Climate Capital has been investing in climate founders for almost a decade. CC Insights shares what we are learning about the early stage climate tech ecosystem. Co-invest with us here.
Heyo! This is Michael Luciani, managing partner and co-founder at Climate Capital + the Co-GP of the Climate Capital Bio fund. Originally investing via the Climate Capital Syndicate, I developed a specific investing thesis & track record and I am now halfway through raising my first fund, Climate Capital Bio, with the brilliant Dr. Jenny Kan. Today Jenny and I would like to tell you why this space is important enough that we launched a specific fund, Climate Capital Bio (CCB), to specifically back founders working in this space.
The TL;DR about the Climate Capital Bio Fund
Climate Capital Bio is a pre-seed venture fund backing biotech companies building climate solutions that decarbonize the largest and least sustainable sectors of the economy. Biology is the most advanced manufacturing technology on earth. Biology creates life, astonishing richness and diversity, and can operate with atomic level precision while also growing to global scale, all while remaining in balance with available resources. And now, humanity can finally read, write, and edit its code base (DNA). Programming biology (that’s what ‘synthetic biology’ is) allows us to build on top of 4.3 billion years of evolutionary research and development to create products and solutions that meet the needs of society today. We see two megatrends that make us particularly bullish on this space:
The first is climate change, which is accelerating the adoption of sustainable bio-production. Over 60% of all of the physical inputs to the global economy can be produced more sustainably by bio-production, addressing over 50% of global greenhouse gas emissions.
The second is that biotech is at an inflection point due to increased democratization and accelerating technical progress. The underlying costs of bio-production have decreased ten thousand fold over the last two decades, from billions to just hundreds of dollars. This makes it increasingly possible to cost effectively switch from traditional manufacturing to bio-manufacturing at scale.
Many VCs lack the technical expertise necessary to evaluate early stage synbio (synthetic biology) companies. In addition to making our own investments, Climate Capital Bio works with other early stage climate investors to share our technical due diligence and create coalitions of investors to catalyze more funding in this critical space. Our goal is to give founders working on solutions that could revolutionize (and decarbonize) trillions in market share more opportunities to find aligned investors to help them build their businesses at the earliest stages.
If you would like to co-invest with us, learn more about what we do, check our investor deck, or invest in the Climate Capital Bio fund just send us a note at bio@climatecap.co.
Why Biotech for Climate?
‘The 75% problem,’ coined by Bill Gates, refers to the fact that the majority of climate attention goes to decarbonizing electricity generation, but the majority of emissions are caused by how we make physical things.
Approximately 60% of the physical inputs to the global economy can be produced by engineered biology - a switch that would address more than 50% of annual GHG emissions! Physical inputs are things that are used to create other things, like building materials, fabrics, plastics, chemicals, foods, fertilizer, and fuels. This work is not hypothetical; startups and research laboratories are working on hundreds of projects right now and the underlying technologies that make bio-production possible are becoming more advanced each day. Decarbonizing chemical synthesis (Aralez), stopping the deforestation caused by food production (Pomodyne), creating climate resilient crops (BioDrive), eliminating data storage electricity use with DNA data storage (CacheDNA), decarbonizing and detoxifying textile manufacturing (Rubi Labs & PrismBio), engineering trees to grow twice and fast and store 2x the CO2 (Living Carbon), and even engineering microbes to mine for battery metals (Maverick Bioworks) – these are all companies we’ve invested in and just a fraction of the promise of biotechnology!
“Bio today is where information technology was 50 years ago: on the precipice of touching all of our lives. Just like software—and because of it—biology will one day become part of every industry.” - A16Z Biology is Eating the World
The ‘bioeconomy' is projected to grow from ~$1 trillion today to over $30 trillion by 2050. Healthcare is projected to be less than a third of this bioeconomy market cap. What’s the other two thirds? Bio-manufacturing. Bio-manufacturing companies, unlike therapeutics and pharmaceuticals, face near zero regulatory burdens. Products made using synthetic biology can be made with less money, at a higher quality, and using little to no fossil fuels. In fact, many biomanufacturing processes are carbon negative!
Inflection Point
Four trends contribute the megatrend of democratization and accelerating progress in biotech today: (1) technological democratization, (2) decentralization of infrastructure and talent (3) government and philanthropic funding, and (4) AI, machine learning, and automation.
(1) Technological Democratization: $3B to $100
The cost to start a biotech company has never been lower, and ‘design, build, test, learn’ cycle times have never been shorter. Historically, periods of ‘democratization’ have resulted in exceptional industry growth. In the 1990s it cost ~$3B and took 10 years to sequence the human genome – now it costs $100 and takes a few hours. The ability to read (and write) DNA is the enabling technology that allows synbio to exist and decreasing costs are fueling an innovation boom. In the same way that Moore’s law predicted the continuous decrease of computing power leading to the software and internet boom of the last 25 years, Carlson Curves (the graphic above), the biological analog of Moore’s law that describes the decreasing costs of DNA sequencing and synthesis, show the radical democratization of this industry that’s driving the current explosion of innovation.
Examples of companies driving technical democratization:
In 2012, Illumina launched the HiSeq 2500, the first DNA sequencer to offer a cost-effective way to sequence whole genomes.
In 2017, Inscripta developed and released the MAD7™ nuclease promoting widespread adoption of CRISPR tools in academic and commercial settings.
In 2017, Twist Bioscience launched the Genome Compiler, a system for manufacturing synthetic DNA on a silicon chip at a fraction of the previous cost.
In 2020, Ansa Biotech launched the AnsaSeq platform, an enzymatic DNA sequencing platform that can synthesize complex sequences rapidly with no harsh chemicals.
In 2021, Inscripta launched the Onyx instrument which can be used to generate CRISPR libraries at the push of a button.
In 2021, Synthego launched the Eclipse followed by the Halo in 2022. These two make up Synthego’s Genome Engineering Platform, which delivers large scale and high quality gene editing tools and cell-based models for research at any stage.
In 2022, Ultima Genomics broke the $100 whole genome barrier, bringing whole genome sequencing (WGS) to the masses.
(2) Decentralization of Infrastructure and Talent.
Infrastructure - It’s more cost effective than it has ever been for companies to develop proof of concepts. Product testing can now occur via digital models rather than in a lab. Once a company is ready for lab testing, they can send out experiments to be done or biological parts to be fabricated to an outsourced ‘ghost lab’. This democratization of infrastructure saves companies the millions of dollars it would otherwise cost to set up new labs from scratch, minimizes technical risks, and accelerates development times.
Examples of companies driving the democratization of biotech infrastructure:
Ginkgo Bioworks provides bioengineering services such as metabolic engineering, strain optimization, and process scale up to other biotech companies.
Cultured Bioscience offers ‘bioreactors in the cloud,’ allowing customers to design, monitor, and analyze high-throughput bioprocessing experiments remotely.
Pow.bio (portfolio company) offers intelligent fermentation as a service, increasing yields and lowering costs for clients.
Wild Microbes (portfolio company) offers a catalog of uncommon microbes and the ability to engineer those microbes - allowing clients to switch to the best microbes nature has to offer in order to increase bio-production yields and lower costs.
Codexis offers a high throughput enzyme engineering platform for biomanufacturing.
Liberation Labs offers precision fermentation capacity.
Synonym Bio offers fermentation capacity and financing.
Aralez Bio (portfolio company) offers amino acid synthesis on demand and significantly expands the repertoire of molecules we can cheaply make with biology.
Tierra Biosciences offers high throughput custom protein synthesis through their cell-free protein production platform.
Talent - Increasingly organizations like Homeworld, Valley DAO, Nucleate, iGEM, and SynBioBeta are intentionally bringing a diverse array of talented individuals together to build at the intersection of climate and biotech. They are creating virtual and physical spaces for the rapid iteration of novel ideas, connecting founders with teammates and mentors, and in some cases even giving out ‘fast grants’ to help projects get off the ground quickly.
(3) Government and philanthropic funding.
Government - The Inflation Reduction Act, CHIPS and Science Act, ARPA-E, ARPA-C, the Department of Energy Loans Program, BioMADE, and other recent US policies all accelerate innovation in climate tech and biotech. Together, these policies amount to strong support for biotechnology companies developing disruptive eco-friendly solutions across energy, manufacturing, materials, chemicals, food and ag. All of this funding is ‘non-dilutive’ and is accessible either as a grant, loan, or higher price customers can pay.
The Inflation Reduction Act provides hundreds of billions in tax credits to help scale up development and commercialization of novel technologies like advanced biofuels and sustainable agriculture.
The CHIPS and Science Act funds the acceleration of new biotech research from the lab to company formation (among many other things).
ARPA-C and ARPA-E grants money to fund high-risk, high-reward research into transformative carbon reduction and sustainable technologies.
The Department of Energy's expanded loan program offers critical access to capital for mid and late-stage companies looking to scale their production capacity and has been given a $400 Billion budget.
The Department of Defense awarded $87 million to the BioIndustrial Manufacturing and Design Ecosystem (BioMADE), a nonprofit that works with both public and private parties to advance sustainable and reliable bioindustrial manufacturing technologies.
Philanthropic - Federal support is increasingly joined by philanthropic capital offered by organizations such as:
Schmidt Futures, a philanthropic venture founded by former Google CEO Eric Schmidt and Wendy Schmidt, focused on funding science and technology research and talent networking programs.
Prime Coalition, a nonprofit organization focused on supporting new technologies to cut greenhouse gas emissions.
Climateworks Foundation, a nonprofit organization with the mission to slow global warming by funding other organizations internationally to help find best solutions to reduce CO2 emissions.
Bezos Earth Fund, established by Jeff Bezos who committed $10 billion to be disbursed as grants to address climate and nature within the current decade.
Manifest Climate, a fast grant program that awards $25K - $100K to scientists working on bio x climate solutions to help accelerate their most ambitious projects.
(4) AI, machine learning, and automation.
Large language models (LLMs), artificial intelligence (AI) & machine learning, and automation are all accelerating every step of the bio-manufacturing pipeline. Each one of these trends is powerful alone but they also reinforce one another - the more that experiments are automated, the more data is generated, the more accurate and effective any algorithmic intelligence will be, etc.
For example ‘guessing and checking’ is increasingly being replaced by algorithms that can make predictive leaps with large datasets. AlphaFold, a neural network developed by DeepMind based on concepts derived from LLM, has demonstrated dramatic predictive leaps in protein structure prediction. In discovery research, algorithms can rapidly analyze massive datasets to generate hypotheses and design candidate proteins, metabolic pathways, and even entire organisms. In lab experimentation, companies like Trilobio (portfolio company) and Opentrons are automating repetitive tasks and allowing scientists to increasingly convert weeks of manual work to hours of automated processes run by robots. Computer vision algorithms can track cell growth for process monitoring and control. In-silico modeling of entire biomanufacturing processes is already allowing for rapid tech transfer and scale-up.
Notable AI breakthroughs and companies that have incorporated AI and machine learning into their workflows include:
The AlphaFold Database, an open source database that predicts the 3D structure of nearly all cataloged proteins known to science.
Genentech is using AI and machine learning to examine the chemical structure of potential antibiotics and determine which ones have the potential to bypass the pathogen's membrane and eliminate it, drastically reducing the time it takes to identify which antibiotics to pursue further research on.
Absci uses AI to create new antibodies and then tests them in laboratories in a 6-week process. In March of 2023, thanks to AI, Absci was the first company to design a functional antibody without any pre-existing data.
MelonFrost (portfolio company) is using AI to build the world’s first evolutionary prediction engine - allowing processes of directed evolution to be understood and commercialized.
What founders need
Early stage climate biotech founders are pioneering a critically important industry - one that will be worth trillions of dollars in market cap and will help humanity mitigate billions of tons of annual greenhouse gas emissions. Working with hundreds of founders in this field, we have seen that what those founders most need is:
Capital - Help bringing on investors who might not be familiar with climate biotech and navigating non-dilutive funding opportunities available to them
Storytelling - Help telling the story of their impact and market potential
Networking - Help connecting with customers and ecosystem partners
Business strategy - Help figuring out the right business model and go-to-market strategy for their products
Tech - Help navigating IP and licensing, figuring out unit economics and scaling, and hiring the right technical talent
Company building - Help setting KPIs and sorting through which parts of “startup culture” are appropriate for them to incorporate into their businesses and which pieces are best left behind
Climate Capital Bio exists so that Jenny Kan and I can dedicate all of our time and energy to helping connect these dots for founders and to helping to educate the rest of the venture ecosystem about the exciting future we see for this space.
This is just the beginning
Most people still think about biotech as a slow and expensive field where scientists work through decades long processes to bring new drugs to market. This focus on previously high costs and on therapeutics prevents many people from recognizing the revolution happening right now in climate biotech.
To end with another Bill Gates quote: “most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.” Today is only the beginning, making the perfect time to be investing in the early stage climate biotech companies that will be the clean industrial powerhouses of the 2030s. If you’d like for us to take a look at what you’re building, please fill out this form and tag yourself as ‘bio’. If you would like to co-invest with us, learn more about what we do, or invest in the Climate Capital Bio fund please contact us at bio@climatecap.co.
Synthetic biology will grow exponentially in the next decades. And while it’s not a full-service solution to solve all climate problems, it is already allowing big industries – particularly the world’s dirtiest ones – to significantly reduce their emissions output while improving their businesses. The potential of bio-manufacturing to be ‘cheaper, better, and faster,’ as well as more sustainable than the legacy methods it replaces, aligns the capitalist incentive structure with the moral imperative of saving our planet. How cool is that?!
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Disclaimer: Climate Capital Bio is structured as a 506(c) fund, which allows us to talk about our work in the public domain legally. This Newsletter (“CC Insights”) is not intended to provide any investment, financial, legal, regulatory, accounting, tax or similar advice, and nothing in this Newsletter should be construed as a recommendation, by Climate Capital, its affiliates or any third party, to acquire or dispose of any investment or security, or to engage in any investment strategy or transaction. You should consult your own investment, legal, tax and/or similar professionals regarding your specific situation and any specific decisions.