Zymergen gets Lit: raises $130M in epic Series B

October 11, 2016 |

bd-ts-101216-zymergen-smIn California, Zymergen has raised $130 million in Series B funding led by SoftBank Group. The round also includes prior lead investor Data Collective (DCVC), as well as return investors True Ventures, AME Cloud Ventures, DFJ, Innovation Endeavors, Obvious Ventures, and Two Sigma Ventures. New investors include Iconiq Capital, Prelude Ventures, and Tao Capital Partners.

Ok, why is this needed, what do you get, and why are these guys pumping in this kind of cash?

First of all, despite this being a Series B financing in the world of microbial engineering, this is not development stage but growth stage finance — it’s about more robots to work on more customer projects with more customers in more places around the world.

The Zymergen idea: An Elite Performance Academy for Your Friendly Neighborhood Production Microbe

Here’s what you get with Zymergen. You pack up your production microbe — currently making enzymes, PlantBottle precursors, flavors, fragrances, advanced polymers, therapeutics and so on. You ship to Emeryville. California. Zymergen uses a fleet of computers and algorithms to come up with microbial modifications. Then, in come the robots to snip-snip and clip-clip the DNA to perfect performance at industrial scale.

From artisans to algorithms

To date, optimizing production microbes been basically about geniuses, resident at companies, who attempt to trace, design, test and improve as fast as they can. It’s a process based inherently on the insight of an artisan.

Think of all the artisans, if you will, that filled Bletchley Park with their reason and genius until Alan Turing showed up with a machine and cracked the German Enigma code with brute computational force.

“Biology is just too complicated,” Zymergen CEO Josh Hoffman told us. “Our approach is highly differentiated. We don’t use scientific insight and we take the geniuses out of the process. We build machines and use robots that learn to engineer microbes faster than ever, and more predictably, and at a level of performance previously unattainable.  The machines move fast, learn fast, and then they get faster and learn faster. And it’s data driven, so the more you do, the better they get, the better the algorithms become.”

Microbes that make what, exactly?

For one, surgical glue, for which current formulations are sub-optimal. Zymergen is developing molecules for biomedical coatings and adhesives. These critical ingredients can be used as more effective surgical glues by first responders – firemen, paramedics, flight crews, etc., either inside the body or on the skin to close a wound or to protect against infection.

What about flexible electronics? Zymergen is also working to develop materials that could potentially enable flexible electronic devices used across mobile phones, monitors, and other portable electronics. Imagine if a mobile phone does not break or shatter when you drop it. Or what if we could roll up a high-def screen and put it on any surface.

What about phones and computers that eventually degrade instead of going to the landfill? A scenario might include remote on-demand degradation of computers that hold sensitive information. The perfect email server for Hillary Clinton, we’d respectfully point out. Not to mention limiting electronics junk in the landfill.

The Optimization

There are dark energy-sucking pathways in microbes. They divert energy for useless functions, or no function at all. Like an iPhone with a mysterious, elevated battery drain rate.

The gains can be substantial. Think tens of millions for the enhanced value of a fully-optimized production organism, over time.

The Speed

“We’ve been able to show in cases as much as four to five times as much improvement as companies themselves, using the old ways, have been able to achieve in a decade,” said Hoffman.

Hence the general global elevation, ahem, of interest from companies. It’s down these days to as little as a two-meeting process to get underway with a project, and dramatic results showing within a year. With the result that the customer companies themselves are moving faster, learning faster. Not unlike the machines. Moving quickly from “why are you here?” to “come on, give me some more.”

As Zymergen CEO Josh Hoffman told The Digest, “now we’ve built the platform and proven it works with multiple contracts. This is not about technical milestones, this is about building a global service for a global sector.”

Although, Zymergen is cagey about the customer list. But there are blue-chippers in there. And that’s why the need for more algorithms, more robots. Sort of like the moment when Henry Ford figured out a way to optimize the production of automobiles — from there, a race for scale and reach.

The customer deal

Here’s the basic deal structure: You pay a fee and Zymergen also keeps a percentage of value of the enhanced yield. Not much out there in the wild about how big the percentage is. But if you dial in the elevated rate of return that groups like Obvious Ventures and Iconiq Capital are seeking, you get an idea that a scaled-up molecule, producing a whale of a lot of something, can generate the kind of returns that makes $130M seem like a reasonable growth-stage infusion.

Steve Chu joins board

Zymergen also announced two additions to its Board of Directors: former U.S. Secretary of Energy and Nobel laureate Dr. Steven Chu, and SoftBank Group International Managing Director Deep Nishar, previously a longtime senior executive at Google and LinkedIn.

Reaction from the stakeholders

“We’re thrilled that SoftBank understands our proven business and supports our long-term growth,” said Joshua Hoffman, Zymergen co-founder and CEO. “The intersection of machine learning and biology allows us to reliably engineer microbes, resulting in new products, new jobs, and wholly new markets.”

SoftBank Group International Managing Director and newly-appointed Zymergen board member, Deep Nishar, agrees. “We are investing in Zymergen because they are a pre-eminent bioengineering company and the market leader. They have a revolutionary approach to engineering biology that is already solving business problems for Fortune 500 customers, and a proven ability to impact the economics of these mature, at-scale businesses.”

Matt Ocko, Managing Partner of Data Collective, added “DCVC has doubled down on Zymergen twice since our seed investment because the company transforms pivotal biology problems into solvable engineering problems, with repeatable, high precision outcomes– more like semiconductor manufacturing than traditional biology. Zymergen’s superb team has solved some of the hardest problems in machine learning and applied robotics, uniting them in a platform and giving the company years of sustainable advantage.”

“Biology is inherently complex, and in the past, this complexity was used to explain inconsistent results. Zymergen approaches biology with an engineering and mathematical mindset. This enables them to put all the pieces together in a repeatable and trustworthy way,” said Dr. Chu. “Zymergen has created a complete solution. As a result, they have achieved a level of scale and quality control previously unseen in industrial biology.”

The Bottom Line

The premise and the promise of biology is that — compared to the inorganic world of using catalysts and heat and pressure to transform something that is not all that chemically active, i.e. petroleum or other fossil feedstocks — the process gets better, faster. At some point you simply leave the inorganic process in the dust. Applying advanced mathematics to biology is revolutionizing this competition.

It is not just a case of optimizing microbes to generate better returns for the companies in question. It is about opening doors to new applications, new uses, new microorganisms with new functions that would have been uneconomic in the past, even at scale. Think of a new generation of organism-designing technologies that have access to profoundly speedy optimization — and you’ll be on the right long-term track.

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