Where industrial biotech fundraising is still seeing success

From our previous blog post, we highlighted the evolution of smart grid venturing – how smart gird innovation today is all about the internet-of-things (IoT). In this blog post, we will highlight how venture investments in industrial biotech have shifted over the past 10 years.

Venture capital investment in industrial biotech, especially to many in Silicon Valley, is considered a thing of the past. Companies such as KiOR, Cobalt Technologies, and Range Fuels have all but failed to disrupt the oil & gas industry and produce biofuels at industrial scale. What caused these companies to “throw in the towel?” After all, many of these high-profile companies are led by seasoned executives and backed by world-class investors. Ultimately, we can arguably say that the traditional venture capital model is simply not the right type of financing mechanism for the biofuels subsector, as it is extremely capital intensive and payback period could span up to 20 years, far longer than what traditional venture capital funds are accustomed to.

Despite several high-profile failures, many companies have since pivoted their businesses, and shifted from a biofuel-centric strategy to other higher-margin markets, such as agricultural, chemicals, and food & nutrition. In addition, we also see companies moving away from a build-own-operate model to becoming platform technology providers, which completely change their business and revenue models.

Taking a look at several recent sizable deals in industrial biotech, we can clearly see a few specific niche areas where the sector is still attracting financing.

zymergenZymergen, a California-based developer of microbial strain optimization technology, has just raised a whopping $130 million Series B round. By combining data science, automation, and biology, the company can develop new microbial strains at a much higher speed and scale for their customers across multiple industries.

ginkgo_logoGinkgo Bioworks, a Massachusetts-based engineer of biological organisms for applications in the energy, medicine, and food sectors, has raised a $100 million growth equity round in June 2016. Similar to Zymergen, Ginkgo Bioworks’ platform technology is aiming to use biology to unlock new applications in a number of industrial markets.

sapphire-energy-logoSapphire Energy, a California-based developer of algae-based crude oil, has raised a $92 million growth equity round at the end of 2015. Despite the company’s legacy name referencing “Energy,” the company has completely shifted to the agricultural market, and is now positioning itself as a cultivation platform for algae biomass and targeting the animal feed market.

How will the pivot play out for the industrial biotech sector over the upcoming years? Stay tuned and subscribe to our data platform, i3, for the latest updates on the sector, companies, and deals.