Polymer manufacturing technology has come a long way since a random guest at Mrs. Robinson's pool party told Dustin Hoffman there's a great future in plastics. Mr. McGuire was right, but his head would have exploded if he knew what synthetic biology upstarts like Zymergen (ZY) had in store.

Zymergen's unique application of machine learning and robotic automation techniques to biological systems has captured imaginations and lots of capital, even though the company doesn't have a steady source of revenue yet. Here's why investors keep shoveling money at this high-risk start-up.

Smiling scientist holds beakers in a lab.

Image source: Getty Images.

A capital magnet 

Between December 2018 and its IPO, Zymergen raised $700 million from investors as a private company. On April 21, the company took in another $500 million in a successful initial public offering (IPO).

Zymergen's most advanced products are impressive, but they haven't produced significant revenue yet. Investors are betting on huge profits in the future because its products can be produced in a bulk fermentation process by cultures of its proprietary microorganisms.

Biofacturing products

Armed with eye-popping sums of start-up cash, Zymergen plans to take the world of high-end polymer manufacturing to a new level with help from carefully selected microorganisms. The company's microbe-driven biofacturing platform looks ready to come up with new products at an impressive pace. 

Zymergen's unique approach combines machine learning with robotic automation to create and test millions of genetic strains at a time. Last December, the company began a soft launch for its first product, Hyaline. This is a clear polyimide film for building next-generation smartphone screens and flexible printed circuits with properties similar to the Kapton brand from DuPont (DD -3.48%).

For decades, various Kapton films have shielded electronic components from harsh environments, but their applications are limited by Kapton's opacity. By selecting from millions of potential microbes bred to assemble the building blocks that make Kapton, Zymergen was able to breed a strain that creates a transparent film.

Launch acceleration?

With machine learning algorithms and automated robotics to do the tedious work, Hyaline could be the first commercial-stage biomolecule of many for Zymergen. Before following hordes of institutional investors into Zymergen, though, it's important to understand the company can't deliver Hyaline or any biomolecule at scale yet. The company thinks it can begin producing Hyaline at a profit in large fermentation vats after its salesforce convinces equipment manufacturers to start ordering significant quantities.

At the moment, Zymergen's still relying on a process it calls Launch Acceleration, which means it's still relying on a third party to manufacture its products without a fermentation process in sample-sized batches. In other words, nobody knows if Zymergen can produce Hyaline or any next-generation materials at a reasonable price point. Despite "launching" Hyaline in December, the company doesn't expect commercial-scale production to begin until 2022. 

Believe it when you see it

Zymergen investors are depending on a non-existent bulk fermentation process to produce next-generation materials at reasonable prices. Strangely, the company hasn't started trying to produce anything at scale and it doesn't have a good excuse for not doing so.

If Zymergen was going slow in order to save money, the lack of progress so far might be forgivable but this is not the case. Since its inception in 2018, the company's burned through over $740 million of its investors' money. Until Zymergen stops waving around this glaring red flag, it's probably best to play wait and see with this highly speculative stock.