Behind the Scenes on Biotech Partnerships

By Adrienne McKee, Ph.D., Partner

It’s not all rainbows and unicorns in the industrial biotech startup world. Truly amazing talent, ideas, and companies have been hit hard by the wild VC roller coaster. Funding for biotech boomed in 2021, then fell sharply, by 2023 decreasing by 43.2% compared to 2022 and by 52.3% compared to 2021, attributed to macroeconomic pressures causing investors to be more cautious and prioritize existing portfolios. Venture capital investors are coming back strong to the biotech sector, with pharmaceuticals leading the way. 

Some blame the tough times in synthetic biology on the startups. Blunders were made in recent years by some high-flying companies that arguably raised too many millions of VC dollars too quickly. The overabundance of capital made it easy to lose focus, and quality declined. Some skeptics see that as a harbinger of doom for the whole sector. 

Biotech is doomed, long live biotech

My take is different, and I’ll come out and say it. Rumors of the industry’s demise are greatly exaggerated. Behind the scenes, there’s growing investment in biotech, but it’s not all coming from a resurgence of VC interest. 

In the corporate sector, biotech developments are thriving, both in the expected places (industrial manufacturers, chemical companies, agtech, foodtech) and in less predictable corners (clothing retailers, beverage giants). Corporate giants are not breaking stride to publicize their endeavors, preferring to quietly test new technologies until they’re validated and market-ready. We talk about synthetic biology as what’s next, but it’s already here. 

Corporate management typically has one eye on their bottom line, and the other scanning for startups to spot trends and take innovative leaps. Some strong examples:

• BASF, a multinational chemical company, sports its own industrial biotech division. Its extensive portfolio of startup investments, includes industrial biotech companies such as LanzaTech’s (microbial gas fermentation solutions), Lactips (protein-based biodegradable plastic), and P2 Science (a bio-refining process to convert organic feedstocks).
• Bold, L’Oréal’s venture capital fund, recently announced a significant investment in the synthetic biology firm Debut. The firm specializes in combining cell-free enzymatic cascades and biofermentation to produce new molecules, leveraging Debut’s extensive IP portfolio, from which more than 7,000 ingredients can be created in order to bring high-value, more sustainable ingredients to market faster. The partnership will allow the biotech company to rapidly scale its manufacturing platform and meet growing demand for breakthrough ingredients to be used in cosmetics, skincare and packaging. It’s a win for both companies, as it propels L’Oréal to meet its sustainability goals, and gives Debut vital resources to scale its innovations.
• MISTA Innovation Center (MIC) is a San Francisco-based food tech innovation platform with deep corporate ties to the corporate sector, including Danone and Conagra Brands. Developed by Givaudan, a global leader in flavors and fragrances, MISTA has partnered with Google Food Lab, Silicon Foundry, the Good Food Institute and others. The broad alliance provides food tech entrepreneurs with a robust, multi-dimensional ecosystem for fostering innovation, scale-up potential, and ready access to the food supply chain. Bay Area MISTA members enjoy on-site commercial kitchens and state-of-the-art development labs designed to facilitate rapid product development.

Building the bridge to new markets

At Hawkwood, one of our specialties is helping large and small corporations amplify their presence in biotech markets and carve a path to market for new innovations. The first step in our work with clients is usually a needs assessment to correctly identify the problem. We then work to generate a range of solutions with the potential to solve that problem, improve efficiency, and increase profitability for the client. 

While our roster covers the gamut from beverage makers to material sciences to clothing retailers, what our corporate clients all have in common is a healthy long-term view and a willingness to reinvest resources in the future. More often than not, the best candidates to help corporate innovators develop new technologies are early-stage startups that haven’t yet achieved product-market fit. With a deep roster of experts who have led both technical and commercial functions for companies of all sizes, Hawkwood excels in facilitating synergistic relationships between large corporations and startups. 

For founders, the partnership model can be a critical first step. By focusing on a corporate market, startups can gain early access to capital, test markets, trusted customers, industrial-scale operations, and an on-ramp to supply chain networks. 

So, has synthetic biology truly hit a down cycle? It depends where you look. What I see, now more than ever, is that big corporate multinationals are quietly doing the hard work of advancing the industry, and they wouldn’t be there without strategic startup alliances.