The pharmaceutical industry spent $200 billion on R&D in 2020. Across industries, 41% of knowledge workers’ time is spent on administrative tasks. In healthcare that inefficiency could quite literally be the difference between life and death. Biotech research will become increasingly more important as emerging technologies such as CRISPR continue to develop at rapid pace. Some forecasts estimate the bioinformatics market growing at a CAGR of 13.4% to over $24 billion by 2027.

Benchling offers digital tools for streamlining lab work. The platform serves researchers ranging from academics to enterprise R&D labs. Benchling’s goal is to streamline administrative tasks and improve R&D workflows by digitizing processing like tracking lab notebooks and inventory.

The opportunity to drive that efficiency is massive. According to one EY study, “From 2016 to 2021, biotech revenues grew 55% and their market capitalization shot up 84% — but despite high sales and investor funding, net income fell 44% in those five years.” Companies are embracing technology to add efficiency to their research, and Benchling is poised to offer it.

While studying Computer Science at MIT, Sajith Wickramasekara spent most of his free time in research labs. Wickramasekara grew up building software and later developed an interest in biology. His was passionate about biology and initially wanted to attend medical school.

However, he began noticing a contrast between the fields of software and biology. Wickramasekara saw the tools for building software were getting better and better. But when it came to his lab work, he saw the tedious limitations of manual work like using notebooks and Excel spreadsheets. He saw an opportunity to streamline lab work collaboration and administration. Wickramasekara dropped out of MIT to found Benchling in 2012.

After founding Benchling, Wickramasekara recruited a team with biology and software backgrounds. Many of the engineers on the team came from companies, such as Google, Facebook, and Palantir, but their research experience spanned genetics, neuroscience, and synthetic biology. The team was poised to tackle the opportunity between software and biology.

In the early days, Benchling focused on academic labs and improving processes around tracking and sharing experimental design tasks. In academia more broadly, you’re operating in intense data silos (many of them stored in hand-written documents and different people’s heads). Benchling had to break down those walls by first making a usable tool that people would adopt into their research process. It then set itself up in the long-term as a system of record. Joshua Elkington put it this way:

Source: TechCrunch

According to Benchling, a scientist at Gilead claims the company now spend 63% less time on administrative tasks thanks to its tools. The company helps lab teams to collaborate by digitizing record-keeping systems. Lab notebooks for molecular biology can be managed in real-time.

Source: LabBulletin

Benchling has also started to build robust integrations with systems like DeepMind’s AlphaFold, an AI program used to predict a protein’s 3D structure from an amino acid sequence (seen above). The ability to integrate cutting-edge AI means that Benchling isn’t just digitizing a pen-and-paper process, it's enabling an improved research process with the best tools.

Benchling began offering DNA editing and analysis tools as it expanded beyond digital notebooks and inventory management software. It has expanded to serve other R&D markets, like RNA Therapeutics and Early Development. This continuous focus on easy-to-use products and deeper and deeper sophistication of their product enabled Benchling to expand from academia into drug development and industrial biotechnology.

One key network effect that increases the value of Benchling is similar to GitHub.

The more researchers can build on the collaborative work of everyone involved, the more effective the process becomes. Given that every aspect of the process (other than execution) is recorded automatically, it increases the speed and efficiency of each experiment.

Customer and Market Size

Benchling’s customer base ranges from small academic labs to enterprise R&D labs. Historically, labs used handwritten notes and spreadsheets to track their experiments, but neither are conducive to collaboration, especially with external researchers.

In the beginning, Benchling let academic labs use its products for free, allowing Benchling to receive early customer feedback and iterate their software. Over the last 10 years, Benchling evolved to become a more sophisticated tool. Here again, we see another analogy to GitHub. By becoming a trusted tool among academics, Benchling expanded into a broader set of fields, and many of those academics act as a distribution advantage for the company.

Allied Market Research estimates the bioinformatics market size to be $8 billion in 2019, growing with a CAGR of 13.4% and reaching $24 billion by 2027. The demand for data management, data extraction, and other software tools is driving the growth of bioinformatics. The potential for tools like CRISPR to increase investment in biotech R&D creates an even more poignant need for Benchling’s product.

Competition

Benchling faces competition from startups like LabVantage and established public companies like Thermo Fisher Scientific, a company making software for lab, data, and process management.

While many of the features behind Benchling’s product suite seem similar to competitors, Benchling has been able to differentiate itself through their freemium model and emphasis on integrations. Their platform combines multiple functionalities, such as an Electronic Lab Notebooks, a Molecular Biology Suite, and a developer platform to offer as much flexibility as possible to the researcher.

Benchling uses a freemium SaaS model. It targets academics with a free tier and offer paid tiers for industry researchers. In addition to lowering adoption barriers, a freemium SaaS model also supports Benchling’s unit economics. The company’s free tier encourages users to try Benchling’s software, lowering customer acquisition costs. When more labs use Benchling, more users will contribute datapoints to Benchling and enrich the platform. Benchling is then able to offer better insights on lab best practices and product usage, thereby increasing the pace of product improvements in their suite of tools. By continuing to launch new products, Benchling will give customers more reasons to transition to a paid tier.

In November 2021, the company announced over 200,000 scientists at more than 7,000 academic and research institutions use their products, having grown ~400% over the course of 5 years. Across user reviews, Benchling’s products are highly regarded with a 4.5/5 rating on G2, near the top of its peers in the LIMS and Electronic Lab Notebook categories.

Sources: Techcrunch (2016), Techcrunch (2018), Techcrunch (2019), Benchling

In April 2021, Benchling also announced it had triple-digit growth in annual recurring revenue ("ARR") for the fourth year in a row. The number of researchers using Benchling grew more slowly than ARR, likely indicating that Benchling is upselling existing customers to more effectively drive monetization through expansion, even though it is not adding net new researchers as quickly.

Benchling indicated its interest in going public via IPO or direct listing in 2022 before market conditions turned less favorable in mid-2022. Benchling is estimated at $100+ million ARR, growing ~100% and with 169% net retention. This profile is likely to be well-received among public SaaS companies. For reference, a close life sciences comparable company is Veeva. Veeva went public in 2013 with a similar financial profile at $130 million of revenue, growing 111% YoY. It has since grown to $1.8 billion in revenue, 119% net revenue retention and have seen their market cap grow from $5 billion to ~$30 billion as of August 2022.

Switching Costs

When a lab uses Benchling for an extended period of time to collaborate internally and with other labs, switching costs go up. Using a different product would make collaboration with other labs more difficult and limit a lab's ability to continue using the data in Benchling effectively. Benchling can continue leveraging its free tier to keep labs on their platform and continue to see value from their products.

Emerging Technology

Growing interest in new technology like CRISPR for gene editing keeps Benchling at the forefront of the capabilities that labs need. As methodologies become more sophisticated, researchers need tools that can match it. Private and public investment in research will likely grow due to CRISPR’s potential.

Broad Set of Users & Use Cases

The demands of building a multi-focus product by Benchling will always make it difficult to serve each end-market and type of customer. As of August 2022, Benchling has a below-average rating in “Ease of Use” and “Quality of Support” on G2. As Benchling continues to expand its product, focus on user growth and diversifying use cases, it may run the risk of becoming “good for everyone but great for no one.”

Selling to Mainstream Customers

Benchling’s focus on academia established them as a key player in the space, but the seeming slow in total users from 2019 to 2021 may suggest more difficulty moving into larger enterprise R&D labs. While those larger organizations are easier to monetize given their larger budgets, they have harder sales cycles and more robust requirements for an application. Benchling’s ability to nail the move up-market will critical in maintaining long-term growth.

In November 2021, Benchling raised their $100 million Series F at a $6 billion pre-money valuation. CBInsights put Benchling’s 2020 revenue at over $50 million. With ~$50 million in 2020 revenue and over 100% growth, the company likely ended 2021 north of $100 million ARR. This would put their late 2021 round at ~60x current ARR. At that time, some of the fastest growing public SaaS companies were trading at ~50x forward revenue. Today, those same high quality companies are trading at ~20x forward revenue, with the average public SaaS company trading at 6x. At a ~$6 billion valuation and assuming it doubles revenue again in 2022, Benchling could end the year at ~$200 million of ARR with a revenue multiple of ~30x ARR.

Given the collapse in software multiples during 2022, Benchling’s planned IPO will likely be delayed. That said, Benchling has a strong case as a public company given their strength within the life sciences vertical, their revenue scale, supposed continuous revenue growth, and high 150%+ net retention.

Benchling is replacing pen-and-paper lab notebooks and collaboration techniques within the biotech sector. The company’s freemium model allowed them to see rapid adoption across academic labs. Since then, it has demonstrated some early success breaking into corporate R&D labs.

There is growing interest and investment in new biotech research technologies, like CRISPR, which positions Benchling to continue growing rapidly as new technologies come online. If Benchling continues to serve their existing market well while also being able to launch additional products, it could still have a strong public offering in 2022 or 2023, despite difficult market conditions.