Stories
To make it big in America, Ronan McGovern’s initial business idea was to separate oil from water. Then the oil price crashed and he turned to beer. He’s just sold the resulting company, Sandymount Technologies, to the global engineering group Alfa Laval.
McGovern recently moved back to Ireland after spending ten years in Boston. On a video call from his new home in Blackrock, Co Dublin, the 31-year-old entrepreneur is already thinking about his next move. Not so much about his next business idea yet – but about how to find that idea. As a true engineer, he is precise and analytical in this approach to make sure it will work.
To understand, he takes me back to where it all started.
*****
McGovern caught the globe-trotting bug while studying mechanical engineering in UCD. During his Erasmus year in Switzerland, he applied for the US government-funded Fulbright programme and was among the students who received its short-lived dedicated science and technology scholarship at the turn of the last decade. The funding led him to the prestigious Massachusetts Institute of Technology.
“One of the universities I applied to and got into was MIT, for a PhD in mechanical engineering. So in 2010, I ended up going over to MIT and did a master’s and a PhD,” McGovern says. “That took me to 2014. I was working on a few different patents along the way. And I saw a lot of older people at MIT who started businesses.”
His thesis focused on membranes and how they could be used to purify water in applications such as desalinisation and wastewater treatment. While writing it, he received mentoring on entrepreneurship through the university: “I said I’ll give it a give it a shot and see if I can start a business using membrane technology, because that’s what I’ve been working on.”
While McGovern was completing his PhD, the US experienced an oil boom driven by high global prices, close to $100/barrel, and the development of fracking technologies. Membranes could address complex wastewater issues associated with fracking and he looked into this market, but found that it had become too competitive before he could enter the fray. That was lucky. “Actually, in 2014, the oil price tanked,” he recalls. Crude oil lost half of its value that year, and hasn’t recovered since. “That ended up being a good market timing decision in hindsight,” he says.
Instead, McGovern turned his attention to higher-value industrial process, including food and beverages production. “I ended up looking at juices, pharma, and then beer,” he says. “I ended up talking to a few different brewers and learned a bit about how beers are, obviously, water-laden, and transport is a big cost there.” Wherever beer needs to be moved and stored, he figured that the logistics would be cheaper if excess water was removed.
“If you can make beer into a concentrate, and it’s still liquid, you can transport it between breweries at much-reduced cost and energy. You cannot transport it in mini-kegs into bars and you can add filtered water and dispense at the point of sale,” McGovern says. “Think about it a bit like a Coca Cola fountain. But we do pay quite a bit more attention to the quality.” He knew membranes could do that and temporarily reduce the volume of beer to a quarter of that of the actual beverage – now he needed to turn it into a business.
“We’re able to get a statistical flavour match between the before and after.”
Ronan McGovern
For two years, McGovern worked part-time as a research assistant at MIT while building an initial client base to test the technology with. “It took me that long to get in first funding as well,” he adds. In 2016, things clicked into place. Through informal university connections, McGovern and two co-founders who have since left the business raised an initial round of $1 million on the back of promises by several brewers that they would pay for trials.
Sandymount Technologies was born – named after his grandmothers’ favourite local walking spot in South Dublin, Sandycove, which he admits to having incorrectly named when incorporating the company. The membrane technology itself was branded as Revos. McGovern is named as the inventor of a series of patents registered by Sandymount.
“Those tests went fairly well. We then had clients asking for larger-scale tests, closer to commercial scale, and they wanted to rent units for themselves,” McGovern says. This led to another fundraise the following year. In total, the company raised around $3.5 million. Backers included Hub Angels and Project 11 Ventures, two Boston-based VC outfits with a local focus. “Then we had a lot of different individuals, some former execs for Anheuser Busch” – the brewers of Budweiser, the entrepreneur adds. Customers including “the top global brewers in the US and Europe” tested Revos at commercial scale and were happy with it. Sandymount’s team grew to 13 people.
I ask McGovern whether, as a beer drinker, I would taste the real thing after it had been concentrated and reconstituted through his technology? He says that the breweries’ sensory experts couldn’t tell the difference. “They have these panels of 20 or 30, people comparing blind before and after. You’re obviously trying to get a taste match on that,” he explains, adding that membranes simply perform a physical separation at low temperature. “We’re literally taking out molecules of H2O, and then putting them back in again. So it’s a fully reversible process. And we’re able to get a statistical flavour match between the before and after.”
As for the fizz, CO2 gas is usually added from a canister at the bottling or draught stage. “Keep in mind that the majority of beer, including craft beer, is force-carbonated. So most of the carbon dioxide is not the natural fermentation carbon dioxide, it’s added,” says McGovern.
The market for the Revos technology extends along the length of the brewing supply chain. Beer concentrated at source can be transported to another brewery for further processing: “You might brew in one country, and then you’ve got a specific packaging line for certain bottles or cans in another location,” says McGovern. But the concentrate can also be shipped all the way to the pub in mini-kegs, which are easier to handle and take a lot less space. “We have a technology for bars that allows you to basically blend under the counter, and it’ll pour out in the normal tap format,” he says.
While McGovern says keeping the beer in concentrate form all the way to the point of sale delivers the largest transport and energy savings, he expects interest for the two ends of the process to vary between regions: “You might see more about transport in markets that are growing like in China and Asia, whereas in established markets, where a lot of the primary transport is already set up, the draft is likely to be the main application.”
Sandymount got its first order of a commercial-size concentrating machine in 2018 and developed the retail technology for bars the following year. When Alfa Laval acquired the company on December 31, it could offer an end-to-end solution, with customers in North America and a test lined up with a brewery in Ireland. The business model is to sell fully automated machines to brewers and draught serving equipment to bars, as well as replacement membranes during regular operations.
The buyer’s view: “A paradigm shift”
Alfa Laval is a household name in many Irish families because it sold the first cream separators used across European farms a century ago. The Swedish firm has since evolved into a process engineering giant listed on the Nasdaq and employing 17,500 people in 100 countries. One of them is Danish-based Kyle Dorton, Alfa Laval’s head of brewing systems, who says he has seen companies try to crack the beer concentrate conundrum since he joined the industry in 2010. They always hit the twin challenges of preserving the beer’s flavour and reconstituting a carbonated beverage at the end of the supply chain – until Sandymount came along.
“Beer concentration is a burgeoning field. Going forward, we see this can create a paradigm shift because of its impact on transportation costs and product losses,” Dorton tells The Currency. Not only is concentrate lighter and less bulky, but it also remains stable for weeks, instead of days for beer in kegs, he says. “This will allow brewers to deliver beer to places further than they did before because of the shelf life and allow new business models.”
In the race to conquer this business, Dorton says Sandymount had two key assets Alfa Laval wanted: “A very unique intellectual property portfolio that they had tested with the key brewers – the same we work with”. In addition, “Ronan has put together a very good team, now integrated into Alfa Laval,” he adds.
Despite delays caused by pub closures during the pandemic, Dorton is confident that McGovern will help his firm conduct tests of the bar equipment used to reconstitute beer in Ireland this year. “We’re preparing supply chains to be ready when things re-open,” he says.
The amount Alfa Laval paid for full ownership of Sandymount is undisclosed. From Dublin, McGovern is now helping with the handover of clients and technology as a consultant to Alfa Laval. “The Revos technology for concentration will be offered in the suite of solutions they have, which includes alkalization, pasteurization, filling lines. It’s been rolled in from day one, it’s not going to be run as an independent company,” he says. Instead of third-party contractors, Alfa Laval will now manufacture the equipment and membranes in-house and market it through its global sales teams. “There’ll be a lot better footprint than what we were able to cover in terms of being a small team in Boston,” says McGovern.
Which begs the question: what next for him?
“I’d be really keen to find something I want to do for 10 years-plus because it won’t be about just getting in and getting an exit.”
Ronan McGovern
McGovern has a separate business called Point 5 Brewing near Boston, which uses his membrane technology to remove alcohol from fermented beverages without affecting their taste. Point 5’s initial attempt to start beer production with crowdfunding support last November coincided with the second wave of Covid-19 in the US and didn’t succeed. “I’m now the whole owner of Point 5 and I’m in discussions around relaunching the brand later in 2021,” he says.
McGovern is currently working on what he calls “side projects” based on his personal experience trying out new technologies. One is to advocate for wider use of cheap Covid-19 antigen test, which are less accurate than expensive PCR diagnostics but, he argues, would improve detection of cases compared with the current policy based solely on symptoms and close contacts. The other is an online course on decentralised finance, including the technical aspects of crypto currencies.
Neither have so far turned into the idea that will drive McGovern’s next business. “I think having done one, I realised the importance of choosing really carefully,” he says. “I’d be really keen to find something I want to do for 10 years-plus because it won’t be about just getting in and getting an exit.”
McGovern is conscious that breaking into an industry as concentrated as brewing was an opportunity that may not easily be repeated. “The top ten brewers have 64 per cent of the volume,” he says. “There’s really only two or three very sophisticated process engineering companies like Alfa Laval. That’s quite a challenging landscape for a startup.”
Having enjoyed a decade in Boston, he was looking for change and found this was a good time to come home. “Maybe it’s more realistic that I could do something from Ireland and not have to necessarily go to the US, because I have connections already. That’s good. But the capital markets obviously are a lot deeper in the US for doing a new business, so I’d have to factor that in,” he says.
