Zymergen, the Porsche 911 of the Materials Superhighway, raises $400M in monumental Series C round

We call it the materials superhighway to suggest an awesome speed of innovation, a connection back to the genetics revolution and the information superhighway, and a focus on the new materials, chemicals, substances, and energies of the advanced bioeconomy. That superhighway may have just found its Porsche 911 — fast as lightning, stunning design and a public reception because of what it can do and is doing that, if it reaches its potential, will have us talking about this one in hushed tones for the rest of the century.

In California, Zymergen has raised over $400 million in Series C funding led by returning investor SoftBank Vision Fund. The round welcomes new investors Goldman Sachs and Hanwha Asset Management, as well as returning investors, DCVC (Data Collective), True Ventures, Two Sigma Ventures, DFJ and Innovation Endeavors.

The amount is believed to be the largest single-round capital raise in the history of industrial biotechnology, and exceeds the haul from most sector IPOs.

Zymergen, once again, does exactly what?

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.

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.

To achieve its results, Zymergen uses artificial intelligence algorithms and robotic genomic “factories” to search the microbial genome, running tens of thousands of experiments to spot subtle signals of improvement. The platform then analyzes these signals to identify paths that no human scientist could ever discover, enabling Zymergen to optimize molecules for specific traits. Zymergen’s platform routinely accomplishes inside a year, in a single building, with a few hundred people, what would take thousands of scientists and specialists a decade, in square miles of facilities, and billions of dollars of spend.

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.”

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.

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

“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.”

And…aside from the 400 million financial reasons…this is a monumental raise, why?

Purpose and timing, in a nutshell.

First of all, despite this being a Series C 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.

As Zymergen CEO Josh Hoffman told The Digest a while back, “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.”

Zymergen has more customer demand (from Fortune 1000 companies) than they have capacity for, 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.

Here’s the Zymergen claim, and it is nuclear fission in a world of grenades, so get your Los Alamos Trinity Test-ready Hype sunglasses on before viewing:

“Zymergen is enabling real-world product outcomes for Fortune 1000 customers that are orders of magnitude greater than any other similar approach, at 100,000 metric ton and greater scales.”

So, there. Everyone else can go home now.

Why investors are crossing over from the computing space

Well, there are four reasons. One for the money, two for the show, three to make ready and four to go. 

Which is to say, 1) some people are jumping on because everyone else is jumping on, 2) some are investing via partnerships (as in the case of Arzeda) because they see transformative differentiation in the Zymergen platform and are keen to c0-seize the New World;  3) see fantastic organism development results and believe that a turning point has been reached in the industrialization of biology akin to the day that Alan Turing showed up at Bletchley Park and upended cryptography and computing forever; and 4) some are interested in accelerating results in the space and Zymergen is the fastest vehicle available to do so. The Porsche 911 of the Materials Superhighway, so to speak.

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.

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. An ideal file holder for any Russian Colluders lurking around. Not to mention limiting electronics junk in the landfill.

The Zymergen How-To Manual

We’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, back then.

“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.”

Computation, 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.

The uniquely powerful here — robotics and artificial intelligence. 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 company notes:

“Zymergen’s unique Molecular Technology centers on combining a radical approach to empiricism with more conventional research methods. Unlike traditional biotechnology or bioengineering companies, Zymergen does more than simply test predictions based on rational models of a cell. We use radical empiricism to accelerate discovery.

“Radical empiricism in biological engineering entails systematically modifying the microbial genome and carefully measuring what phenotypic changes result; with this approach, we can find the particular genetic modifications that impact a trait of interest without necessarily understanding why that change has an effect. We do this through a combination of a priori knowledge and experiments designed using machine learning, executed using automated workflows, and analyzed using sophisticated algorithms. In the process, we discover beneficial genetic modifications that we carry through an iterative learning model for rapid design, testing, and experimentation.”

And you can learn one heck of a lot more in a new white paper, The Promise of Molecular Technology, just out from Planet Zymergen, which you can find here.

Here’s how the Heroic Deeds work out at the Payment Counter

So, yes, you have to pay your Homeric heroes, these days.  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.

The Backstory

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.

Zymergen’s epic $130M Series B

Zymergen’s monster $44M Series A

More about the Materials Superhighway

Reaction from the stakeholders

They’re pleased and delighted, those stakeholders, we’re delighted to report.

“We believe biology will allow us to reinvent all kinds of material products we use in our everyday lives,” said Joshua Hoffman, Zymergen co-founder and CEO. “With the Vision Fund’s continued investment, and the support and validation from top financial institutions, we will lead the discovery, development and engineering of new molecular products and usher in a wave of industrial innovation built on biology. Zymergen enables its globally leading customers to deliver new and existing products faster, more profitably, at higher quality, with a dramatically reduced environmental footprint, all on a repeatable basis.”

“The secular trend of synthetic biology, enabled by the genomics revolution and computational biology, is creating new opportunities across multiple industrial sectors,” said Deep Nishar, Senior Managing Partner at SoftBank Investment Advisers. “We believe the company’s differentiated combination of AI and genomics creates a platform that makes it economically viable to engineer biology and build better, novel, and sustainable products. We are excited to support the Zymergen team in unlocking this potential to advance industries past their dependency on conventional hydrocarbon processing.”

Ok, now the tough talk about roadblocks

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.”

“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.”

So, a pathway design deal worth noting

In March 2016, Zymergen and Arzeda signed a multi-year agreement to develop strains and processes to manufacture novel, high utility molecules and materials utilizing Arzeda’s pathway and enzyme design and Zymergen’s strain construction capabilities.

“We have only started to scratch the surface of what synthetic biology can deliver in terms of new molecules and materials. Arzeda’s computational design technology opens up the ability to produce molecules with applications in transportation, medicine, and communications that are not currently biosynthesized,” said Arzeda CEO Alexandre Zanghellini. “Uniting with Zymergen’s innovative strain design platform has the potential to help make our designs a reality. “Zymergen’s scientists are constantly pushing the envelope in synthetic biology, and we are thrilled to be working with their team.”

Arzeda’s Archytas industrial protein design software and Scylax computational pathway design tool will be used to identify and design new enzymatic pathways capable of producing molecules that are impossible to synthesize via conventional chemistry.  These pathway designs will be implemented and tested by Zymergen’s high-throughput strain development and testing platform.

And, eh, a manufacturing deal?

Two thoughts here. One, in theory this is strain improvement, not novel manufacturing of novel materials. The customers are supposed to have their own fermenters. Second, thought, Zymergen may well invest to develop a foundry that can manufacture the improved microbes at scale (as opposed to manufacturing the products that the improved microbes produce) — as with a Novozymes that is manufacturing advanced enzymes even if it is not manufacturing ethanol, to use an example.

The Bottom Line

It’s a towering cash achievement, if the company doesn’t have a billion-dollar valuation at this stage, in fact well beyond that, we’ll expire from shock. More importantly, the company’s armed for epic levels of breakthrough microbial development. If I were a productino microbe, I would ready myself for several months at Camp Zymergen. If I were the server salesman with the Zymergen account, I would be writing my “salesman of the year” speech for the holiday party.