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VCs invest in bio-based chemicals

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Hydrocarbon Engineering,

Venture capitalists (VCs) have pumped US$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 - 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 US$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 such as DNA synthesis-as-a-service and automated genomic engineering and laboratory 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.

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 US$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 fibre materials like nylon and silkworm silk have prompted big deals, like US$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 commercialising 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 - 2015.


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