CellFor grabs $10M for improved tree seedlings

Vancouver-based CellFor said it raised $10 million to expand the types and quantities of its specialty tree seedlings that increase timberland yields by more than 50 percent an acre.

The seedlings are developed by cross-breeding the seeds of the fastest-growing trees and using somatic embryogenesis to produce large numbers.

The seedlings grow 30 percent to 40 percent faster than normal pine seedlings, said CellFor CEO and President Tom Urban. Additionally, the trees are highly resistant to major disease and grow uniformly, which increases the value of the timber.

“If you look at analogies across other agricultural systems, hybrid corn was introduced in 1930s and ‘40s, and today it has 100 percent of the market. No developed country in the world uses open-pollinated corn,” Urban told the Cleantech Group. “Now we’re in the beginning of this transformation of the forestry industry, moving to high-quality, high production seedlings. It’s the technology of forestry.”

In four years, CellFor has sold 20 million seedlings. The new funding will help the company expand its existing facilities to meet an enormous demand driven by the desire to use forestland more efficiently, Urban said.

The industry estimates that new technologies could reduce the land needed for the world’s entire timber production to just 5 percent to 10 percent the area used today, allowing for more forestland to be preserved (see Report calls for forest preservation).

The seedlings’ increased growth rate gives foresters two options, Urban said. Foresters could either reduce the rotation age time to harvest from 25 years to about 22, or allow the trees to still grow 25 years and harvest more wood, he said.

“If you can increase productivity of the land we are currently managing by 30 to 40 percent, it reduces the pressure to go and cut,” Urban said. “These trees also sequester 30 to 40 percent more carbon per acre per year than our baseline today.”

The uniform quality of the wood allows foresters to sell timber to saw mills for $40 a ton rather than pulp mills for $7 a ton, Urban said. The seedlings also come at a premium: $0.30 to $0.40 each, compared to $0.05 for a traditional, open-pollinated seedling.

“Foresters by nature are conservative folk,” Urban said. “Asking somebody to pay five to six times what they’re used to paying is not an easy task. So we’ve done a tremendous amount of work explaining and proving out the value proposition.”

Part of the value is that the trees are resistant to fusiform rust and pitch canker, which are diseases that are difficult to treat with chemical pesticides, Urban said. Fusiform alone results in annual losses of 562 million board feet of sawtimber, 194 million cubic feet of growth stock, and $28 million in stumpage, according to the U.S. Department of Agriculture.

There are a couple competitors in the space, including South Carolina-based ArborGen and Washington-based Weyerhaeuser.

With 200 employees, CellFor now has the capacity to produce 50 million seedlings a year and expects to ramp to 100 million a year in two to three years, Urban said. The company has been focused on Southern Pine but is now developing seedlings for Radiata Pine to break into the Australia and New Zealand markets, which demand 80 million to 100 million seedlings a year.

There’s a market for 1 billion Southern Pine seedlings in the Southeastern U.S. each year, Urban said. CellFor is now looking to sell the seedlings in Brazil, Argentina and Uruguay, which together demand 300 million to 400 million Southern Pine seedlings a year, he said.

The most recent funding round came in the form of convertible note financing from new and existing investors. Since it was founded in 2000, CellFor has raised roughly $100 million in four rounds from investors including ATP Capital, CSFB Private Equity, GrowthWorks Capital and BDC Venture Capital.