Zymergen – Synthetic Organisms Built by Robots and AI
When you read about what some startups are doing these days it seems like you’re reading a sci-fi book. Earlier this year we published an article titled “3 Companies Building Nanorobot Companies” and we talked about using software, robots, and synthetic biology to engineer synthetic organisms (essentially nanorobots) that can be used to create efficiencies. According to BCC Research, the global market for microbes and microbial products was projected to approach $154.7 billion in 2015 and almost double to $306 billion by 2020. Healthcare is largest consumer of microbes (61%) followed by energy (24%) and manufacturing (13%). The massive size of the microbe industry is just begging for a bit of disruptive technology to address it and that’s exactly what Zymergen is getting up to.
Founded in 2013, San Francisco startup Zymergen has taken in a total of $174 million from a whole slew of investors that include Draper Fisher Jurvetson and Softbank. Their most recent funding round of $130 million closed just last week and was led by Softbank, a publicly-traded Japanese technology conglomerate. This should come as no surprise considering Softbank has recently announced their intention to become the world’s number one technology investor with up to $100 billion allocated to investing in future technology companies.
Update 12/16/2018: Zymergen just raised $400 million in Series C funding. SoftBank led the round, and was joined by investors including Goldman Sachs, Hanwha Asset Management, Two Sigma Ventures, and DFJ. This brings Zymergen’s total funding to just over $574 million.
Zymergen talks about “unlocking the power of biology” and that may very well be the best way to describe what they do. The Company is using some of the most exciting technologies there are today like synthetic biology, artificial intelligence, and robotics to develop synthetic organisms that do things that until now have been impossible to do. Let’s break down how all these technologies come together.
- Robotics – The best way to understand the application of robotics in this context is to read about another company we profiled called Emerald Therapeutics which has a 15,000 square foot “lab in the cloud”. This robotic lab has its own programming language and can perform over 100 different types of experiments in a fully automated fashion. That’s the same sort of robotics applications that Zymergen is using.
- Synthetic Biology – The biggest tool in the toolkit of synthetic biology is the ability to edit the genetic makeup of an organism in order to create a synthetic organism. Since our first article highlighting 7 gene-editing companies, two of those companies are now publicly traded and one of them is preparing to IPO. Gene editing is now a mainstream tool being used to propel synthetic biology forward and while a massive legal battle is underway to split up the spoils, companies like Zymergen are busy using gene-editing technology to change the way that microorganisms behave. A good example of this would be a company we talked about before called Joule which is using gene editing to create a synthetic organism that can literally sweat hydrocarbons.
- Artificial Intelligence – The reason that you’re reading about artificial intelligence a lot lately is because we’ve now mastered how to teach a computer to learn. When AI recently mastered the game of Go which is infinitely more difficult than chess, it accomplished that by learning how to master Go itself. The AI Go player was doing moves that humans had never seen before. Now think how that can be applied to biological experiments. You may have 100s of variables to change going into the experiment and 100s of variables to analyze after the experiment. AI can probably perform optimizations that humans would never be able to meaning that the “recipes” needed to make useful synthetic organisms are now more accessible than ever.
Let’s try to visualize the use case for this technology. The entire process starts with a client who contacts Zymergen with a particular task. Let’s say they have a microbe used for making a particular type of fuel additive and they spend $300 million a year purchasing that microbe. Now let’s say you could improve the efficiency of that microbe by 20% and save $60 million a year in additive purchasing costs. We’ll let you do the math on what the present value of those savings over the next 10 years. Zymergen probably has already handled many such requests for synthetic organisms so they have the process entirely automated and costs are predictable. Here’s a slide from the company showing how that process works:
According to an article by Bloomberg, these “designer microbes can cost $500,000 to genetically engineer“. What’s more, Zymergen actually incents themselves to win by taking a percentage of the economic gains, a royalty of sorts. That’s a very nice chunk of change for Zymergen and a big chemicals corporation could easily spend millions of dollar to create efficiencies all the way across their business. We like to refer to this as “winning continuously“. It’s no surprise to see that Zymergen is already working with some Fortune 500 companies, most of whom become repeat customers, and DARPA who asked them to build 360 new synthetic organisms.
The most recent funding announcement added the former U.S. Secretary of Energy and Nobel laureate Dr. Steven Chu to the Board of Directors along with Softbank’s managing director Deep Nishar. Let’s hope for the sake of retail investors that we see an IPO exit as opposed to an acquisition exit by a large chemicals company such as Dow Chemical (NYSE:DOW).
Here at Nanalyze, we complement our tech investments with a portfolio of 30 dividend growth stocks that pay us increasing income every year. Find out which ones in the Quantigence report freely available to Nanalyze subscribers.