Lux: VCs invest $5.8 billion in biobased chemicals
Venture capitalists have pumped in $5.8 billion into biobased 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 percent of all VC investment in 2016 (through October 11), and three of the top five deals. Fermentation and catalysis had funding shares of 20 percent and 16 percent, 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.
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 in 2016 to commercializing biobased products that offer improved performance, not just “greener” replacements for petro-based compounds. About 80 percent of VC investment in 2016 was on improved products, as opposed to only 46 percent 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.