In a sense, humankind has been putting microorganisms to work since the ancient Sumerians started brewing beer some 6000 years ago, or when we first began to use yeast to leaven bread. But today, our new-found ability to edit the DNA of microorganisms means they can be tweaked to produce everything from speciality chemicals to food proteins.

Synthetic biology, or the re-engineering of biological systems, is an umbrella term for a vast number of technologies — from cell and gene therapies that can combat diseases like cancer, to developing new mRNA-based vaccines against Covid, to growing cultured meat in a lab. Some of the healthcare benefits are relatively well-publicised and have dominated media headlines. But there are other uses that are less well-known, from agriculture to new materials development.

For this report, we have looked at these more nascent uses, excluding the more mature areas such as cell and gene therapies and plant-based protein production.

This market still tends to be somewhat modest in size — depending on definition — but is seen as having high growth potential.

One report from Brainy Insights estimates the size of the synthetic biology market to have been worth nearly $12bn in 2022 and expects it to grow to nearly $56bn by 2030. It attributes this tremendous growth potential to scientific breakthroughs and innovation which have made it possible to apply biology to so many areas.

Similarly, according to a report by BCC Research, the synthetic biology world market was forecast to increase from an estimated $9.5bn in 2021 to $33.2bn by 2026, at a compound annual growth rate (CAGR) of 28.4%.

Our narrowly defined area of synthetic biology (excluding food and alternative protein applications) only really began to take off with venture capital investors in 2018-19, according to PitchBook’s data. Corporate-backed deals have remained a relatively modest portion of those deals – oscillating between 15% and 30%.

Median deal sizes and median post-money valuations have remained fairly modest. Most deals have been at a seed and early stage. However, those figures have been growing, evidencing its high growth potential perceived by investors.

Geographically speaking, the US and Asia have been the primary regions where engineering biology VC deals have taken place and much less so Europe.

Biotechnology and medicine

Gene editing and so-called “designer babies” have been some of the most talked about breakthroughs on the healthcare side. This has come with some controversy, such as in the last of the He Jiankui affair in China in 2018, where the first genome-edited HIV-resistant babies were brought to life. At the same time, Car-T cell therapy, where a patient’s own cells can be used to combat cancer, are giving hope to many.

But there are a number of other ways that healthcare is using engineered biology.

A great case in point is sitagliptin, sold under the brand name Januvia, a drug commercialised by Merck and used for treating type 2 diabetes. In simple terms this drug increases the secretion of insulin and supresses the releases of glucagon, which drives glucose levels to normal, according to Nature magazine and Wikipedia.

Xiylo, a University of Bristol spinout, similarly discovered a molecule that binds only to glucose, and turned that into a “smart insulin” company, helping diabetics. It was acquired by Novo Nordaisk in 2018.

Agriculture and food

Synthetic biology in the agriculture and food market is expected to witness significant growth in the coming years – from an estimated $3.2bn in 2020 to $14.12bn by 2025, at a CAGR of 34.56% during that period, according to a report by BIS Research. Driving factors behind this expected growth include the growing need for global food security, heightened consumer awareness of the importance of nutrition and greater investments in research.

Potential applications in agtech and foodtech range from crop yield management and development of disease and pest- resistant crops to the improvement of soil health, optimisation of food processing as well as enhancing food nutritional value and food safety.

There are many promising startups in this space. California- based Pivot Bio, for example, is developing a microbial solution that replaces nitrogen fertilisers. It has received backing from several corporate VCs including Tekfen Ventures, Bunge Ventures and Leaps by Bayer, according to PitchBook.

Similarly, Colorado-based DMC Biotechnologies develops bio-based chemicals designed for low-cost, sustainable transformation of multiple product markets. The company is backed by Solvay Ventures, the venturing arm of chemical producer Solvay, according to PitchBook.

Material advances

Engineering biology is also making strides in materials that could be greener and more sustainable. A case in point would be an application of synthetic biology to the textiles and apparel industry. It is all about living organisms with the potential to become bio-fabrics.

Big global clothing brands have a sustainability and emissions problem when it comes to synthetic fabrics. Artificial leather is made from petroleum derivatives and needs harsh chemical treatment to make it feel and look like real leather, as a blog post on Cleantech.com explains.

The post identifies several startups (Modern Meadow, Provenance Biofabrics and VitroLabs) that specialise in making bioleather, without animals being involved. Modern Meadow makes such leather from yeast-expressed collagen, the primary component of skin, and claims to do it at costs on par with traditional leather. Provenance Biofabrics similarly uses collagen to create leather.

Another interesting application is the harvesting of spider silk. Also known as super silk, protein fibre spun by spiders is five times stronger than steel and more elastic and waterproof. It is, however, very difficult to farm and mass-produce. As the CleanTech.com blog post notes, today genetically engineered hosts (e.g. yeasts, silkworms and goats) can be used to get spider silk. Two companies specialise in this – Bolt Threads, which works with yeast, and Japan-based Spiber which uses E.coli.

Bio-engineered materials can go beyond fabrics and textiles. According to Nature magazine, hyaline films are made from diamine monomers produced by engineered organisms that were optimised using a suite of robotics to build millions of strains in parallel. Such films are clear, flexible and robust to make them suitable for flexible electronic devices like wearables.

Stumbling blocks

The engineering and synthetic biology sector faces some challenges in scaling. While nature may have developed enviable chemistry, bio solutions are not always easy to harvest on a large enough scale to be commercially viable.

As a piece by the Manhattan Institute declared, “despite decades of hype, as well as years of mandates and subsidies, biofuels have never made a significant dent in our need for oil.”

According to IEA data, bioenergy is the largest source of renewable energy globally, accounting for 55% of renewable energy, but only 6% of global energy supply.

The time horizon required for these technologies to mature and in some cases obtain regulatory approvals, are also a challenge for VC and PE investors.

In the case of environmentally sustainable materials, the biggest economic hurdle may be inability to price-compete with commodities like oil and gas or conventional chemicals.

Thus, engineering biology has a long and bumpy way ahead but its disruptive potential is large enough for investors to take an interest.

Satisfying a growing world population’s hunger for protein is not easy to do in an environmentally sustainable way. Although a wave of plant-based products and vegan alternatives have hit the market, even these come with a carbon footprint about 37-57% that of actual meat.

Other protein technologies must come into to play to solve the problem — and producing protein using engineered micro-organisms is one of them. Arkeon Biotechnologies, an Austrian startup, has created archaea microbes to convert hydrogen and carbon dioxide into 20 proteinogenic amino acids. These acids can be used to create alternative protein ingredients, essential for human health whilst being both sustainable and regenerative.

There are a number of companies producing proteins using precision fermentation, but Michael Mitsakos, co-founder and chief commercial officer, says Arkeon’s process is different from that of competitors.

The amino acids we produce are excreted outside the cells of the organisms,” he says. “Whereas other ‘CO2-to-food’ companies do not excrete amino acids at all as it remains as part of the biomass they are producing.”

Examples of other CO2-to-food-based startups that do not excrete amino acids include AirProtein, a US-based company that has developed AirMeat, which raised $107m over two funding rounds with corporate investors including ADM’s corporate arm, ADM Ventures, Barclays and Alphabet’s GV.

Arkeon Biotechnologies was founded in 2021 by Gregor Tegli, the CEO; Gunther Bochmann, the chief technology officer; Simon Rittman, the chief scientific officer and Mitsakos. The founders have a combined 43 years of experience in the venture capital and biotechnology sectors.

Rittman served six years as the principal investigator and head of the archaea and physiology and biotechnology group at Universitat Wien and Mitsakos was the venture partner for three years at Purple Orange Venture, a Germany-based seed fund.

A promising investment climate

Engineering biology startups have garnered interest from corporations such as Leaps by Bayer and CPT Capital, but Mitsakos says there is still work to be done to convince investors it has mainstream potential.

“I believe the more cases we have that show how industrial biotechnology is superior in terms of costs and reliability, there will be a gradual shift to explore biotech as an alternative way of producing the things we need for our industries,” he says.

Biotechnology startups must also have “operational and financial excellence” to survive, says Mitsakos. A recent study by Labiotech.eu found that a growing number of these startups are failing, due to flawed financial strategy and mediocre science.

“Launching a biotech company from scratch would be a great challenge for any entrepreneur. Having that combination of business co-founders, scientists and technology and engineering experts has helped propel Arkeon to success and can help other startups thrive too,” says Mitsakos.

Certain engineering biology companies have attracted large amounts of funding, especially in the food sector, such as Motif Foodworks, a US-based precision fermentation company that has raised $343.5m since its launch in 2019.

However, applications of engineering biology in other sectors have struggled. Pembient, a US-based company which is creating a bio-fabricated version of elephant ivory to replace illegal wildlife trading, has only raised $500,000 since its launch in 2015.

To ensure that all these bioengineering startups receive equal funding, Mitsakos says that a stronger biotechnological infrastructure needs to be developed.

“The sector needs to make sure that we have enough capacity in terms of facilities and bioreactor capabilities. Also, partnerships

with corporations, industrial companies and government institutions can help provide the resources to allow the businesses to develop,” he says.

Corporations and other venture investments

Arkeon has raised a total of $11.2m in funding, including a

$7m seed round in 2022 which saw venture firms Square One Foods, Synthesis Capital and ReGen Ventures participating. Mitsakos says the capital raised is being used to forward technological upscaling and industrial partnerships.

“The next steps for the company are to increase production output to commercial levels,” says Mitsakos.

Aside from venture capital firms, corporations that have also invested in Arkeon include ICL, an US-based global specialty minerals corporation that supplied $2.9m in early 2023 to the startup.

“We were initially approached by ICL regarding a collaboration that evolved into a full partnership and investment,” Mitsakos says. “At the beginning, we were interested in how ICL wanted to use our amino acids for their products, and from there they became a real investor and partner for us.”

He continues: “I do not see any downsides with working with corporations for investment. Though ICL is our only corporate investor, the ability to work on product applications and investment has been a great combination.

“The operational expertise and closeness to market that ICL brings to the table are important, highly valuable and beneficial for both of us,” says Mitsakos.

Mitsakos is motivated by the thought of fixing the food systems through engineering biology.

“Decoupling food production from resource-intensive agricultural practices and instead using electricity and gases to produce food is an approach to the global climate challenge,” he says. “With Arkeon we’re not only utilising CO2, but we’re also converting it into food, without the need for more agricultural land. Our technology is independent of agriculture, resilient to changing conditions due to climate change, and a way to produce protein sustainably for a growing population.