policy choice the administration is more keen on pursuing,” Flakoll says.

Ben Brenner, senior vice president at the clean technology government relations firm Boundary Stone Partners, agrees that the Trump administration has plans to support some innovative energy technologies. He expects the government to continue using grants, loans, and other financial assistance to advance these projects. “Can a leaner DOE workforce do this as quickly and effectively as the administration expects?” Brenner asks. “That remains to be seen.”

C&EN contacted the DOE to ask if staff cuts would affect the agency’s ability to support companies developing new technologies. The agency didn’t respond to those questions.