1 Synthetic biology overall investment trends¶

Coming off two historically peak years in 2020 and 2021, venture investment in synthetic biology was down considerably in 2022. In the last quarter (Q4), startups in the field raised \$2.7 billion. This was an increase of \$1.1 billion (42.0%) from Q3's \$1.6 billion. But in Q4 last year, startups raised \$3.9 billion - meaning this year was a decline of -\$1.2 billion, or -45.4%. In all of 2022, startups raised \$10.3 billion, compared to \$21.8 billion at the same time a year ago; a decline of \$11.5 billion.

At first glance, it would seem that synthetic biology's best days are behind it, but in reality, the decline since 2020-2021 impacted venture capital across all sectors, and around the world. The headlines summing up a disappointing 2022 Q4 were clear. According to Fortune:

Every quarter, we are getting a better sense of just how much the venture capital industry has pulled back from an unprecedented 2021—and a clearer picture of how deals will likely play out moving forward. New data released today from Crunchbase shows that venture funding fell to \$445 billion last year—down 35% from 2021 levels. Let’s be honest: Those numbers are still *really* high. In 2020, investors wrote checks worth some \\$342 billion to startups across the globe, per Crunchbase.

But it’s worth pointing out that the slowdown really sped up in the last two quarters of 2022—meaning that while VCs have been predicting a pullback for a year or so, it really only started playing out in the last six months. Indeed, in Q4 2022, funding levels hit their lowest point since the first quarter of 2020, back when VCs were dreading a collapse due to the COVID pandemic that never really panned out as expected.

The pullback is being felt even in seed stages now. Seed-stage and angel funding dropped 35% in the fourth quarter of 2022 compared to the year-ago period, per Crunchbase. And late-stage companies, which have been experiencing the brunt of the pullback, saw funding levels drop to \$40 billion in the fourth quarter, down 64% from 2021 levels. https://fortune.com/2023/01/05/vc-funding-2022-recap/

Similarly, Big Four consulting giant KPMG wrote:

VC investment globally dropped for the fourth straight quarter in Q4’22. While the total of VC investment looked particularly weak compared to the record quarterly high set during the same quarter last year, it remained comparable to the levels of investment seen prior to the onset of the Covid-19 pandemic. https://kpmg.com/xx/en/home/campaigns/2023/01/q4-venture-pulse-report-global.html

The chart below compares the synbio field with VC investment overall, on both the global and US levels - clearly showing a similar trend for all three categories. So while synbio's slide paralleled that in other venture fields, it's worth remembering that 2020 and 2021 were the outliers, and the long-term trend over the last five years and farther back has remained strong.

1.1. Average investment amount and deal count¶

Looking at average investment amount and deal count helps clarify the story still further. Deal count is down more than 50% from the peak of 159 in Q1 of 2021, reaching 73 deals (up from 66 in Q3). But average transaction sizes have been increasing fairly steadily for five years or more, reaching just over \$7 million in the last two quarters.

1.2. Top ten transactions overall¶

The big winner of the quarter's fundraising was LanzaTech, with a \$500 million haul from Brookfield Renewable Partners, earmarked for constructing and operating new facilitles for transforming carbon dioxide into sustainable fuels, fabrics, packaging, and other goods and materials. The next two largest rounds went to medical synthetic biology, with Intellia Therapeutics and Moderna Therapeutics raising \$300 million and \$250 million respectively.

Solugen, Recursion Pharmaceuticals, Inari, and Autolus raised between \$100-200 million; Metagenomi, Sound Agriculture, and NotCo raised rounds between \$70 and \$80 million to take the Top Ten Transactions in the synbio space.

2. Investment trends by Synbio Stack¶

Applications like food, medicine, and chemicals raised more than 85% of the funds invested in the latest quarter - up from 75% a year ago. Companies farther down the synthetic biology "stack" (the layers of types of technology and tools that together combine to make biology an engineering discipline) are dominated by organism engineering platforms that brought in about 5% of the total.

2.1 Bio-CAD¶

2.2 Cloud Labs and Automation¶

2.3 Gene Synthesis and Sequencing¶

2.4 Organism engineering platforms¶

2.5 Synbio applications¶

3. Synbio Applications¶

3.1 Agriculture¶

3.2 Automation and hardware¶

3.3 Chemicals¶

3.4 Consumer goods¶

3.5 Diagnostics¶

3.6 DNA data storage¶

3.7 DNA synthesis¶

3.8 Energy and environment¶

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