Two years ago, the synthetic biology start-up Geno decided to further scale its process to manufacture a primary alcohol, BDO, from farm-grown materials such as sugarcane, sugar beets, and corn rather than petroleum-based substrates. The chemical is used in the manufacture of numerous products, and has grown into a $10-billion-plus a year market. While Geno’s bio-BDO performs just as well as the petroleum-based product and can be manufactured at a competitive price, its plant-based syn-bio process emits less than 10% of the greenhouse gases that industrial processes do, making it more sustainable.
Although Geno (then called Genomatica) first produced BDO from plant sugars in 2008, it needed to evolve from lab to scale. That’s why the San Diego-based firm strategically decided to work with seasoned incumbents such as DuPont Tate & Lyle Bio Products in 2013 to test its process; with Novamont, an Italian bio-plastics manufacturer, in 2016, to commercialize and manufacture its bio-BDO at scale; and then, with Qore—the Cargill-HELM joint venture—to open the second commercial plant using the Geno process. Qore plans to invest $300 million to build a syn-bio campus in Iowa by 2024, the centerpiece of which will be a 65,000 tons per annum bio-BDO plant—the world’s biggest—that will cater to around 2% of global BDO demand.
In the Syn-Bio Age, going it alone is neither necessary nor sufficient for success. The world over, numerous science-based startups are developing and deploying syn-bio technologies to design sustainable production processes and products such as “green” cosmetics, foods, fuels, pharmaceuticals, plastics, and, of course, industrial chemicals. Consequently, business’s perception is that, just as digital ventures did in the 2000s, syn-bio startups will disruptively challenge incumbents. In that sense, syn-bio startups and incumbent companies, especially those that use petroleum-based feedstocks and industrial processes, appear to be natural-born rivals that must compete against each other. However, that may not be the case in reality—for reasons on both sides.
On the one hand, unlike digital technologies, syn-bio products and processes are analog in nature, making them similar to existing products and processes. Many syn-bio startups need the domain knowledge that incumbents possess to meet product specs, address regulatory issues, and establish supply chains. Moreover, they face technological, scale, and cost-related challenges in commercializing their products and processes, as the Geno case exemplifies, because the science, and technologies, of biology are still not fully understood.
On the other hand, many incumbents have realized the pressing need to come to grips with syn-bio technologies, with society exhorting them to develop greener products and processes. Only by teaming up with promising syn-bio startups, rather than competing with them, will incumbents be able to gain an advantage for the future by accessing technologies they don’t currently possess; create innovative products; and reduce the risk of being disrupted. Crucially, the incumbents possess five valuable, rare, inimitable, and non-substitutable assets and capabilities that syn-bio startups can use to tackle the challenges they face in scaling and commercializing their novel technologies. They are:
Technical know-how
Many syn-bio technologies don’t scale linearly, and, moreover, unforeseen challenges often dog their evolution. While syn-bio startups have developed R&D capabilities, many lack the process engineering skills and knowledge of industrial operations that incumbents possess. That’s why incumbents can help syn-bio startups scale new syn-bio products and processes. Their R&D teams and manufacturing experts are likely to ask the right questions to help tackle the challenges on the path to refining innovations and prevent startups from going down dead ends.
Furthermore, incumbents can provide access to the talent pools and patents needed to finetune and scale syn-bio processes, so their output meets quality standards—a time- and investment-intensive challenge for most startups. In 2017, for example, Royal DSM, which operates in the health, nutrition, and materials businesses, invested $25 million in the California-based syn-bio company Amyris. While the latter’s yeast-based strain engineering platform complements the incumbent’s R&D capabilities, Amyris has benefitted from DSM’s expertise in fermentation, downstream process development, and manufacturing at scale.
Market insights
Despite the novelty of their products and processes, syn-bio startups have to tackle real customer problems if they are to win. Science-based startups usually have a deep understanding of the technologies they’re working with, but they struggle to tailor products and processes for different industries, customers, and uses. That’s where incumbents come in; they offer the deep insights into customer behavior that are needed to develop commercially viable solutions for different market segments. By enabling the collection of customer data and feedback at scale, they can also help syn-bio startups build better customer relationships.
Several syn-bio application platforms develop products for different industries, but they may not be willing to market them or capable of marketing them at once. Instead of developing the capabilities and building the organization to understand various market segments, these startups focus on strengthening their platforms and innovation. Incumbents are, therefore, their natural marketing partners. Last year, for instance, the Swedish bio-manufacturing platform EnginZyme partnered with Tetra Pak, the food processing and packaging giant, to find new ways to improve food and beverage production by, for example, turning waste into valuable ingredients. By gaining access to Tetra Pak’s processing knowledge and marketing expertise, EnginZyme has learnt to tailor its products so they better meet customer needs.
Manufacturing facilities
Setting up a facility to manufacture syn-bio products is a long-gestation, capital-intensive, and high-risk project. It costs between $100 million and $200 million to build a fermentation facility, for instance, and it could take three years, on average, to finish. Unlike startups, incumbents constantly (re-)design and construct manufacturing facilities across the world, so they can provide project construction, management, and operational expertise. They can also provide the funds and, sometimes, even the facilities that syn-bio firms need to test and execute processes. That could come in handy for many syn-bio firms, especially when venture capital is drying up because of the stagflationary economic environment.
In June 2022, Unilever invested in a $120 million venture with Geno to develop and scale plant-based alternatives to palm oil and fossil fuel-based ingredients that the former can use in its cleaning and personal care products. And, in September 2022, the Tokyo-based Kao Corporation, another leading global chemicals and cosmetics company, made an additional investment in the enterprise. Encouraged by the incumbents’ interest, technical support, and resources, Geno is rapidly scaling its syn-bio platform to develop and produce ingredients for an estimated $625-billion market.
Regulatory knowledge
Although policies and regulations play a major role in supporting syn-bio, as we have discussed in a previous article, navigating them poses a major challenge for most startups. Similar syn-bio products made from dissimilar raw materials or by disparate processes will attract different regulations. For instance, Impossible Foods, Mosa Meat, and Meati all make syn-bio meats, but they are each subject to the specific laws that regulate their raw materials (microbes, animal cells, and fungi, respectively). Working with an incumbent in the foods business will help syn-bio startups master regulatory challenges and get new products to market faster.
Most incumbents have years of experience in navigating regulatory frameworks. For instance, in its partnership with BioNTech, Pfizer contributed not only its manufacturing, testing, and distribution infrastructure, but also its capabilities in navigating clinical research and trials. The latter proved to be invaluable in bringing BioNTech’s mRNA-based COVID-19 vaccine to market quickly. Incumbents can also help push for the creation of standards to ease the development of syn-bio products and use their networks to shape policy.
Value chains
Syn-bio startups must attract a sufficient number of customers, which takes time and needs significant investment in marketing. Corporations that have an established brand and customer base can draw on their reputations to gain consumer attention and trust for syn-bio products and processes. Furthermore, incumbents possess established value chains, consisting of feedstock suppliers, distribution partners, and sales channels, which could prove to be invaluable to startups.
Consider MycoWorks, which has developed Reishi, a fungi-based mycelium grown in a lab that emulates the sensory aspects of high-quality cowhide leather. To help its products break into a competitive marketplace, MycoWorks initially supplied Reishi only to the luxury brand Hermes, which used it to develop a sustainable version of its Victoria bag in 2021. By executing production runs at a pilot plant in Emeryville, California, and demonstrating the quality of its product, MycoWorks recently secured $125 million in venture funding to build its first full-scale manufacturing plant in South Carolina.
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The Syn-Bio Age requires both syn-bio startups and industrial incumbents to work together. Incumbents must recognize that by leveraging their assets and capabilities, they can play a key role in scaling and commercializing syn-bio technologies. Only then can both generate all the benefits that the science promises. Indeed, business in the Syn-Bio Age must be a dance between startups and incumbents—not a fight.
Read other Coins2Day columns by François Candelon.
François Candelon is a managing director and senior partner at BCG and the global director of the BCG Henderson Institute.
Maxime Courtaux is a project leader at BCG and an ambassador at the BCG Henderson Institute.
Max Männig is a consultant at BCG and an ambassador at the BCG Henderson Institute.
Vinit Patel is a project leader at BCG and an ambassador at the BCG Henderson Institute.
Some of the companies featured in this column are current or past clients of BCG.
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