Betting on Your Customers

Enabling first mover markets and balancing existing markets

I’ve written about immobilized enzymes a few times. The first was EnginZyme in 2022 and Cascade Biocatalysts in 2023. If you are scratching your head at what immobilized enzymes are and why they are important then let me provide a quick refresher.

Nature does complex organic chemistry every day at room temperature without the need to burn coal or natural gas or split atoms. Nature does this chemistry by using a folded protein, an enzyme, that lowers the energy requirements for certain chemistries to occur. Enzymes are how trees grow by using sunlight and carbon dioxide to create cellulose and lignin. Enzymes are how fungi break down lignin to get at that sweet sugary cellulose—degraded by another enzyme called a cellulase.

The problem with naturally occurring enzymes is that they can be expensive and difficult to use in reactions other than the ones they evolved to catalyze. This might mean they only work on certain substrates (chemicals) or only under certain conditions (pH). Thus, scientists have tried to figure out ways to stabilize and expand the use of enzymes without being destroyed through deactivating (misfolding, aggregation) by engineering their fundamental structure. [KE1] Immobilization, meanwhile, enables flow chemistry and the re-use of the enzyme over and over again by fixing it in place or recovering it from a reactor through filtration. Karim, the founder of EnginZyme, discovered a generally applicable enzyme immobilization technology that works for all enzyme types and is suitable for established industrial equipment. In a word: Magic.

Here are a few highlights that EnginZyme have been working on since I last wrote about them in March of 2022:

• June 2022, they announced a partnership with Tetra Pak to create sustainable and economically sound solutions for the food and beverage industry.

• July 2022, they announced their own proprietary reactors, EziFlow, fixed-bed flow reactors small enough for lab scale and for tweaking parameters essential for scaling up to a pilot plant.

• December 2022 - Raised their Series B financing of 21 million euros.

• August 2023 - leveraging artificial intelligence in enzyme development.

• October 2023 - Successfully produced a key mRNA ingredient, Beta-Pseudouridine, using fully enzymatic synthesis that is more efficient than he chemical synthesis that is common today. The high purity beta-pseudouridine is produced in Europe and is available GMPgrade, animal free. The technology can easily produce enough for the current global demand and can use immobilized enzymes.

I caught up with Karim again in March 2024 to see how things were going with EnginZyme since we last spoke. In a word. Excellent. Or, at least about as excellent as any “Deep Tech” company could be doing right now. The next thing that Karim is excited about in the next few months is the potential to make Kojibiose from regular sugar. Kojibiose is a sweetener that has about half the sweetness of regular sugar but has an overall lower glycemic impact on the body. Kojibiose was previously a rare disaccharide that could now become widely available due to new enzymes described in this 2017 paper and immobilization technology from a company like EnginZyme:

[P]reliminary studies indicated that kojibiose and its derived oligosaccharides could selectively stimulate beneficial gut populations. Indeed, the α-1,2 bond is largely resistant to the action of enzymes in the digestive tract but can be cleaved by specific micro-organisms such as lactobacilli. Moreover, kojibiose has been reported to significantly stimulate the growth of bifidobacteria, a common target for prebiotic development. Besides its potential prebiotic properties, kojibiose is not metabolized by common oral bacteria and has therefore attracted attention as a low-calorie sweetener for the prevention of tooth decay.

Part of why you are hearing about this sugar through this newsletter writer who tries to focus primarily on synthetic and natural polymers is that Kojibiose is an expensive and relatively novel sugar. Running a clinical trial with Kojibiose would be prohibitively expensive, but a high efficiency fixed bed reactor with immobilized enzymes (enabled by synthetic polymers) could bring the cost down to something closer to other designer sweeteners. EnginZyme claims that they can produce 340 g/L of Kojibiose with their fixed reactor. A sweetener that helps prevent tooth decay? Coca-Cola and Mars Wrigley have entered the chat.

That’s the thing with chemistry. A little discovery here and there can fundamentally change how the world functions. Catalysts are able to spin straw into gold, no imps named Rumpelstiltskin needed, and usually the only inputs required are some sort of feedstock and some energy. The Haber-Bosch process, which is an energy intensive reaction that converts air into fertilizer (nitrogen), is more efficient with catalysts that companies like Clariant produce. Catalysts, like Ziegler-Natta (Chemistry Nobel Prize winner in 1963) or Phillips are why you can buy milk in a lightweight plastic jug made out of high-density polyethylene or yogurt containers out of polypropylene. The things that seemed impossible and outlandish can become reality with the proper use of a catalyst.

Balancing Being First with Being Profitable

When you have the technology to help revolutionize how we make the things that we consume on a daily basis it can be hard to know where to take your technology. Your potential customers can be fickle, unreasonable, and obstinate, but they are also your path to success. Oftentimes, as a supplier, you need to do a lot of hand holding and something even do the majority of the work for your customers before they will commit resources to figuring out how to use your products.

Karim and his team have focused on being agile in addition to having what they believe to be a really good product. EnginZyme’s team can iterate through a product development process in as little as 9 months[KE2] . This means the team can go from whiteboard to samples with the potential customer and ready for a good manufacturing practice (GMP) scale-up in under a year. If this sounds like custom product development for each customer—trust your instincts.

Each customer might need their own specially tweaked product, maybe they have a proprietary enzyme or have very specific conditions such as high acidity or alkalinity. It’s EnginZyme’s job to figure it out (founders take notes here) because even if you have “product market fit” you still need to put in the work. If EnginZyme can succeed where enzymatic catalysis was not previously used then the productivity gains can be significant, perhaps even industry redefining. The thing is that most customers are highly risk averse, especially when they are established, and these types of “first mover” areas will ultimately be small revenue generators. The bet you (product development teams, I’m talking to you) are making is that your customer will open up new markets with their new product or new competitive advantage and that market will take off like a rocket ship that must use your product to blast off. A nice recent example of this is Nvidia and artificial intelligence.

When doing specialty product development, it’s more work for you up front, but if you can enable your customer to somehow be better (e.g., productivity gains) then it’s a relatively defensible moat that can be hard to design around. The calculus that founders and product development teams need to make is how many early first market bets can you make until you start to see revenue. Everyone wants to see graphs that are up and to the right, but it can be difficult to have the patience to wait for those early bets to pay off and maybe difficult for investors to write the next check while you wait for those bets to pay off.

A fundamental risk with a first mover approach is if your bet on that customer will result in a new market being opened up for everyone—think mRNA vaccines. Or will that new market remain super niche and while potentially very profitable might never exceed a million dollars in total revenue for your customer. The next place my mind goes is hedging these first mover risks and thinking about how to use better enzyme immobilization technology in existing markets.

In specialty chemicals we might call this a “me too” product, but if you truly have an enhanced value proposition via new technology your “me too” might still be an overall value-add and therefore a reason for customers to switch. There are tons of chemical processes out there that use enzymes (hello high fructose corn syrup) and a product that allows for those same classic enzymes to work even better might mean there are still small to medium productivity gains available. A small gain at scale can still mean millions of dollars in profit, and in a world where inflation seems to still be persisting you might need those gains sooner than later.

If you want to get in touch with Karim or the EnginZyme product team, please email them directly at karim@enginzyme.com.

Tony