Investing in Synthetic Biology: a View from Synbio Markets

Synthetic biology – an engineering approach to biological science– is gaining traction in biotechnology worldwide.

Synthetic biology – an engineering approach to biological science– is gaining traction in biotechnology worldwide. This year’s massive iGEM competition in Boston showed a global appetite for synthetic biology (also known as synbio) among young academics. Their technical skills matched their entrepreneurial spirit, incorporating business models into their research projects to demonstrate the feasibility of their technology. Globally, the field is attracting the attention of VCs, governments and industry hoping to boost progress by investing in this early-stage field.

Some $12 billion has been invested in the synthetic biology space in the last decade, with $4 billion in the last year according to SynBioBeta. Just what piques the interest of VCs and angel investors? How can startups avail of public or industry seed funding to get their idea off the ground? Here are some of the insights from Synbio Markets.

Right on the money

The investment environment in the United States is very different to that of Europe. “Obviously the U.S. is ahead, in terms of the fact there is a lot of money there and venture capital going into synbio,” said Alex Williamson, CEO of Bio Market Insights hosting the Synbio Markets event. Neil Goldsmith, co-founder of investment firm Double Bioventures, points to the disparity in U.S. private investment versus the relatively subdued investment in Europe. “It is interesting that, with the exception of the alternative [plant-based] meat guys, that no one’s really shown that this works as an investment,” Goldsmith said, adding, “The Americans are going for this really aggressive land grab and Europe is being very traditionally skeptical. I don’t think we know which is going to work out as the right approach.” While Europe lacks in early-stage venture capital, it does have a supportive framework of public funding for research geared towards developing a sustainable bio-based economy.

The industry also recognizes the potential of synthetic biology. Bioindustrials historically have attractive returns according to Thomas Grotkjaer of Novo Seeds, part of multinational Novo Holdings. “Industry players want to acquire de-risked assets, not early-stage,” Grotkjaer explained. Novo Seeds invests in early-stage companies and helps them to de-risk through scaling up, bringing them closer to their exit point. Angel investors networks also seek to develop early-stage companies through minimizing risk. The UK Innovation Science Seed Fund, Double Bioventures, RebelBio, Synbio Tech, Babel Ventures and Purple Orange Ventures all operate in the synthetic biology space targeting early-stage companies and offer support developing companies. Some of these networks are putting return for humanity ahead of return on investment. They call it impact investment and synthetic biology is a big beneficiary of this new line of thinking.

Investment with a difference

Gary Lin of Purple Orange Ventures is intrigued by an idea: Can capitalism be a force for good? This led him to look at technologies being developed to address the UN’s Sustainable Development Goals, settling on cultivated meat – meat grown without the animal. He thinks the science is out there to achieve great things, but it is locked away in siloes. With that in mind, Purple Orange has backed Wild Earth, an alternative protein company making vegan pet food. Wild Earth has attracted a lot of interest through impact investment. “They’re specifically focusing on pet-food and bringing in a lot of top-tier investors. Ryan Bethencourt was a founder and he has a great idea of how to create a product that could scale,” said Lin.

Bethencourt also co-founded IndieBio and has a history of impact investment, working with Babel Ventures and investing in Singapore-based Shiok Meats. He’s not the only investor looking to steer capitalism in a better direction for the planet. Claire Smith heads up Beyond Investing, an ethical and environmentally focused investment fund, which targets companies operating in line with those principles. Her aim is to make the world a better place by, as Lin mused when founding his firm, using capitalism as a force for good.

What are investors looking for?

Impact and return for humanity are also of high importance for established investment firms looking at companies in the post-seed stage. “We try to assess our companies based on having a positive impact for 1 billion people,” says Rodrigo Mallo Leiva of SOSV. “If it has a brilliant team but destructive for the planet, we won’t invest,” said Josko Bobanovic of Sofinnova Partners. A panel of investors from SOSV, Sofinnova and Moelis & Company who operate in the synthetic biology space were asked their thoughts on investing in synthetic biology-enabled technology.

A big question around synthetic biology is how to define and break down this cross vertical platform. For the investors, the focus is not breaking it down but building up applications for the individual technologies. “For us we would look at it and consider the speed to get this to market. What’s the niche? What’s the market? What’s the mechanism to get market share? What can you use that is already out there such as old facilities?” said JP Pfander of Moelis.

“It’s difficulty to approach this from a technology point of view. We think we have the capacity to understand the different options available to us. It’s really that element that provides the key test whether this technology stands up or not,” said Bobanovic. Leiva emphasizes the novelty of the synthetic biology space before outlining his approach, “We are trying to focus on remarkable individuals and teams that can bring a product over time. We make mistakes and are constantly learning, that’s how we look at it.”

So just what are investors looking for in a synthetic biology company at these early stages? Leiva highlights the importance of a good team that is focused on providing a solution to a defined problem, “We want a proof of concept that has a connection to a problem. Not teams that have technology but no problem to solve.” It’s also important that the technology works, though it doesn’t need to be all proven,” Bobanovic said. “A team mature enough to recognise what they don’t know and say what they need. An early indication of what they want from their business. They need to understand why they want to go into a particular market. It may not work but we want them to know this before going into invest.”

All the investors are keen to point out that they provide more than money. Their expert networks and teams all seek to build companies and de-risk them to help get them to the market. Pfander thinks this key for the synthetic biology field to build itself over the next five years, “Part of it is funding, part of it is networking. Part of it is more mature capital markets. I think that will change in the next five years, but it’s more like it happens in the U.S. rather than Europe.”

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