Sometime this summer, you’ll be able to buy shares in a Boston company with the ticker symbol DNA.
Ginkgo Bioworks was founded about a dozen years ago by a group of MIT grads and one of their professors, and the focus has always been on manipulating genetic material, DNA, to get living cells to perform new jobs. While scientists have been doing that for decades in labs, Ginkgo wanted to find ways to automate and accelerate what has been a largely manual, slow, craftsman-like process.
The goal? Helping pharma companies to develop drugs, or industrial companies to produce new chemicals — perhaps even someday enabling living cells to spit out a cost-effective liquid fuel to replace gas. Ginkgo is in the midst of an acquisition by a publicly held “blank check” company, Soaring Eagle, that will give it a public stock market listing, valuing the company at $15 billion.
Cofounder and chief executive Jason Kelly likes to compare Ginkgo to Amazon Web Services, which provides computing power and data storage without needing to own the hardware. They hope to do the same for anyone who needs custom-crafted cells, enzymes, and other organic ingredients. I spoke with Kelly and cofounder Reshma Shetty. What follows is an edited version of our conversation.
What do you remember about the early days? It seemed like the classic MIT spin-out, in terms of founders who had learned a lot about a cutting-edge topic and wanted to try to find a business.
Shetty: We got started in 2008. Four of us were PhD students at MIT, wrapping up our theses at the same time we were figuring out whether to launch Ginkgo. We were virtual for the first year. There was no home base or office, because we couldn’t afford one.
Kelly: The first official address was my apartment in Cambridge. We said, “Let’s give ourselves a year.” Our bar for success was paying ourselves a grad student stipend, since we all needed to pay rent. That was like $28,000, matched to an MIT stipend. We’d all worked together for five years at MIT already.
Shetty: We had a very strong collective vision, that synthetic biology is super cool and has a ton of potential. But the tools and technologies we have just suck. If we were going to realize the full potential of biology, then we needed to really invest in building this foundational layer. We needed some cash. A lot of the first year was applying to every source of funding we could.
Kelly: This was July of 2008. The Nasdaq Composite fell off a cliff. But even if that hadn’t happened, no investor would’ve invested in us. Even the legit biotechs were going belly up. So we had to get creative in how we funded the company.
Shetty: Our first contract was with ITI Scotland, [a Scottish economic development organization], which got really interested in synthetic biology. That let us open our first lab.
Kelly: The initial lab space was on Tide Street in the Seaport. A lighting company had a spare storage room in the back. We were looking for 800 square feet of lab space in Boston as cheaply as possible. Now we have 260,000 square feet.
What was your experience trying to raise funding?
We weren’t doing a therapeutic [drug], so it felt like we were un-fundable. So we focused on grants. We had 100 to 150 different grant proposals, and we got 10 or 15, from organizations like the National Science Foundation, the Small Business Administration, the Department of Energy, the Pentagon.
We weren’t a biotech that made any sense to the Boston venture capital community. Biotech equals drug here.
As I recall, some of your early customers came from the world of perfumes and fragrances, like creating synthetic rose oil? Or maybe that’s just what you showed to reporters so we’d understand what you were doing.
Kelly: Our first customers were a couple of companies in the fragrance industry, where they use a lot of plant extracts — you’re getting mint oil from a mint leaf, so we figured that inside the plant, there must be genes that produce mint oil. We’d move [those genes] into yeast or bacteria, grow it in a tank, and instead of beer, you’d get mint oil. Animal feed is also produced with fermentation like that.
It’s not totally true that no one was funding companies in DNA synthesis or synthetic biology tools, though. There were startups like Codon Devices and Gen9, which raised millions, and they both flamed out.
Kelly: Yes. We bought some of Codon’s equipment. The first year of Ginkgo was us operating as movers. We’d carry out [the lab equipment] and put it in the truck and drive away. It was a great experience for us; it was a good birth to see what it looks like when a company goes out of business, and there’s two people left, and their job is to sell off the stuff.
Shetty: It made us more fiscally conservative to see that.
Kelly: With Gen9, we acquired the team, the intellectual property, and the assets of the company. Gen9 has very good long DNA synthesis technology. So that team and technology is still in use at Ginkgo today.
You were the first company to participate in the Y Combinator program for entrepreneurs, which has produced companies such as Airbnb, Dropbox, and Reddit. How did that affect you or the company?
Kelly: Now, about 20 percent of the companies they accept are bio-related, but we did it [in 2014], we were the very first one. At demo day, [when companies give investors and overview of their technology], the overwhelming majority of the investors were like, “I don’t do biotech.” And I was like, “The biotech investors in Boston don’t do biotech, either.”
It teaches you how to be a high-growth entrepreneur. We always had a big mission. [MIT professors] Drew Endy and Tom Knight, [a Ginkgo cofounder] always said, “If you’re not trying to do something big, what’s the point? Y Combinator said, “If you’re going to build a company, why not a Google? Why build a small company?”
What was your thinking about going public through an acquisition by Soaring Eagle Acquisition Corp., versus a more traditional initial public offering?
Kelly: We’d been planning to take the company public starting mid-2020. We wanted to be ready for it. We bulked up our finance function, hired our chief financial officer, made a bunch of moves to get ready. About two years ago, we got Marijn Deckers from Thermo Fisher and Bayer as our new board chair.
Our original plan was to do an IPO, but [we] got some inbound interest from SPAC sponsors [special purpose acquisition companies like Soaring Eagle.] I said, “Let me actually do first principles research on the whole thing.” We met with seven sponsors, and got more info from the banks about how it works. [One benefit is speed.] We were doing all this stuff with COVID testing, pharma stuff is going crazy, we’re building new facilities, and we added 150 people last year. I was like, “I can’t tolerate seven months of 2021 all dedicated to IPO readiness.” The SPAC felt more timing-controlled. That was the big driver.
The company had $77 million in revenue last year. How much came from your work in COVID testing, which obviously won’t be around forever?
Kelly: Sixteen million dollars came from biosecurity stuff, like COVID testing; $59 million was cell engineering work, where we’re using our foundry to program cells for customers in pharma and industrial biotech.
Is the business model for cell engineering just fee-for-service: pay us, and we’ll create this customized cell for you?
Kelly: Partly. You’re going to get a bill as we do the work in our foundry in Boston — usage-based pricing — similar to how Amazon Web Services would charge you for compute cycles.
The second way we generate revenue is value share, downstream value that we get when a customer’s cell goes to market and creates value for them. We do that through a royalty or equity in the partner company. It’s sort of like the Apple app store.
The foundry revenue is nice, because it comes in today. But the downstream value — the royalty streams and equity payouts — is all profit margin. In the long run, that will be the majority of the revenue.
Over time, our business focus will be on [helping pharmaceutical companies develop] therapeutics. Their R&D budgets are a lot bigger, and they’re migrating spending that is currently happening internally. It’s a lot like companies having their own computer servers, versus outsourcing to the cloud. There’s a lot of that internal spending that can migrate to us.
When you look at Ginkgo today, with 500 people and this $15 billion valuation, and where you were in 2008 or 2009, what strikes you?
Shetty: We have fancy offices. Great. But to me, the really cool thing is, we’ve managed to attract 500 super-smart, talented, passionate people who could go do any one of a million things. But they’re dedicated to making biology easier to engineer, and they’re as excited about our mission as we were. That to me is the ultimate cool thing that we’ve been able to do.