This article is brought to you by Mayfield. Mayfield is a top-tier, early-stage Silicon Valley venture capital firm, which has invested in over 500 companies over a 49 year history, of which over 300 have gone public or been acquired. Some notable companies include Amgen, Applied Bio, Genentech and Intuitive Surgical. Mayfield, along with Wilson Sonsini Goodrich & Rosati is sponsoring a lunch and learn session Building Synthetic Biology Companies at Scale at SynBioBeta 2018.
Scaling is difficult for any startup — that’s no secret. Scale too fast, and you’re in over your head. Scale too slowly, and you miss out on opportunity and waste investors’ time and money — as well as your own. The internet abounds with how-to-scale articles from Forbes, Entrepreneur, and other industry watchdogs — and scaling is a topic that continues to thrive.
This year at SynBioBeta 2018, attendees will have a chance to learn from expert entrepreneurs and investors some tried-and-true scaling advice. Mayfield and Wilson Sonsini Goodrich & Rosati are sponsoring a Tuesday lunch and learn session “Building Synthetic Biology Companies at Scale.” Mayfield’s Ursheet Parikh will be joined by IndieBio founder and SOSV general partner Arvind Gupta, GeneWEAVE co-founder Diego Rey, and life sciences many-time entrepreneur Maneesh Jain for an informative discussion moderated by Raj Judge, corporate partner at Wilson Sonsini Goodrich & Rosati.
“I’m excited by our distinguished guests because they represent a cross-section of the synthetic biology industry, everything from early, early stage startups to scaled companies, and how to invest and grow all of them will be represented on the panel,” says Judge.
Leading up to this event, now only weeks away, I talked to all four panelists about their unique views on scaling — what are the biggest scale challenges facing synthetic biology companies today, how they’ve successfully scaled, and the advice they’d give fledgling entrepreneurs. I’ve summarized some of our conversations, and I hope they get you as excited about the lunch and learn session as I am.
Hurdles to scaling
According to Mayfield’s Ursheet Parikh, entrepreneurs in the life sciences must solve four categories of problems to successfully scale: build the product after proving the science, delight the user, be a really good enterprise entrepreneur (think starting a grassroots movement), and get the investors. The challenge is significant, but for those who can successfully do it, it presents a critical advantage, too. “I think if companies can go do that, then they get to actually own their own destiny because they don’t have to sell early to other larger organizations,” says Parikh.
Raj Judge adds that talent is critical to a company’s success in scaling. He says that recruiting the right people with the right talent to build the foundation of the company on is one of the biggest challenges facing companies as they scale.
One of the biggest hurdles to scaling synthetic biology companies lies at the interface between the biological and digital realms: the biological sample. Maneesh Jain points out that, unlike the tech industry, the synthetic biology sector contends with the significant variability introduced into the system just because the samples are biological in nature. This variability must be overcome through robust methods to access the biological sample, innovative ways to perform synthetic biology assays and creative ways of analyzing the results — all of which have historically been time-consuming and costly.
Arvind Gupta uses the industrial fermentation sector as a prime example of this. “You have to change things every time you change a fermentation size,” he says. “Conditions within a 1uL bioreactor are easy to control and understand across a liter. Scale to 20 kiloliters and you now have 20,000 different microenvironments, in essence.” It’s incredibly difficult to understand what happens at scale based on a 1uL test — you can’t predict lag times, or how to get things to perfuse throughout the medium, for example.
The investor role in scaling
Investors play a critical role in scaling; without finances, a startup cannot scale. Venture capital-funded startups receive funds because they have a plan to scale — and their investors tightly hold them to this plan. But, if you’re lucky, you’ll land investors that are involved in much more than signing checks.
IndieBio is an example of a startup accelerator that helps thousands of companies scale successfully through their access to an extensive mentor network. Arvind Gupta says that he’s seen companies in the IndieBio program move from idea to product in only 70 days, and attributes such rapid movement to IndieBio’s built-in mentor network. Diego Rey echos Gupta’s sentiments. “One of the most valuable things for young founders is that they have access to a community of mentors,” he says.
Investors typically carefully scrutinize a startup’s potential to scale when they are deciding whether to invest or not. To most investors, the founding team is critical. Gupta says that it takes a special founder to show the IndieBio team something they haven’t seen before. They look for real dedication to the long haul, deep expertise in a certain problem, and fresh new approaches to solving the problem. He says it’s usually easy to tell, just by watching outward actions, if the founding team understands the inner model — a key indicator of success. In short, he looks for entrepreneurs that approach their business venture with an attitude of “I will take the time to unpack something that maybe others wouldn’t take the time to do.”
Ursheet Parikh agrees. “If a company has to scale up, it really comes down to the founders,” he says. “When I’m looking at investing, the big question is, who are the people we’re backing? If somebody is going to be a technical founder, and also wants to be the CEO, it’s hard to do that, [you] have to choose … if you want to be the CEO, then you have to commit yourself to being the best CEO.” Top-flight CEOs can attract other top-flight team members. Jain thinks founders who are mission-oriented but at the same time selfless and fearless are those who are especially likely to succeed — and those he would be enthusiastic to fund.
Judge emphasizes that thriving company-investor partnerships are crucial for success — something that both startups and investors should keep in mind. “The most successful investors and companies will be the ones that have a partnership between the groups. That means not only are the early stage incubators going to have to help mentor and partner with the company, but also the investors have to do the same. It’s important for investors to view the company strategically and as an extension of their own efforts to grow their portfolio rather than just a financial investment,” he says. He adds that synthetic biology companies really demand a cohesive team of people to help them grow in the way that they have to grow.
Words of wisdom for companies figuring out how to scale
With their collective decades of expertise, all four panelists have a lot of advice for young startups looking to scale. Diego Rey says that the most important lesson he learned when starting GeneWEAVE was the value of having a good handle on the market. “You need to put in the time to really understand the problem your products are solving and the value you’re delivering to customers,” he says, “because you should not scale until you achieve product-market fit. Otherwise you’ll be running in the wrong direction.”
But finding the right market doesn’t always mean finding the biggest market. Arvind Gupta says that one trick of the trade is finding different markets with different products for higher profit margins, even if the market size is smaller. For example, if you need to make 100 tons of gelatin a year to hit your market size and cost, that might mean that you need to raise $75 million before you can sell anything — a tough pill for any investor to swallow, says Gupta.
And once you raise that money, you need to use it right. Parikh says that the number one mistake he sees companies in synthetic biology make is using all of their seed money to prove out their product, leaving nothing to prove out the business model. This is critical because you have to build a business to scale. “Your product cannot be devoid from your go-to market,” says Parikh.
But building a successful business model doesn’t mean building your own supply chain. Maneesh Jain says that he often sees companies try — and fail — to build their own supply chains — an unscalable goal. Instead, he sees power in applying facilities, ideas, and scaling examples from other industries. A successful case in point is the Ion Torrent benchtop sequencer. “We realized that one of the most scalable industries has been semiconductor chips with over a trillion dollars of investment in the last four decades. What if you could use that instead of building manufacturing methods from scratch? That really allows an entrepreneur to piggyback on large investments in another industry … then what happens is you’re able to achieve scale and price point that’s interesting.” Indeed, using this model, the cost of Ion Torrent machines and experiments dropped by a factor of ten from previous generations, allowing more and more people to do DNA sequencing.
Judge agrees that companies that can leverage low-cost, existing infrastructure will be those that can grow more rapidly and efficiently. He sees exponentially decreased costs in laboratories and compute power as the driving factor allowing smaller and smaller companies to emerge and explore markets and technologies that they otherwise wouldn’t be able to do without a lot of early stage financing. He advises that “if there are areas that are available to you that accelerate your development cycle and that you can license or run on top of, that should be considered.”
Scaling synthetic biology
Several companies are operating on the model Jain and Judge expound upon, leading to an explosion of synthetic biology companies in the space. This is one of the most exciting things to Diego Rey as he thinks about the future of synthetic biology. “We’re enabling scaling by taking advantage of existing infrastructure, and that is allowing so many more people that previously weren’t in the field to innovate.” That, he says, amplifies the innovation even more because not only are more people innovating but innovation is now coming from many new points of view..
Arvind Gupta is particularly excited about the human healthcare applications of synthetic biology. “I cannot say how excited I am about the future of genetically modified humans as a catch-all for being able to treat cancer and autoimmune disease,” he says, adding that GMO synthetic biology is “going to change humanity tremendously.” But due to safety considerations and other regulations, Jain sees research tools and diagnostics scaling much faster than anything that ultimately involves putting something into the human body. “I think that doing gene editing in cells for research purposes is something that’s going to scale very fast because this sort of technology is already writing on the baseline,” he says. Ultimately, he says, those that don’t try to build their own supply chains but leverage existing infrastructure will be those that scale quickest.
It is difficult to say which sector may scale successfully first. But, what we do know, says Judge, “is that synbio funding has increased consistently and substantially year on year. This means that there will be more and more companies with the ability to pursue more and more of these technologies. What that yields is an ecosystem that can rely on a larger infrastructure, talent pool, and exit pool that will grow as the years go on.” He adds that the sectors likely to benefit the most from such a broader spectrum of companies are the software players and tools and automation groups — the industry suppliers.
What to think about before the panel
While the panelists and I discussed many more exciting topics, I left many details out in order to maximize what you can learn from the lunch and learn session at SynBioBeta 2018. Our panelists had some interesting food-for-thought ideas that conference attendees can chew on in the weeks leading up to the session.
Rey wants individuals coming out of academia and entering industry to see industry as more than defaulting to a position in an established company. He wants people to start thinking about starting their own companies. With low-cost infrastructure booming, it’s never been easier to start a synthetic biology company, he says.
Gupta has a message for founder in the industrial fermentation space. “If I were a startup that had already perfected strain optimization, I would be asking myself ‘how do I know that I still have a company in the long run, and how do I investigate that for myself in the long run?”
Judge also wants people to prepare for discussion on IPO, a topic he says that is always of interest at sessions like these. “The one interesting thing that’s happening in the industry that’s unusual is how some of these companies are going to IPO much more rapidly. Growth barriers are not as great as they have been in other industries,” he says.
But perhaps Parikh sums up the landscape best: “We’re at an exciting point in the field of engineering biology because, as the cost of digitizing biological information approaches zero, the engineering biology innovation loop is hitting critical mass. This data along with advances in bio development platforms such as gene editing and gene synthesis makes it possible to easily engineer biology. This enables fast development of new breakthrough applications and solutions in therapeutics, diagnostics, food, materials and environmental engineering which feeds more demand for innovation in this accelerating loop. In the coming decade, we are going to see engineering biology change the world.”