# Zymergen (2013 – 2023)

- URL: https://girisimcikafasi.com/en/startup-graveyard/zymergen/
- Sector: Biotechnology
- Country: United States
- Total funding: $876 million
- Cause of closure: Product problems

## What did it do?

Zymergen was an Emeryville-based biotechnology company that used genomics and machine learning to design genetically modified organisms that produce chemicals and materials. It argued that its production process was safer and cheaper than conventional manufacturing. Its first product, Hyaline, was a biologically produced polyimide film for electronics applications such as foldable displays.

## Why did it shut down?

Filings with the SEC showed the company had lost more than $262 million in 2020 against revenue of just $13 million. The same filings revealed difficulties in manufacturing Hyaline and that two customers had complained the product did not work in their own production processes. In August 2021 the company said product revenue in 2022 would be immaterial, the CEO left and the shares fell 68 per cent in a single day. Hyaline production was dropped in November 2021. In July 2022 Ginkgo Bioworks acquired the company in a $300 million all-stock deal; Zymergen filed for bankruptcy in October 2023 and decided to liquidate in February 2024.

## The story

In August 2021, just four months after its IPO, Zymergen told investors it did not expect meaningful revenue from its first product in 2022 and removed its CEO. The shares fell 68 per cent in a single day. For a company that claimed it would redefine materials production by combining biology with machine learning, this was the beginning of the end.

Zymergen was founded in 2013 in Emeryville, California, by investment banker Joshua Hoffman, biophysicist Zach Serber and biochemist Jed Dean. The company aimed to produce chemicals and materials by designing genetically modified microorganisms with robots and algorithms. Investors were convinced: $2 million was raised in 2013 and $44 million in 2015; SoftBank's Vision Fund came in with $130 million in 2016, followed by another $400 million in 2018 and $300 million in 2020. By 2016 its customers were reported to include DARPA and Fortune 500 companies.

Yet according to an insider quoted by Forbes, the company was unable to generate revenue during this period while continuing to attract investment. Its first product, Hyaline, a biologically produced polyimide film for foldable displays, launched in December 2020. The company went public in April 2021 with a $500 million IPO led by JPMorgan and Goldman Sachs, reaching a value of around $3 billion. Its SEC filings, however, showed losses of more than $262 million in 2020 against revenue of just $13 million.

The same filings also revealed difficulties in manufacturing Hyaline and that two customers had complained the product did not work in their own production processes. As the problems became public, its market value evaporated quickly and shareholder lawsuits followed. After the August 2021 announcement hundreds of employees were laid off, co-founder Jed Dean also left, and in November 2021 Hyaline production was abandoned altogether. In July 2022 Ginkgo Bioworks agreed to acquire Zymergen in a $300 million all-stock deal. Under Ginkgo's ownership, Zymergen filed for Chapter 11 in October 2023 and in February 2024 announced it would sell its remaining assets and be liquidated.

Zymergen's story shows how expectations collapse when they are scaled before a lab success has been proven to work in the customer's factory too. Strong science and large sums of capital were no substitute for fit between product and market.

## Lessons

- Before an IPO or a large round, prove with independent pilots that a product that works in the lab also works on the customer's production line.
- Every large round raised without proof of revenue raises expectations; the wider the gap between expectation and reality, the harder the fall.
- Before tying the whole company to a single product and a single target market, validate the market's size with customer commitments.

## Sources

- [Zymergen](https://en.wikipedia.org/wiki/Zymergen)
- [Synthetic biology company Zymergen plunges 68% after saying product revenue will be 'immaterial' in 2022, removing CEO](https://www.cnbc.com/2021/08/03/zymergen-zy-plunges-68percent-on-forecast-for-immaterial-revenue-in-2022.html)
- [The Inside Story Of How SoftBank-Backed Zymergen Imploded Four Months After Its $3 Billion IPO](https://www.forbes.com/sites/amyfeldman/2021/10/13/the-inside-story-of-how-softbank-backed-zymergen-imploded-four-months-after-its-3-billion-ipo/)
- [Biotech startup Zymergen nabs $130 million from Softbank](https://techcrunch.com/2016/10/10/biotech-startup-zymergen-nabs-130-million-from-softbank/)