VCs Invest $5.8 Billion in Bio-based Chemicals, as Focus Shifts to Disruptive Synthetic Biology

Lux Research

This year, synthetic biology startups have raised 53% of all VC funding in bio-based materials and chemicals, as venture firms flock to technology platforms such as DNA synthesis-as-a-service, says Lux Research

BOSTON, MA – December 20, 2016 – Venture capitalists have pumped in $5.8 billion into bio-based materials and chemicals (BBMC) startups since 2010, reflecting the drive for sustainability, performance, and alternatives to petroleum feedstocks. While from 2010 to 2015, the investment focus was on drop-in replacements for established chemicals, in 2016 VCs’ focus has shifted to disruptive synthetic biology (synbio) and conversion technologies, according to Lux Research.

Synbio startups attracted over $300 million, accounting for 53% of all VC investment in 2016 (through October 11), and three of the top five deals. Fermentation and catalysis had funding shares of 20% and 16%, respectively.

“VCs in 2016 have taken a step back in the value chain to focus on upstream technology platforms like DNA synthesis-as-a-service and automated genomic engineering and lab equipment,” said Victor Oh, Lux Research Analyst and lead author of the report titled, “Show Me the Money: Where Is Venture Capital Placing Bets in Bio-based?

“Synbio companies are embracing information technology like BioCAD and BioLIMS to create disruption and to integrate new digital genetic tools like CRISPR gene editing,” he added.

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Lux Research analysts built a database of companies and investments in the BBMC space. Among their findings:

  • Synbio poised to grow bigger. The top five VC investments – Zymergen, Gingko Bioworks, Twist Bioscience, Elevance Renewable Science and Bolt Threads – reveal an emphasis on automating synbio. These five have raised $430 million in total, and growth of these platforms should lead to even bigger numbers for the segment in 2017.

  • Spider silk catches fancy. Spider silk’s superior properties over those of conventional fiber materials like nylon and silkworm silk have prompted big deals, like $82 million for Bolt Threads over the last two years. Japan’s Spiber and Germany’s AMSilk have also pulled in big deals, and up-and-comers like Araknitek and Spiber Technologies may be up next.

  • Low oil hits drop-ins, substitutes. Amid low oil prices, VCs have shifted focus this year to commercializing bio-based products that offer improved performance, not just “greener” replacements for petro-based compounds. About 80% of VC investment in 2016 was on improved products, as opposed to only 46% from 2010 to 2015. (For more, listen to the Lux Analyst podcast “Navigating the Web of Bio-based Performance Materials”).

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The report, titled “Show Me the Money: Where Is Venture Capital Placing Bets in Bio-based?” is part of the Lux Research Bio-based Materials and Chemicals Intelligence service.