The Synthetic Biology Climate Change Opportunity

Tom Baruch
25 min readJan 18, 2022


Sir Francis Drake Boulevard. IMAGE: Stephen Leonardi

According to last August’s Intergovernmental Panel on Climate Change (2021), scientists around the world are observing changes in the earth’s climate in every region and across every climate. United Nations secretary general, António Guterres, called the report “code red for humanity.” In their December 31, 2021 “Scenes From a World On Fire,” the New York Times editorial board stated “Climate change is already here; it’s just not evenly distributed yet. Nor will it ever be.”

Three years ago, in 2018, The Economist had warned, “The world is losing the war against climate change…” That same year, the Global Commission on the Economy and Climate concluded that transitioning to a low-carbon, sustainable growth path could deliver a direct economic windfall of $26 trillion and create over 65 million new jobs by 2030. At the same time, John Elkington, one of the founders of the global sustainability movement, estimated the transition to a carbon-free world offers $12 trillion per year in market opportunities through 2030. Yet, the planet continues to warm, and humans’ greenhouse gas contributions to global warming continue unabated.

Climate change and global warming are the biggest challenges facing humanity. They will impact everything: agriculture and food, education, housing, water, the economy — even national stability. Synthetic biology is already disrupting every production industry from agriculture and food, building materials, chemicals, environmental remediation, medicines, water treatment, engineered biology is a transformative force.

Innovation offers humanity the most essential tools for slowing and reversing climate change. Synthetic biology, as a growing interdisciplinary area that involves the application of engineering principles to biology, provides multiple tools to reduce global greenhouse gas emissions and transform manufacturing — and potentially change the dangerous climate trajectory we are on.

Biotechnology Is Only Getting Started

We’re 22 years into The Biotech Century, and biotechnology — thanks to the COVID-19 pandemic — was front-page news for most of 2020 and 2021.

As of the first quarter of 2020, more money than ever — some $13 billion — had flown into institutional biotechnology funds. By the end of 2020, according to Fierce Biotech, total US investment into the industry was more than $20 billion, including 59 funding rounds that exceeded more than $100 million. According to industry watch group SynBioBeta, some $8 billion flowed into synthetic biology-focused companies. (To compare, some $30 billion was raised in 2020 by climate-related funds.)

The synbio industry cheerleaders identify the breadth of the opportunities to apply biotechnology to most manufacturing in a range from a conservative $20 trillion (McKinsey) to a whopping $100 trillion over the next 20 (IndieBio). “Most manufacturing” means the application of biotechnology to replace fossil fuels, create new foods, materials, and medicines.

All over the world, governments are drafting bio-economy blueprints and bio-foundries are being built. As biotech resources become more readily available and bio-manufacturing increases in sophistication, one or several bio-manufacturing entities has the potential to grow to the size and possibly compete with the giant foundry Taiwan Semiconductor Manufacturing Corporation — a behemoth with a $550 billion market capitalization.

But Science Business Is Tough

Scientists are rarely trained as entrepreneurs, and most synthetic biology (and biotech) companies are founded by scientists trying to advance the science, create a business model, and find customers while simultaneously growing and running the company.

This is incredibly difficult.

Back in 2006, Harvard Professor Gary Pisano asked why the biotechnology industry had failed to perform up to expectations in Science Business: The Promise, The Reality, and the Future of Biotech. At the time, Pisano noted that the biotech industry’s problems stem from its unique character as a science-based business. Pisano identified three unique business challenges for biotechnology companies:

  1. How to finance high-risk investments under profound uncertainty and long time horizons
  2. How to learn rapidly to keep paces with advances in [drug] science knowledge
  3. How to integrate capabilities across a broad spectrum of scientific and technological bases.

Science business is complicated.

Companies that ignore the challenges of scientific discovery, customer/market development, and the scaling of sales do so at their own risk.

Synthetic biology founders interested in building a profitable $1 billion business must take a long-range view — ten years — and learn from the successes and failures of others.

Why 10 Years?

Startups can create substantial value within a critical commercialization window. From inception, the startup’s aim should be to achieve a market capitalization of $1 billion within ten years. (For points of reference, Apple Computer did it in eight years; Ginkgo Bioworks in eight).

Why does that 10-year window matter?

First, humans are incapable of thinking decades ahead. We are a medium-term species. UCLA Researcher Hal Hershfield classifies observed human behavior that indicates that people are incapable of thinking decades ahead, a phenomenon he titles “Present Bias,” This describes “people’s tendency to opt for smaller, immediate rewards rather than waiting for a bigger reward in the future.” Understanding this is critical for the successful entrepreneur and investor.

Present bias explains the reason why most people don’t start saving for retirement in their twenties. It also describes why the world failed to address challenges such as global warming and ocean acidification more than thirty years ago, despite knowing both would lead to the destruction of the environment.

In my experience, the operable number for creating value while making an impact is ten years.

Expected Returns — 20% Per Year for the Life of the Investment

Second, the ten-year window enables investors to make market rates of return on investments. Generally, a startup isn’t going to scale and reach that $ 1 billion valuation without an infusion of cash. That cash is probably going to come from venture capitalists whose funds typically have an 8-to-12-year lifespan. That means VCs are forced to enter and exit from all investments during that time. Why? At our fund, Baruch Future Ventures, we have calculated that investing in companies that will return money in 10 years instead of 20 (and no fund is set up for 20 years) triples the rate of return.

While many synbio solutions to climate change and resource scarcity will take longer than ten years, investors have come to rely on the compounding and ultimately exponential growth effect within that time frame to realize their desired returns.

This brings us to…

Why $1 Billion?

“A million dollars isn’t cool. You know what’s cool? A billion dollars.”
- Justin Timberlake as Sean Parker in The Social Network

One billion dollars — unicorn status — the small but growing universe of companies that achieve that valuation has become the minimum benchmark for success in every area of investment — including synthetic biology.

Most, but not all, venture capital firms are focused on investing in companies that might provide billion-dollar exits. In addition, as mentioned above, most venture funds only have an 8-to-12-year lifespan in which to achieve that.

OK. So, how do you build a billion-dollar company? Read on.

Part 2. How to Build a Profitable Billion Dollar Company

Think Big, Start Small

According to Startup Genome’s “Global Startup Ecosystem Report 2019,” 11 out of 12 startups fail, primarily due to premature scaling — meaning they probably had some of the components necessary for success, but not all. Common reasons for startup failure, according to the website Failory, include lack of product-market fit, marketing problems, team problems, finance problems, tech problems, operations problems, and legal problems.

Synthetic biology companies are hard. They face all the challenges mentioned above and then some.

But not only are they hard, when they’re started, they’re still a business in search of a business model.

At the start of a business, the most important organizing principle is problem orientation. It is not creating technology and marketing it toward an undefined customer or market. History is littered with technology-focused startups that crashed and burned — most recently, Theranos, but in the industrial biotechnology space examples include, Synthetic Genomics, Verenium (aka Diversa, aka Industrial Genome Sciences) — who all focused on technology instead of markets; in biofuels companies Solazyme/Terravie, LS9, Sapphire Energy and Aurora Biofuelwho all failed when the price of oil dropped.

Many companies I have worked with achieved great success by working with a business model canvas (BMC) process, which involves executing and learning relentlessly (iterating and pivoting) to test the model until the startup can shift to execution mode. The BMC is a targeted customer-driven process that applies to all start-ups, not just those in synthetic biology, taken to define and realize unique value propositions. The canvas allows a startup to move from strategic considerations to tactical ones. It also offers the startup the opportunity to focus on shrinking time using the following strategies:

Think big but start small.

During a period of early concentration on the business model definition. Having a grand vision of how you will create a sector-leading company is excellent but begin modestly. Focus on solving a real problem for customers. If your product or service doesn’t solve a problem in a way that is better or cheaper or more convenient or easier than incumbent companies or technologies, customers will never pay.

Starting small is what Elon Musk did with Tesla. From the beginning, Musk maintained that the company’s long-term goal was to create affordable mass-market electric vehicles. The company started with premium sports cars (they started retro-fitting Lotus sports cars) aimed at early adopters, then moved into mainstream vehicles. (The strategy, which Musk famously revealed in 2006 blog post, has recently been named a recursive product strategy).

To think big but start small requires a methodology that can be easily followed. Many companies, including the ones I have invested in, work with a Goals Objectives Strategies and Tactics (GOST) framework, which helps create the mindset and behaviors necessary to pivot quickly when disruption hits (as it always does). Without GOST, there is no focus. Every challenge becomes two steps back for every one step forward. With GOST, each setback becomes a new pivot, a new opportunity to launch forward, without wasting valuable resources — time or money

GOST is the basic foundation of many successful businesses. A well-organized GOST has demonstrated time and time again to lead to business success.

Implementing GOST to Grow Your Business

Goals are general targets that have business value. Goals define what the business wants to accomplish overall. Goals are always long-term and always tangible and specific to one’s business. Goals focus on the WHAT you want to achieve, e.g increase sales volumes by 100 percent over the next two quarters or become the most profitable business in the section being served. Goals are key because they help a business take specific steps and then evaluate whether those goals will lead to success and sustained future growth.

Objectives are specific targets that have direct business value¹. Objectives have specific outcomes that define HOW goals will be achieved. Objectives are best defined when they meet the SMART criteria or “specific, measurable, achievable, relevant and time-bound.” For example, discovering the specific audience for your product and communicating the tangible benefits that will get that audience to act (buy, purchase, lease, replace) is an objective.

Strategies are the plans that will help you execute against your objectives and achieve your goals. Strategies are the solution to a problem. Strategies are about the WHAT of how you plan to allocate resources to achieve the business’s goals and objectives. A key strategy in terms of appealing to an audience of potential customers would be to communicate the functional and emotional benefits to buying a product, supported by a reason to believe (why customer X should believe that Product Y will deliver those benefits).

Tactics are the specific, “devil in the details,” tangible actions you will execute to achieve your strategy. Tactics are the tools you use to support the strategies you’ve decided on.

Your plan and strategy will help you navigate and prioritize every day’s demand. With established goals, you can follow the best tactics to create impact.

Setting up and following the GOST model is a crucial step in giving your team direction when juggling multiple tasks. It provides the ability to measure the impact of tactics and provide information as to how close you are to achieving specific objectives. With every activity, a company must set goals that can be measured — providing information on the impact of the goals, objectives, and strategies.

Pursue Excellence in Every Dimension

From the beginning of the business, leadership must require excellence from itself and from the team. Every business must demand excellence from the external community supporting the startup, including suppliers, contractors, and service providers.

In his classic business book Good to Great, Jim Collins boiled down the transition from good company to great company to one word: discipline. Collins found that a company’s success results from disciplined people, disciplined thought, and disciplined action, and I might add, with discipline pursued with excellence across every dimension of the organization.

Excellence is a top-down endeavor. Startup team members empowered to speak up and contribute will be more invested in the company’s success. If team members know their voice will be heard and valued, they will speak up. Potential customers and partners (and even investors) should be given the opportunity to provide input on an ongoing basis. This becomes especially important when a company experiences challenges that require pivoting and which may be first noticed by the team or customers.

The principle of excellence in every internal and external dimension cannot be compromised. When excellence is allowed to slip in one area, internal friction will detract from the energy the organization should be devoting to GOST. This loss of energy will distract from the concentration necessary to achieve scaling objectives and strategies. Customers and investors will notice.

Execute Relentlessly to Scale Milestones

Scaling doesn’t mean growing a business. It means putting in place the systems to handle an increase in sales, work, or output in a cost-effective, reasonable manner to drive exponential growth and revenue.

To scale requires well-defined milestones. One way to do this is to tie scaling milestones to the amounts of cash available to the business, then develop a roadmap with milestones you can realistically achieve with that investment. This approach offers a way to build a fully funded growth plan with sufficient runway to seek additional financing.

Checkerspot offers a good example. The founders had been at Solazyme, a company that failed to pivot during the biofuels debacle of the early 2000s and were anxious to apply the lessons they learned to form a new company. Checkerspot’s products are based on a engineering microalgae to produce bio-based chemical building blocks, among them, high-performance, bio-based polyurethanes for us in a variety of soft and hard good applications where they can replace incumbent petroleum-based materials.

BFV advised the founders to adhere to the “think big, start small” strategy while defining and executing against a series of scaling milestones. These included:

  • Scaling the fermentation lab from milliliter-scale to thousands of liters for commercialization purposes; and,
  • Introducing new products starting with high-price specialty products for recreational and sporting goods applications that would benefit from the increasing manufacturing capacity.

Market knowledge obtained from ongoing customer interviews enabled Checkerspot to start with molecular design, build new materials, and test its prototypes before commercializing products. The company worked closely with end-consumers, relying on feedback to continuously improve the performance of their materials and products.

Today, the company has more than 10 products in development and three products on the market, including their high-performance WNDR-Alpine snow skis. Most recently, materials science clothing company Pangaia announced the launch of a line of apparel based on materials supplied by Checkerspot.

Each of Checkerspots’ products can command performance or sustainability premiums while taking advantage of low manufacturing costs. The company is carefully balancing manufacturing cost curves via low-cost commercial fermentation and the price elasticity of demand moving from outdoor recreation into materials application in automotive, aerospace, personal care, apparel, food, and nutrition.

It’s the Business Model, Stupid

Previously, I mentioned that oftentimes startups — especially science-based start-ups — are technologies in search of a business model.

Every successful company, whether it knows it or not, owes its success to choosing and executing against the right business model. A digital platform or synthetic biology platform may enable a new epoch of transformative growth, but the engine of transformation and growth often turns out to be its business model. It is not being first to market, nor having the most cutting-edge technology, although those could be significant contributors to growth.

In their Harvard Business Review article, Reinventing Your Business Model, Mark Johnson and Clayton Christensen wrote, “A business model, is in essence, a representation of how a business creates and delivers value while also capturing value for itself, doing so in a repeatable way.” Johnson and Christensen propose a business model framework based on:

  • The customer value proposition is, by far, the critical element to get right. A successful business model identifies an important, unsatisfied customer job-to-be-done or problem-to-be-solved and proposes an offering — a product, service, or combination — that does the job or solves the problem at an affordable price.
  • The profit formula is that the company creates value for itself and its shareholders while providing value to its customers. It includes a revenue model — how much money can be made, that is, price x quantity; a cost structure, — e.g., direct costs, overhead costs, economies of scale; a target unit margin — how much each transaction should net to achieve profitability; and resource velocity, — e.g., inventory turns, asset utilization, throughput, lead times.
  • Key resources that are needed to profitably deliver the value proposition to the targeted customers. It includes people, technology, facilities, equipment, information, channels, brand, partnerships, and alliances.
  • Key processes or means by which produce and deliver their offerings in repeatable, scalable, and sustainable ways. It includes business rules, behavioral norms, and performance metrics.

Business model innovation has long been the domain of disruptive startups looking to compete against established companies by changing the rules of the game, creating new markets, and reshaping entire industries. Business model innovation also requires a focus on customers, which in turn sets the stage for scaling sales quickly with the right offering to the right audiences.

In the world of synthetic biology, Calysta provides an example of the benefit of business model innovation. Calysta creates a sustainable alternative protein for food and feed ingredients by fermenting natural gas with naturally occurring bacteria. Calysta’s bottoms-up approach to protein production offers the shrimp aquaculture industry a level of nutritional benefits and transparency that previously did not exist. When combined with leading certification standards, producers, retailers, and consumers can be guaranteed that their food is produced ethically — critical in the shrimp industry, where slave labor is still rampant. Early on, the company realized that its optimal business model was joint venture sales to a consortium of customers. This business model resonated with the marketplace and resulted in a solid partnership with the global agriculture and food company Adisseo and investments from BP, Temask, and Aquaspark.

Part 3 Lessons From the Zymergen Situation

Founded in 2013, Zymergen, like many other synthetic biology companies, offered strain improvements to customers. Their product was organism engineering as a service deployed on a consulting model; that is, a customer would contract Zymergen to engineer an organism to produce a product that would become a product or product component. The company benefited from easy money and raised nearly one billion over six funding rounds, notably a 2016 Series B for $130 million led by Softbank and a 2020 Series D for $300 million. Over time, the company spent $1 billion developing its laboratory automation, organism engineering platform. At its IPO, the company was valued at $3.5 billion.

As of the third quarter of 2021, Zymergen had revenues of $13 million (compared to $15 million in 2019 and $13 million in 2020). Perhaps somewhere along the way, the Zymergen team realized that their service income (engineering organisms) didn’t justify their valuation. Moreover, the consulting model (i.e., engineered organism as a service)defied their ability to achieve economies of scale from labor costs. As a result, they turned their efforts to producing products.

In 2020, Zymergen introduced Hyaline, a new film for electronics applications. According to founder-CEO Josh Hoffman in Forbes, “As a bio-fabricated film, Hyaline performs better than the competition and is manufactured sustainably. It has the potential to transform the electronics industry.”

This past summer, just a few months after its IPO, Zymergen’s stock lost 75 percent of its value. At that time, several armchair pundits suggested the industry should not get distracted by failure of Zymergen’s stock performance and focus instead on synthetic biology’s potential for innovation. In other words, Zymergen’s experience needn’t be harmful to the entire industry if the company became a learning tool for the entire industry as a way to move forward together.

I believe Zymergen’s woes were the result of a poorly designed business model. Zymergen might have had the right product-market fit, as the electronics industry is often willing to pay for performance. However, it would later be revealed that Hyaline offered no salient performance benefits compared to other colorless polyamides developed through synthetic chemistry means which are tried and true. The company claimed Hyaline was “green,” but most electronics industry customers care little about environmentally friendly products and there are other, probably easier ways to reduce a carbon footprint than using one film in devices that comprise dozens of components.

Most companies fail on timelines, especially those expected by venture capitalists, because the timing is often longer than anyone thinks possible at all stages of the process. Experienced investors should know that microbe engineering timelines are always moving targets (Biology is hard) and product development processes are challenging.

In the company’s summer SEC filing (the one that triggered the stock price drop), Zymergen wrote:

We may choose to accelerate product launch by first entering the market with a non-fermentation derived product and move to full production through fermentation later. As we scale manufacturing, we will also begin sending film samples from our manufacturing lines back to customers to confirm both quality and performance.

The fact that Zymergen, a synthetic biology, company was willing to go through a non-fermentation route may have meant they didn’t have confidence in their timelines, and maybe they did not have confidence in their platform. Clearly (and unfortunately), the Zymergen platform did not deliver.

Zymergen was one of the biggest, but not the only, organism engineering companies in the synthetic biology ecosystem. Their tools have broad applicability across agriculture, food, chemical, nutritional, and all manufacturing industries. Automating the engineering of organisms to produce a target molecule is extremely valuable and will only become more so as more companies look to leverage biology to displace unsustainable, non-circular manufacturing processes. While automation and processes might have been good for optimizing products, they don’t help one decide what product is worth making or how to sell it — that can only be accomplished by a team that is close to its customers.

In terms of lessons for entrepreneurs, Zymergen’s key failing was due to the misalignment between platform and product and the poorly defined business model. Each requires a very disciplined and smooth scaling of sales and marketing. Platform plays are challenging. Few biotechnology platform companies have developed a “killer platform.”

What About Ginkgo Bioworks?

As of this writing, Ginkgo Bioworks had just gone public via SPAC in one of the largest SPAC mergers to date, valuing the company at $15 billion.

Ginkgo was started in 2009 by a team of MIT graduate students building made-to-order microbes, enabling its customers the ability to grow rather than manufacture their products. Calling itself the “organism company,” Ginkgo’s product is organism engineering as a service offered on a consulting model. In other words, companies go to Ginkgo to order an organism that produces a specific effect, typically, a protein.

According to its most recent website, the Ginkgo platform runs on two pillars: A Foundry or biological factory, where the company uses hardware, software and automation to optimize organisms, and a Codebase, which generates a growing set of cells, enzymes, genetic programs, data, and knowledge that is shared among all Ginkgo customers.

If the business model sounds a lot like Zymergen’s, it is because at a first glance it is identical. However, Ginkgo’s approach differs in one major way: The company has never sought to be a product company. Instead, the company focuses on developing, improving and deploying its cell engineering and automation platform to develop engineered organisms for clients.

When an opportunity to develop a product has arisen, Ginkgo has invested in and spun the business off into its own entity. Ginkgo spinouts include Joyn Bio, a company engineering plant producing microbes to eliminate fertilizers; Motif FoodWorks, a company bringing transformative plant-based food technologies to the market; Allonnia, a company using microorganisms to clean polluted sites; Concentric by Ginkgo, a biosecurity company that currently provides mass COVID-19 testing; and most recently, Arcaea, a company seeking to transform the cosmetics supply chain with biology.

Recently Ginkgo introduced Cell Development Kits to the life sciences community. Cell Development Kits are supposed to be analogous to the software development kits (SDKs) deployed by the likes of Apple, Facebook, Google, and Microsoft. Those SDKs facilitate the creation of applications for a specific platform. In Ginkgo’s case, the $100,000 CDK gives a customer access to the Ginkgo platform, enabling the engineering of organisms with a focus on commercial scale-up for a range of application, as well as access to Ginkgo’s network of investors.

As of this writing, Ginkgo’s market capitalization is nearly $18 billion. According to their most recent filings, the company’s revenues were some $78.8 million, half of which came from their Concentric COVID-19 testing spinoff (for which it is losing money). The company revenues of $78.8 million are a far cry from the company’s $26 billion valuation. However, the value of the platform has been priced into the valuation.

Ginkgo has built a very strong brand making itself synonymous with synthetic biology. It has been a long-time supporter of making the engineering of biology easier and has turned most synthetic biology scientists into ambassadors for its messages. That is the power of consistent marketing and great public relations.

Despite an evolving platform business model, Ginkgo currently sits on $2 billion on its balance sheet, which will likely insulate them for the foreseeable future.

There are many companies besides Zymergen and Ginkgo Bioworks that offer organism engineering as a service. Few, if any, offer their clients an end-to-end solution, from organism engineering to fermentation scale-up. And scale-up or biomanufacturing may be the biggest opportunity in synthetic biology.

Last December, Judy Savitskaya and Vijay Pande from A16Z noted

“Synthetic biology presents the tantalizing opportunity for scientists and entrepreneurs to choose from a menu of products and a menu of production processes independently, so neither decision constrains the other. Expanding the production process or enabling infrastructure menu represents a huge opportunity to make bio-manufactured products cheaper and thus far more likely to succeed in the market.”

While many synthetic biology companies have platform ambitions, the good ones started with at least one viable product in mind or found a viable product before scaling.

Perhaps if Zymergen had chosen to focus on engineering improvements while scaling sales, they might have avoided their fate. Perhaps if Zymergen hadn’t taken additional funding to become beholden to timelines dictated by investors, they could have avoided their fate. As for Ginkgo Bioworks, we have yet to see whether its business model is sound, and they can create the requisite demand for their product. As of this writing, the company seems to be moving in the right direction.

Regardless, the lessons remain the same: Think big and start small. Know your market. Understand who wants to buy your product, why, and at what price. Execute relentlessly while developing a business model. Get to know and stay close to your end-customers. Be humble, listen, and learn. And be prepared to pivot.

Part 4. History Lessons — Part 1

Young(er) entrepreneurs are often unaware of business history. Worse, many are ignorant of their own industry’s history. (Science founders, you don’t get a pass.)

This is unfortunate because it means they haven’t learned important lessons from business failures (in the 1990s, Apple almost went bankrupt), pivots (Netflix pivoted from sending DVDs to providing streaming services), and successes.

Let me offer one from the industry that transformed the 20th century — software — and several from industrial biotech.

Following the invention of the microprocessor at Intel, Bill Gates took an existing technology (the operating system MS-DOS), adapted it to a specific market (personal computers), then dominated that market by innovative promotion and cunning business savvy (licensing first to IBM, while retaining the right to license to other personal computer makers).

While many in Silicon Valley were selling software, Gates was focused on setting standards, first with MS-DOS, then with Windows™. That standard allowed Microsoft to own the value proposition related to the microprocessor embedded in every personal computer. It turned out standardization was the major scaling event that led to rapidly declining operating costs associated with computation.

MS-DOS and Windows™ helped shape the modern computer industry and continue to influence its growth. Gates’ brilliant moves made Microsoft one of the most valuable companies and made him one of the richest in the world.

There is no reason why lessons from Gates’ brilliant moves with Microsoft can’t be repeated again and again. Especially as we apply Stanford Professor Drew Endy’s call² for the standardization of biological parts (i.e., BioBricks) to organism engineering and bio-manufacturing and use them to clear greenhouse gases from the environment.

When Things Go Wrong

Seventy-five percent of technology startups do not generate profits. Ninety percent of new technology companies fail.

There’s an entire industry devoted to studying why startups collapse and how to reduce the number of failures. Market intelligence firm CB Insights regularly parses post-mortem essays by startup founders to pinpoint why they believe their company failed. For example, in their August 2021 Top Reasons Startups Fail article, the CBI Insights team revealed that the number one reason for failure — no surprise — is running out of cash, according to 38 percent of polled startups. The number two reason is the lack of a market need for their product.

Reread that last sentence: Lack of product-market fit is the second reason why startups fail.

In other words, if no one wants your product, your company isn’t going to succeed.

All too often, startups build things people don’t want with the irrational hope they’ll be able to convince them otherwise. Yet, scientists believe their technology will succeed in the marketplace.

Failure is inevitable for any successful startup. Failure comes with the territory. Unfortunately, dealing with adversity is a skill that needs to be learned by most and is not natural for many.

Remember that Thomas Edison called every failure an experiment. He made no excuses for 10,000 light filament failures. When pressed by his contemporaries, Edison answered, “I have just found 10,000 ways that won’t work.” Then, he succeeded.

The best entrepreneurs tackle hiccups without losing their stride or their passion. The key to doing this well is starting with a clear vision and a strategic framework knowing where one can and cannot make compromises. Their approaches emphasize customer development and developing relationships with customers and making it easier to anticipate hiccups that the entrepreneur (who is usually too close to the project to see trouble brewing) might never see. However, the startup team, can also help foresee challenges and should feel empowered to do so.

Successes and Lessons from BFV’s Portfolio. History Lesson Part 2.

BFV was an early investor in synthetic biology, and we continue to be bullish on the technology and its potential impacts, especially with regards to climate applications. At BFV, our goal is to build a model for investing in startups that will achieve sub-decade scaling and market rates of return on capital deployed better than that achieved by comparable companies in consumer-facing sectors

This section is called History Lesson Part 2 because it highlights the need for young entrepreneurs to understand their own industry’s history. Without that knowledge, you would not know why 23andMe’s biopharmaceutical deals look a lot like those that Millennium closed with big pharma in the late-1990s. Likewise, you would not know how the drop in oil prices triggered the biofuels debacle, which in turn catalyzed the synthetic biology industry.

Here are a few history lessons from the BFV portfolio to add to the above list of lessons learned.

Codexis Scales Customer Engagement

Codexis is a protein engineering company founded in the mid-1990s as a biofuels company. It was one of the many companies that preceded what would become synthetic biology. However, when the cost of oil dropped, interest in biofuels all but disappeared, more than a few companies went belly up, and many investors lost money. As a result, Codexis’ biofuels business model was precarious. But the company maintained an emergent pharmaceutical-focused business that served as an opportunity to pivot and develop a viable business model in the pharma space.

Codexis, under the inspired leadership of CEO John Nicols, made a rapid pivot focusing its business development on pharmaceutical customers. As a result, the company has developed smart business partnerships with several pharmaceutical customers, including Pfizer — creating a building block of Lipitor, and with Merck providing the active ingredient in Januvia. In addition, it has developed enzymes in-licensed by Nestle Health Sciences and Takeda Pharmaceutical and recently turned profitable in the third quarter of 2021.

Today, Codexis is the premier example of a publicly traded synthetic biology company that has consistently met or exceeded analyst forecasts in almost every quarter for the past five years.

Geltor Scales Manufacturing with Sales

When Alex Lorestani, Ph.D., and Nick Ouzounov, Ph.D., met at Princeton University, they asked why so many consumer products were still derived from animal sources despite advances in biology, medicine, and computer science. Lorestani and Ouzounov developed a unique process for re-engineering the bacteria e. coli to prioritize protein expression over cell division. They founded Geltor to commercialize their technology.

The founders went through IndieBio’s synthetic biology accelerator, where Arvind Gupta told them, “Technology is not a product. A product is a product.”

Gupta steered the team to produce collagens because performance collagens could work not just across many product lines but across multiple industries at different price points. Moreover, there were no non-animal alternatives at the time, which offered Geltor the opportunity to build a platform starting with a single molecule that could evolve into multiple variants.

Once the team had selected collagen as their initial product, they mapped out market segments to find where cost curves matched the price elasticity of demand. Geltor started with a surgical-grade collagen that sells for $2500 per ounce. As they have scaled production, they have moved into cosmetics-grade animal-free collagen at $300 per pound. Finally, they produce animal-free gelatin for the food and candy industry at $5 to $30 per pound. In each market, they were able to “tune” their collagens for performance needs (Geltor calls this “Ingredient as a Service”).

As customers expect to buy products on demand, the Geltor team focused on scaling manufacturing, initially with partners but now in-house. Geltor has scaled its fermentation-based technology platform 1000-fold. In mid-2020, the team raised more than $90 million in a Series B funding round.

Closing Thoughts

The Coronavirus pandemic was a Black Swan event that offered a Green Swan of opportunities. According to author Nassim Nicholas Taleb, Black Swans are unexpected, hard-to-predict events that result in extreme unintended consequences. The pandemic is a classic Black Swan showing us the fragility of systems pushed to their breaking point. It resulted in supply chain shocks, calls for increased resilience and localized production.

Green Swans, in contrast, are positive market developments deemed improbable but can have a profound positive impact across economic, social, and environmental value creation. As a result of the pandemic, we witnessed new collaborations arise between companies and individuals that likely would have never worked together.

Technology alone is not the solution. Technology is becoming a commodity. We see exponential drops in pricing with a concomitant increase in speed across industries. A ten-year-old incumbent in Boston can be rapidly displaced by a virtual, globally distributed company that can scale and localize manufacturing, sales while keeping customers close, interested, and focused on the next wave of innovation.

Climate change will disproportionately impact the most vulnerable. The World Bank estimated that the effects of climate change will push an additional 100 million people below the poverty line by 2030. The impact of extreme weather is already resulting in $520 billion in consumption losses every year, pushing 26 million people into poverty. A Stanford University study found that climate change has increased economic inequality between developed and developing nations by 25 percent since 1960.

Moving the needle on climate change will require relentless innovation. The goal should be to create a truly circular carbon economy based on a continuous cycle of enzymatic pathways. There is no waste in nature. Biotech entrepreneurs must use nature as their example and adopt intelligent strategies and tactics that align the right innovators with the right customers and partners.

As of this writing, Blackrock CEO Larry Fink said he believes the next 1,000 unicorns will be involved in climate technology, “they’ll be businesses developing green hydrogen, green agriculture, green steel, and green cement.”

Perhaps without realizing it, Mr. Fink is describing many synthetic biology companies. Synbio offers the technologies to hatch multiple Green Swans that will feed the planet, restore and strengthen economies while healing the environment. We’re in for an exciting ride.

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  1. Two of the best tutorials on objectives are “Measure What Matters” by investor, venture capitalist John Doerr of Kleiner Perkins, a contemporary successor to “High Output Management” by Intel CEO Andy Grove.
  2. Caton B. Refinement and standardization of synthetic biology devices. Nature Biotechnology 26, 787–793 (2008). Accessed at link 4 January 2022.



Tom Baruch

Managing Director of Baruch Future Ventures, investing in early-stage companies focused on resource scarce and climate-sensitive markets. www.