Zymergen lands $44M in monster Series A venture round

June 17, 2015 |

Zymergen-Dyadic-3-smWhat just happened? First of a new generation of bioeconomy wonders now counts Jerry Yang, Max Levchin, Eric Schmidt funds as investors’ and “several Fortune 100 companies” among its customers.

Today, the Zymergen story, so far, can now be told. And we look at potential roadblocks down the road for this new class of companies coming out of the block.

From California comes the news that Zymergen, founded in 2013, is emerging out of stealth and has completed a Series A investment round of $44 million. Data Collective led the Series A, with participation from AME Cloud Ventures (Jerry Yang), Draper Fisher Jurvetson, HVF (Max Levchin), Eric Schmidt’s Innovation Endeavors, Obvious Ventures, True Ventures and Two Sigma Ventures.

What Zymergen does

By applying its robotic automation, proprietary machine learning software, and deep computer analytics to the complex field of industrial microbiology, Zymergen can, cost-effectively, and predictably “program” microbes to produce high-value commercial molecules.

Zymergen-Dyadic-4As the company puts it, “Zymergen’s approach unlocks the promise of clean, inexpensive, and reliable manufacturing through biology for the first time in history.”

If you’ve gleaned already that this is the kind of collision between Big Data and biology that is creating tsunamis of interest in Silicon Valley — well, you go right to the head of the class.

Specifically, Zymergen works on strain development — engineering strains for partners, or creating new ones — as they say, “working across microbes, products and traits”. What makes the company of high interest is the promise of a dramatic acceleration in the pace of strain optimization.

Zymergen-Dyadic-5We’ve seen big potential leaps in productivity before. Revolutionizing the pace of strain optimization, as you may recall, was the core technology within OPX Bio (recently acquired by Cargill). As OPX said of itself:

“The EDGE technology is rapid – up to 5,000 times faster than conventional bioengineering methods for redesigning the genetic code of microbes. EDGE is also rational – meaning that we first determine and then purposefully program the specific, optimum genetic code in a microbe for bio-based production of our products rather than counting on random genetic changes to evolve a microbe that is only slightly improved.”

Zymergen-Dyadic-6-logoComputation, as a matter of fact, is at the heart of Genomatica, too, as you might glean from the name — beginning as it did as a venture in computational analysis. Both OPX and Genomatica eventually went down the product route; with more conspicuous success in the case of Genomatica and its BDO activities.

So, what’s different here? Primarily, the automation systems, and an integrated approach. By bringing together the most advanced techniques in biology with the latest in automation and computation we work in high-throughput to engineer and evaluate thousands of strains in parallel,” the company says.

Something uniquely powerful here — robotics. Zymergen’s robots – and the protocols they create to control them – enable them to build and test thousands of strains with resources typically required to build and test tens of strains — faster breakthroughs on a more predictable and affordable basis. And in there is a state-of-the-art laboratory information management system (knowns as LIMS) that supports data capture, analytics and execution across all aspects of the genome design lifecycle.

The backstory – where did Zymergen come from?

The company began in 2013 — driven, as a number of company formations have been and continue to be — out of the realization that rapid increases in the rate of biological innovation are possible, happening, and of transformative impact. Biology is moving at a “faster than Moore’s Law” pace if we look, for example, at the cost of genome analytics.

In the past 18 months, it has been feeling like 2005-2007 all over again in the Bay Area — every time you open a door in Emeryville, 20 companies fall out. Agricultural equipment, sensors, analytics, new foods, microbe and strain development — all of it happening at light speed, and at a convergence point between computer technology and biology.

If you’ve heard of companies like Aseptia, Beyond Meat, BioConsortia, Blue River Technology, Calysta, Conservis, Edyn, enEvolv, Granular, Impossible Foods, Industrial Microbes, Lygos, Mango Materials, Modern Meadow, Opus 12, PrecisionHawk, Siluria, Triton Algae, Tule, and Vestaron and Visolis — these are some of the companies in the vanguard.

Zymergen’s seed round began in earnest in early 2014, as CEO Josh Hoffman began to do the investment rounds, and made stealthy appearances at industry venues such as BIO and ABLC. We first met with him in spring 2014, on background, and were impressed.

Hoffman? A background with Rothschild, Lloyds, McKinsey — he’s an economist by training. Two key members of the science team, VP Engineering Jed Dean and CSO Zach Serber, come out of Planet Amyris, while CTO Aaron Kimball arrives from Cloudera and WibiData, which five years ago was one of the earlier Big Data plays. The rep on Hoffman? “Smart young guy with a great big idea, who has been beat up just slightly enough to not be too arrogant,” goes the thinking around Silicon Valley.

By the spring-time of last year, the company has opened its pre-series A money raise in the Valley, and had landed money from Eric Schmidt’s fund, and personal checks from founders of Yahoo and PayPal, raising $4.5M in that round.

If you saw Hoffman on a plane to Brazil around that time — yes, GranBio founder Bernardo Gradin, former CEO of Braskem, also was a pre-series A investor. In some ways, perhaps Gradin’s backing was key at the time — because here was an industrial-scale operator in the advanced bioeconomy giving the green-light and writing checks towards a new technology.

Hoffman says, “It’s amazing to know that we can harness activities at a cellular level to churn out the raw materials we use in our everyday lives. And yet the progress in this field has been slow and disappointing, because companies have been constrained, pursuing inefficient approaches. We think this is a problem of data and computation, rather than one of scientific discovery alone. We have developed algorithms for efficiently discovering the best paths for programming microbial DNA. The potential long-term applications are virtually limitless.”

Between then, and now?

The platform is now fully built out, including the back-end data-collection which basically uses the same infrastructure that Google and Facebook use. According to those in the know “The platform is delivering results for microbes used in large-volume, full scale production today.”

Meanwhile, the platform is host agnostic and they are working on a number of non-canonical production species today.

Which leads us to the purpose and timing of the raise. On the one hand — the purpose of the raise is because Zymergen has more customer demand (from Fortune 1000 companies) than they have capacity and they want to make sure we can scale to meet existing demand. On the other hand, experienced hands around the Valley know that you “raise money when you can, not when you need it,” and Zymergen is taking good advantage of having built a solid reputation for delivering, against a big sexy target where Silicon Valley thinks it will play, and would like to own, as Big Math hits the world of agriculture and biology.

What can you make?

As we highlighted in the Materials Superhighway last month, when we began to preview this massive new wave in innovation and the implications of its attack, almost everything is up for grabs. Either because someone wants to light-weight, add tensile strength, make something more malleable, tasty, healthy to eat, or cheaper to produce, more functional, or more sustainable.

The revolution in materials is coming after plastics, steel, pharma, food, chemicals. As Zymergen notes, “with potential applications that include everything from more fuel-efficient cars to more pest-resistant plants to adhesives that can stay intact inside a patient after surgery.”

After all, we have classified 200,000 molecules in the material world and it is believed that more than a million might be out there — every one of them has a functional purpose, every one of them is subject to process improvement. It’s a matter of manifestly reducing the Time, Money and Aggravation to do so — and that’s where Big Data, computational speed, and robotics are expected to lend a hand.

So, you’ll see new materials, new fermentation processes to make them; new advances in rate, titer and yield as SuperStrains appear. In some cases, we’ll see new crops, with new techniques in the field to improve the performance of crops — new crop protection schemes, analytics provided by mobile sensors flown in drones. All of this is already underway — just a question of how fast it will arrive, and what areas of innovation will come first.

Reaction from the unusual suspects

So, there’s Zymergen, posting itself at the crossroads of all this activity, with a team that perked up interest and, according to those in the know, producing credible results to date.

“Unlike the prior generations of companies in this field, Zymergen is pursuing a repeatable, technology-focused approach with controllable costs and fast delivery timelines,” said Matt Ocko, Managing Partner of Data Collective. “With a seasoned leadership team made up of scientists with decades in the field, world-class AI and robotics technologists, and business people with long experience in dealing with demanding Fortune 1000 customers, Zymergen is already solving critical real-world problems with the potential for massive impact in the years to come.”

Ok, now the tough talk about roadblocks

So, let’s think up a theory explaining why two top guns for Amyris have jumped ship and are now at Zymergen. If you remember, Amyris was the hottest company in the advanced bioeconomy in the late 200s and early 2010s, edging out Solazyme for a while there as it reeled in a big IPO in the 2010-11 window.

Turns out, you can create pathways to a whole bunch of transformative products, but at some stage someone, somewhere has to do the manufacturing. And manufacturing at world-scale based on new bugs has proven just a teensy bit more difficult than expected.

And the sugars many of these microbes use for energy haven’t proven as cheap as once hoped.

“You can face a huge bottleneck in the manufacturing,” Dyadic CEO Mark Emalfarb told The Digest. “You have all these labs with amazing talents making amazing things, really useful stuff, and then it gets stuck for years in discovery because there is no way to make it at scale. Thousands of genes get stuck because they can’t make enough protein to even test it, much less manufacturing quantities.”

Dyadic should know, after a 20-year journey to develop its own expression system, based on a wild-type C1 fungus originally discovered in Russia in the early 1990s.

“At the end, you need pyruvate, that’s what is going to provide energy to living cells, no matter what you are doing you are in the pyruvate business and he who makes cheap pyruvate will win the war, no matter what bugs and pathways you discover beyond the pyruvate path, no matter what chemical or compound you figure out how to make, and a lot of them are golden, believe me, it’s amazing what these guys can do. But if you don’t have the right manufacturing plant for the sugar, the carbon cost is too high or what you make interferes with your process.”

Zymergen-Dyadic-2

“And, you need an expression system that is suitable for large-scale production. We’ve seen projections that, in biosimilars alone, companies could save up to $250 billion over 11 years if just 11 biosimilars are approved. But they need manufacturing systems that have the right expression, the right production, the right downstream processing, the right product attributes.”

Because if you are hitting the right performance with your pathway, you still need to hit the right yield, and there is no way that anyone would contend that we are keeping pace, in manufacturing, with the pace of innovation in sequencing and discovery of useful genes.”

“It’s all going to come down to the economics. We think that we have the platform in C1 that you can drop pathways in to, where it is low carbon and programmable, and that’s why we work with companies like BASF, Sanofi, and Abengoa. What they have concluded is that you can’t develop something that no one will ever make enough of. The products that will be chosen by the big players will be based on high productivity, secretion, activity. Also, think about the market size, but also the IP expiry date, and the competitors. These are the real-world metrics by which the new products are going to be judged.”

The Bottom Line

When we started previewing the Materials Superhighway earlier this year, we didn’t record exactly world-shaking levels of interest from the broader audience. Mostly from insiders, conversant with the science, comfortable with the implications of the rate of change.

Perhaps, this news from Zymergen will be a wake-up call. With the caveat on manufacturing from Dyadic.

Expect to see the first impacts in the pharma world, then crops, then chemicals and materials, then fuels — following the price curve, as it were.

It’s coming, get ready.

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