TMT Post| Virtual Fire Bubble To VC, Is This Track So Terrible?

"I really don't like it when people ask me what I want to do when I achieve freedom financially."

I remember a story I heard before. It’s about an entrepreneur with a successful career who was always being asked such questions in his life, making him feel very confused.

Stories are stories. However, in real life, those entrepreneurs who have really achieved freedom financially are not shy about telling everyone their new ideals for the new phase of life.

Last year, three Internet bigwigs, Colin Huang, CEO of Pinduoduo, Yiming Zhang, CEO of Byte Dance, Xiaochuan Wang, CEO of Sogou, have all stepped down. One thing they have in common is, in addition to the fact that they were all CEOs of major Internet giants, the pursuit of life sciences.

Xiaochuan Wang said that in the next twenty years, he wants to do his part for the development of life sciences and medicine and help to improve public health.Yiming Zhang believes that the impact of life sciences on human life has been growing with great potential. Colin Huang has selected protein robot and plant synthetic protein (artificial meat) as the focus for future research.

Looking further behind, Steve Jobs realized in the last moments of his life that "the biggest innovations of the 21st century will be at the intersection of biology and technology."

Synthetic biology, as a discipline involving biotechnology, genetic engineering, molecular biology, microbiology, biophysics and computers and other fields of interdisciplinary, is a great tool of the life sciences.

Origin and Birth

In 1939, on the eve of the outbreak WWII, a young man named Waclaw Szybalski had just graduated from high school in Lviv, a town lies at the Polish-Ukrainian border. He was enthusiastically preparing to become a freshman at an aviation academy. Building airplanes had always been his dream.

Szybalski was raised in an intellectual family and most of his parents' friends were university professors, which gave him the opportunity to deal with different fields of science from an early age. Among them, aeronautical engineering was the subject that interested him the most. If everything had gone well, today this young man's name would probably be in the textbooks of aeronautical engineering all over the world. Because the Soviet Union occupied Lviv shortly after the outbreak of the war, aerospace engineering was banned due to its politically sensitivity.He had no choice but to switch his major to chemistry and studied under a professor of biotechnology. He eventually becoming a microbial geneticist.

Szybalski was raised in an intellectual family and most of his parents' friends were university professors, which gave him the opportunity to deal with different fields of science from an early age. Among them, aeronautical engineering was the subject that interested him the most. If everything had gone well, today this young man's name would probably be in the textbooks of aeronautical engineering all over the world. Because the Soviet Union occupied Lviv shortly after the outbreak of the war, aerospace engineering was banned due to its politically sensitivity.He had no choice but to switch his major to chemistry and studied under a professor of biotechnology. He eventually becoming a microbial geneticist.

Fast forward to the first year of the 21st century, Eric T. Kool, professor of Stanford University, once again used the term "synthetic biology" to describe the synthesis of functional, non-natural organic molecules in biological systems at the 2000 American Chemical Society National Meeting. He combined the results of systems biology and genetic engineering to redefine the concept synthetic, making synthetic biology recognized as a new discipline by the academic community for the first time.

Chronologically speaking, synthetic biology has been studied in the United States for 20 years. From this perspective, China is falling behind.

Dr. Guochang Zhang from Amyris shared his journey insynthetic biology for more than a decade in the recent "Innovation and Joy" synthetic biology event held by China Growth Capital.

He spent 10 years in Tianjin University, from undergraduate to doctoral studies. According to him, more than a decade ago, his undergraduate major was not named as synthetic biology but bioengineering, because there was no concept of synthetic biology in China at that time. After graduating from his Ph.D, Dr. Zhang found it difficult to find a job in China, which made him a bit depressed and wonder: why did he choose such a major in the first place?

However, he was still convinced that the 21st century will be the century of biology.

After discussing with his family, he went to the U.S. to continue his postdoctoral studies, determined to continue his journey. When his first arrived, however, Dr. Zhang was still a little anxious. After all, the 21st century has just started.

The good thing is that there were some pioneers who advanced against the torrents. They slowly started the synthetic biology industry up in the United States. Pioneering companies like Amyris, Zymergen, Ginkgo and others were gradually recognized by the market. This gave many relevant professionals like Dr. Zhang a chance to find their causes and also gave some Chinese investors and entrepreneurs confidence and inspiration.

Open the 2016 investment menu of Rui Ma, partner of Frees Fund, you will see "Bluepha", a synthetic biology firm. Rui Ma said very frankly that in fact, he did not know much about synthetic biology before he met Bluepha.

For this investment, Rui Ma and colleagues went to the US and found out that synthetic biology was becoming a local hot trend. Why did so much money come in? Such a situation affected him greatly. Back home, he rushed to acquainted all the synthetic biology teachers he could find, and immediately discovered the early trend of synthetic biology technology from the investment logic.

"When you found the smartest people with the best backgrounds in the world are willing to sink their teeth into this, then such a cause is definitely something worth gambling on." said Rui Ma.

Later, Bluepha got three rounds of financing within a year, and its estimation is said to have exceeded 4 billion. It became a star project in the sector. It has been favored by many investment institutions such as Hillhouse Investment, China Renaissance, Country Garden Venture Capital, Lightspeed China Partners and so on. From the first round, with estimation of RMB tens of millions, until today, Frees Fund has made seven rounds of investment. The initial judgment on the development of synthetic biology has been proven by the returns.

Another company with bright financing results is the Tidetron, which was established last year. It has gotten four rounds of financing of more than $100 million each in only one year. It also attracted much attention from the sector. Its founder, Zhiqian Zhang, said that he was inspired greatly when he visited Yale in 2017 and established his own lab back China.

As one of the post-95 generation, Zhiqian Zhang has been thinking, since he is so young, why not try to make this work and see what kind of changes his team's technology can bring to the society. So after the technology in the lab was relatively mature, Zhiqian Zhang started to pay attention to the producing products, and set up Tidetron.

A synthetic biology boom in the U.S. has somehow promoted the China's development in this field.

Is synthetic biology really becoming a popular trend?

In 2022, it is said that synthetic biology is on fire, and some even say that synthetic biology is simply a bubble promoted by capital. But is that really the case?

To answer this, we need to figure out a fundamental question-is synthetic biology really becoming popular?

Theoretically speaking, such a tendency is reasonable. In 2020, the gene editing system CRISPR-Cas9, known as the "Hand of God", won the Nobel Prize in that year. In 2021, the consumer track faced slump, and downstream is no longer available. Everyone began to go upstream. In 2022, carbon neutral started to promote green biomanufacturing, and all these lead to synthetic biology technology.

According to data from the McKinsey Synthetic Biology Report of August 2021, in theory, 60% of the world's products can be produced by biological methods, a third of which were originally substances derived from nature. Synthetic biology has changed the way they are produced. And it is expected that in the next 10-20 years, synthetic biology market related to materials, chemicals, and energy will have a potential of $ 200-300 billion.

Xiao Wang, the founder of Unity Ventures, said that the synthetic biology track is favored because of its underlying technical logic, such as breakthroughs in underlying technologies such as next-generation DNA synthesis technology, gene editing technology, bioinformatics technology, high-throughput biological experiment technology, etc.. All of this made access to all kinds of biological data possible. Between 2010 and 2020, biological data has grown more than 50 times, covering genomic, transcriptome, proteome, and other types of histological data sequencing and clinical data, etc. These, combined with the rapid development of computer technology, allow us to expect new breakthroughs based on computational methods. The collection of computing and biotechnology will generate tremendous opportunities.

Lei Mi, the founding partner of Zhongke Chuangxing, also stated that synthetic biology is indeed a disruptive technology worth expecting for human development.

Although investors are recognizing the prospects of synthetic biology, and some are even saying outright that synthetic biology is a track they have to pay attention to, they are still very cautious about investing, after all, vision is not the same as reality.

Up to now, there are 12 synthetic biology financing events in 2022, which is far from being the hot trend.

Richland Capital managing partner Zhebo Ding said that synthetic biology is still in the early stages of development. Whether it's on fire or not is a relative concept. But now there are definitely more and more people involved, especially at the business level. Therefore, there will be no doubt some bubbles in the heat of capital. In the past, a company may not be able to finance a round in two or three years.

As for whether synthetic biology is a bubble? In the words of Rui Ma: "I feel like it's not that popular, and it seems like people are getting ready to stand down."

“It’s just hard”

Why hasn't synthetic biology become trendy? It is mainly stuck in its difficulty.

The difficulty of synthetic biology is well understood: go and compare horizontally with other industries, you will understand the degree of difficulty.

Ma gave an example: if you only focus on a component in the biological system, such as DNA, then it is about sequencing companies and there was a wave of booming businesses early in 2015. If you only focus on proteins, it is the direction of proteomics, which has been very hot in China and the United States since 2020. If you only focus on the interests between components, such as the interactions between proteins and small molecules or proteins and proteins, then it is about AI Pharmaceutical companies, which also just experienced a boom. The complexity of synthetic biology is that you need to focus on the mitigation of a string of proteins and other components and their interactions, but also put in a pathway, and then put them in a platform organism to achieve effective expression. Here, the difficulty has surpassed the cases mentioned above, and this is only the strain construction process, not to mention the amplification and production.

Yuxuan Lan, the co-founder of PhaBuilder, said in an interview that industrial scale-up of synthetic biology is not an overnight process. In the fermentation facility, microorganisms face an extremely complex environment, and stability is difficult to ensure. Stability requires constant exploration and optimization of inoculum ratios, media formulations, dissolved oxygen control and replenishment methods. It took four years to achieve the ideal results from a small trial in a 10-liter fermenter to a pilot test in a 5-ton fermenter.

When you solve these problems, a new challenge comes, that is, the selection of products.

Zymergen once designed a foldable optical film, which was very suitable for folding cell phones. When Zymergen successfully overcame all the difficulties and produced the optical film, it realized that the mass production volume was far below expectations. Zymergen's stock price plummeted, as a result, providing a valuable lession.

Selection of products is a difficult and important step. Here we compiled some recommendations based on previous interview:

• Xiao Wang, the founder of Unity Ventures: Within the capacity of technology, choose substances with as high added value as possible with the largest market.

• Rui Ma, the partner of Frees Fund: If bio-manufacturing is theoverall direction in the future, then the really smart companies have already started to lay out on the upstream. For example, if the raw material for manufacturing a certain product is glucose, and the next step up is starch and corn. It is likely that the future development will be limited by China's corn yield, and companies need to find a sustainable raw material. So going upstream is a better location and way for early stage investors to take.

• Lei Mi, the founding partner of Zhongke Chuangxing, added: Tianjin Institute of Industrial Biotechnology, Chinese Academy of Sciences has made a major breakthrough in starch artificial synthesis, achieving the ab initio synthesis of CO2 to starch in the laboratory for the first time in the world. Solving the raw material problem of bio-manufacturing is also a good direction.

• Zhebo Ding, the managing partner of Richland Capital: The correlation between the products in the pipeline is important. Is there any similarity and synergy between the underlying biosynthesis routes? In the future, we hope more companies will see the scale effect, which will allow your marginal cost of R&D and yield to gradually decrease.

In fact, product selection is a matter with inverted logic. Companies cannot focus on just one parameter. You have to think about what the market needs, the market size, and whether this product has high added value. Then think about whether the technology can make it happen or achieve breakthrough, and then finally consider the relevance between the selected products.

The difficulty of synthetic biology can be imagined: companies must have the whole-chain thinking. Any mistake in any one link can be fatal.

Investment Relativity

Of course, not all companies can solve the hard problems at start. After all, there is no perfect startup. There are always their own shortcomings that can not be eliminated.

For example, Tidetron faced dilemmas in the early stage. Zhiqian Zhang said in an interview that when he first contacted the institutions, people would think it was great and amazing to talk about synthetic biology. But at that time, there was only technology and no product, so investors would find it hard to make a decision.

But he was so confident in synthetic biology and the technology of Tidetron that he raised several millions himself as start-up capital. Xiao Wang said that it was this firmness of Zhiqian Zhang that moved him, so Unity Capital became one of the earliest investment institutions behind Tidetron.

Entrepreneurs who know the technology and are determined to do business are very difficult to find, even today. This might also be the reason why Bluepha impressed Rui Ma at first.

Along the way, Bluepha witnessed many challenges. The industry environment it faced in the early days was much tougher than it is now. The round when they got ￥1500 million financing consumed Bluepha for a year and a half. Such a number is probably the seed round valuation of many synthetic biology companies nowadays. In order to survive, Bluechip also did a side business for a while - training high school students to participate in iGEM (Internationally Genetically Engineered Machine). Rui Ma said that the education business once accounted for 70% to 80% of Bluepha's revenue. The team has done a lot of iterations and upgrades in business, product, technology, marketing, and fundraising, and suffered a lot to persist to the present achievement.

Along the way, Bluepha witnessed many challenges. The industry environment it faced in the early days was much tougher than it is now. The round when they got ￥1500 million financing consumed Bluepha for a year and a half. Such a number is probably the seed round valuation of many synthetic biology companies nowadays. In order to survive, Bluechip also did a side business for a while - training high school students to participate in iGEM (Internationally Genetically Engineered Machine). Rui Ma said that the education business once accounted for 70% to 80% of Bluepha's revenue. The team has done a lot of iterations and upgrades in business, product, technology, marketing, and fundraising, and suffered a lot to persist to the present achievement.

"We are not willing to invest in the kind of business that has a high degree of certainty but is not so ideal and sentimental. We prefer to invest in things that are difficult to do, but have huge economic and social benefits once they are delivered." Rui Ma said.

In fact, since the synthetic biology track has been in the spotlight, the voices that calling it “To VC “have never stopped. Ma said, " I don't care if you are “To VC”, you just need to persuade me." I think the confidence comes from the experience accumulated by Rui Ma and Bluepha in the past six years.

In the primary market, there are often stories about good matches between investors and businesses, especially in the technology sector. Interestingly, a group of people with capital and resources invest in another group of people with highly sophisticated technology. These investors have absolutely the same ultimate goal, i.e., investment returns, but sometimes they have different, even opposite, decision-making logic.

Zhebo Ding's investment rules are different from Ma's. In his opinion, it is completely possible to avoid “To VC” projects in terms of products.

"I'm not going to invest in you just because you came out of Harvard, MIT, Berkeley or other top colleges; the right background is a necessary condition, but not a sufficient one. I also won't look for a counterpart in China just because synthetic biology is hot in the U.S. with SPAC listed companies like Zymergen and Ginko." Zhebo Ding always believes that the core of investment is still in the product capability.

"You say you have the underlying core competencies, and you have also established a product pipeline. All the ideas are on paper, but there is just no product quality, so aren't you just a PPT company? Why do companies with real strength need “To VC”?" Zhebo Ding asked rhetorically. "You have to make the product and then go compare it with the existing products, whether the advantage is cost, performance or purity."

He then added, "At least two or three products in the pipeline should make it to the pilot stage, and then tell me the timeline for the scale production, the stability of the current strains, how challenges such as isolation and purification during the production process will be addressed."

Of course, there is a consensus among investors. For example, synthetic biology companies are broadly classified into two types: platform and product, and most investors are more bullish on product-based companies.

Xiao Wang's advice to startups is to try not to focus too much on platform data but focus on strain development and product landing first. The complexity of biological systems makes the prediction and modeling process very difficult, and most teams do not have the of "algorithmic + biological" to identify what can be modeled.

This is not to say that platform-based companies are not worth investing. In the long run, they are very expandable and have the opportunity to grow into very innovative and large-volume companies in the future, but in the short to medium term, their ability to self-build is doubtable.

Rui Ma believes that the two are not comparable. The platform should do real innovation. The product should do the real value. Investors are not saying that the investing platform rather than product, and vice versa.

From the valuation level, Zhebo Ding said that, the valuation system of synthetic biology enterprise is actually affected by various factors. There may be people deliberately mix the two together. But in general, we expect more future development space and vision for platform-type enterprises, so their valuation will be slightly higher than the product type, but it still depends on the specific circumstances.

Look Forward

The late arrival of synthetic biology in China has indeed result in a certain gap with the United States, but in the long run, investors still have a very optimistic attitude towards the development of domestic synthetic biology.

However, the biggest challenge now is that talents, especially experienced talents, are very scarce in China.

Zhebo Ding said that the people studying synthetic biology are relatively young now, and most of the practitioners come from overseas universities and research institutes, so many do not have much practical work and mass production experience. They have never really run a biochemical enterprise, and may not even have stepped into a chemical factory with a certain scale. They can only continue to explore based on the original laboratory research. From pilot testing to mass production, they are still crossing the river by feeling the stones. This is not to say that this will not work, but this will take a long time and they will miss some market opportunities, which will have a great impact on future product commercialization.

Xiaohan, a doctoral student in basic medical immunology, became very interested in synthetic biology when he participated in iGEM at the undergraduate stage. His classmates also paid attention to it. Xiaohan told TMT Post that for many undergraduates, participating in iGEM is more like an attempt at a different research field. iGEM's participating projects cover the process from basic research to application, which can help participants understand how synthetic biology products are created, and is also beneficial for cultivating newcomers in the industry.

Although there are not many students who continue to focus on synthetic biology after the competition, it should also be noticed that synthetic biology has been widely used in basic research and achievement transformation in the field of life sciences. Therefore, being attentive to synthetic biology is also positive for personal development to a certain extent.

Statistics show that in the 2021 iGEM competition, the number of high school teams in China is 65, while the number of participating teams in the entire United States is only 50. In the future, as the experience of domestic practitioners accumulates and the number of new talents increases, the talent gap will soon be filled.

In addition, the accessibility of synthetic biology, i.e. public awareness and commercial acceptance, has yet to be improved. Xiao Wang said that enhancing accessibility will help to promote data sharing and open source on the basis of protecting patents and inventions, allowing more researchers to join the industry, further lowering the development threshold, and making it a mature discipline in engineering.

The good thing is that the domestic synthetic biology industry is developing rapidly. In the past few years, the Institute of Synthetic Biology Innovation led by Shenzhen Institute of Advanced Technology and the research center of Tianjin Institute of Industrial Biotechnology of Chinese Academy of Sciences represent south and north research center. They try to build a synthetic biological ecosystem. In addition, Baoshan District, Shanghai established a synthetic biology industrial park; Hangzhou Economic Development Zone has also deployed a number of synthetic biology-related enterprises. These happened in the past two years.

From the perspective of the external environment, capital has begun to be enthusiastic about it, so more people will definitely participate. Any emerging track will go through a period of frenzy, then fall into a period of cooling-off and depression, and finally return to a rational development.

From the perspective of the external environment, capital has begun to be enthusiastic about it, so more people will definitely participate. Any emerging track will go through a period of frenzy, then fall into a period of cooling-off and depression, and finally return to a rational development.

Now, we can see a large number of overseas technical personnel returning to join the tide of domestic entrepreneurship. Everything that is close to the Chinese market and uses technology and innovation to meet the needs of Chinese customers must be promising. But we can't just look at future development without solving practical problems, and we should be alert to the phenomenon of "synthesis" for the sake of "synthesis".

Zhebo Ding reminded that the irrational heat will definitely disappear. In the end, it is the enterprises that suffer the most. Therefore, I hope that enterprises and investors can be more pragmatic, find mutually adaptive expectations, and work more solid and don’t mess up the whole market.

Article source:https://www.tmtpost.com/6057646.html