The Economics of Biotech Scale-Up. How Big Should a Fermentation Plant Be?
- Gustavo Valente
- Mar 25
- 8 min read
Why the optimal production scale is rarely what biotech founders expect
One of the most common assumptions I see in biotech and foodtech startups is this:
“If a bigger plant reduces cost per kilogram, then we should plan for the biggest plant we can justify.”
On paper, that sounds logical.
In practice, it is often one of the fastest ways to build the wrong business case.
Yes, a larger fermentation plant can reduce manufacturing cost per kilogram through economies of scale. That part is true. But that does not mean the biggest possible plant is the right first move for a startup.
Because fermentation plant size is not just an engineering question. It is a strategic manufacturing decision tied to market demand, realistic plant utilization, feedstock availability, capital constraints, execution risk, and fundraising reality.
And this is exactly where a techno-economic analysis becomes useful early: not to generate a perfect answer, but to test whether the production scale being discussed is commercially realistic before it gets repeated in pitch decks, pilot plans, investor conversations, or internal strategy documents.
So, how big should a fermentation plant be? In most cases, the right answer is not the biggest plant the model can justify, but the one that best balances cost, utilization, CAPEX, and commercial reality.
Short answer: how big should a fermentation plant be?
The right fermentation plant size is usually not the largest scale that gives the lowest modeled cost per kilogram.
It is the scale that best balances:
manufacturing cost
realistic demand
plant utilization
CAPEX
operational complexity
technical maturity
and the company’s actual path to market
For many startups, the best first commercial plant is not the biggest or the cheapest one on paper. It is the one the business can realistically finance, fill, operate, and learn from.
Bigger is cheaper… until it isn’t
In most fermentation-based processes, increasing production capacity reduces unit cost.
This happens for familiar engineering reasons:
equipment cost does not scale linearly with throughput
labor does not double just because capacity doubles
utilities and infrastructure are spread over more product
fixed costs are diluted across higher annual output
This is why techno-economic analysis often shows a downward cost curve as fermentation plant size increases.
But founders sometimes take that principle too far.
They see that a 50,000 t/y facility gives a lower cost per kg than a 5,000 t/y facility and immediately conclude that the larger plant is the better option.
What gets missed is that a lower modeled cost is not the same as a better manufacturing strategy.
A plant can look attractive in a spreadsheet and still be completely wrong for the company trying to build it.
The real question is not “How big can we build?”
It is:
How big should we build, given where the company is today?
That question is much more useful because it forces production scale to be evaluated in context.
The right fermentation plant size depends on several things happening at the same time:
realistic market demand over the first few years
expected sales ramp
available capital
operational complexity
process maturity
product value
tolerance for underutilization
feedstock sourcing and logistics
A startup does not scale like a mature industrial company.
A multinational may optimize around long-term cost leadership and high-volume market share.
A startup often needs to optimize around:
survivable CAPEX
investor credibility
manageable execution risk
realistic ramp-up
learning speed
and a plant size that can actually be filled
Those are very different optimization targets.
Underutilization easily destroys cost models
One of the biggest mistakes in biotech scale-up is assuming high plant utilization too early.
A large fermentation plant only works economically if it is used well.
If the techno-economic analysis assumes 90% utilization but the business only fills 30–40% of capacity in the first years, the economics can deteriorate very quickly.
Now the company is carrying:
excess depreciation
excess fixed overhead
oversized utilities and infrastructure
higher financing pressure
more operational complexity than the business can absorb
This is one of the reasons some large-scale manufacturing plans look strong in investor decks but become fragile in reality. In several cases across the sector, companies have built or financed capacity that proved far harder to utilize profitably than expected.
In practice, I often see early capacity targets repeated for months before anyone has properly pressure-tested whether the process, market demand, downstream configuration, and supply chain can realistically support them.
The issue is often not the equipment itself. It is the decision to build at a scale the business cannot realistically fill.
A smaller plant with higher utilization can be far healthier than a larger plant with a better theoretical cost per kilogram.
Different products need different scale logic
Not all biotech products should be sized using the same logic.
Food ingredients and other lower-value, higher-volume products
For these products, fermentation plant size matters enormously. If the plant is too small, the process may never become cost competitive because fixed costs remain too high per unit of product.
In these categories, founders may indeed need to think about minimum economic scale quite early.
Specialty molecules and higher-value products
For higher-value products sold at lower volumes, the logic can be different. A smaller commercial plant may remain economically acceptable for much longer because the business can absorb a higher manufacturing cost while scaling more cautiously.
The uncomfortable middle
Some startups sit in between these two extremes. They are not high-value enough to tolerate small inefficient plants, but not mature enough to support a very large facility.
This is exactly where a TEA becomes especially useful, because it helps reveal whether the business is heading toward:
a specialty-product economics model
a commodity-like scale model
or a strategically unstable middle ground
The minimum competitive scale matters more than the maximum scale
When founders think about plant capacity, they often jump to the biggest scale they can imagine.
A better question is:
What is the minimum fermentation plant size at which this process becomes commercially credible?
That is usually the more important threshold.
Below that point, the process may be technically feasible but economically non-competitive.
Above that point, cost may continue to improve, but not always enough to justify the additional CAPEX, complexity, and scale-up risk.
A good techno-economic analysis can help estimate how fermentation plant size affects:
unit cost
CAPEX
labor structure
utility demand
facility footprint
and minimum competitive scale
And that is often more valuable than a single cost number.
Because the real insight is not just “bigger is cheaper.”
It is:
where economies of scale begin to flatten
when extra capacity gives only marginal cost benefit
whether competitiveness depends on unrealistic scale
and whether phased expansion is more sensible than one giant leap
What founders should pressure-test before locking plant size
Before committing to a commercial fermentation plant size, founders should pressure-test at least these questions:
1. What can we realistically sell in years 1–3?
Not the long-term vision. The near-term reality. Plant size should reflect a credible ramp, not only an ambitious future market share assumption.
2. What plant utilization is genuinely realistic?
A model built around 85–90% utilization may look attractive, but it can be dangerously optimistic for a first commercial facility.
3. Can the company finance the CAPEX this scale requires?
A larger plant may improve modeled unit economics while simultaneously making the project much harder to fund.
4. Is the process mature enough for that scale?
Some processes still have unresolved yield, titer, recovery, fouling, contamination, or operability risks. Scaling those too aggressively can magnify problems rather than solve them.
5. Can the feedstock and supply chain support that throughput?
This is often overlooked. A large plant needs not only bioreactor capacity, but also reliable upstream and downstream logistics.
6. Is phased expansion possible?
Sometimes the best answer is not one large plant, but a smaller first facility designed so capacity can be expanded later with less risk.
Oversizing can damage fundraising, not strengthen it
Some founders assume that showing a very large future plant makes the company look ambitious and investor-ready.
Sometimes it does the opposite.
If the proposed fermentation plant size appears disconnected from:
technical maturity
demand ramp
operational readiness
or capital reality
then the plan can feel inflated rather than credible.
Investors may not explicitly say, “your plant is too big.”
But they may respond indirectly:
the capital requirement feels heavy
the ramp assumptions feel aggressive
the execution plan feels premature
the company appears to be skipping intermediate steps
This is why plant size should be treated as a strategic narrative supported by engineering, not just as an aspirational number.
A well-argued smaller first facility can be much more convincing than a heroic large-scale projection that depends on everything going right.
The best first plant is often not the cheapest one on paper
This is one of the most important lessons in biotech manufacturing strategy.
The best first plant is often the one that best balances:
technical learning
realistic utilization
capital efficiency
operational manageability
commercial flexibility
and investor credibility
That may not be the plant with the absolute lowest modeled manufacturing cost.
And that is fine.
The best first commercial plant is not the biggest or the cheapest one on paper. It is the one the business can realistically finance, fill, operate, and learn from.
Because the purpose of an early-stage TEA is not to force the company into an unrealistic optimum. It is to help the team choose a production scale that fits both the process and the stage of the business.
Sometimes that means confirming that large-scale manufacturing is necessary.
Other times it means revealing that the smarter path is:
a smaller first commercial plant
phased expansion
regional production
contract manufacturing
or a strategy built around learning before full optimization
Plant size should be a decision, not a default assumption
By the time many startups run a serious techno-economic analysis, the target fermentation plant size has already been repeated so many times that it starts to feel like a fact.
But very often, it was simply an early assumption that was never challenged properly.
That is risky.
Because plant size influences nearly everything:
equipment sizing
CAPEX
labor structure
utilities
site selection
logistics
financing needs
and ultimately whether the business case feels credible
The earlier this is explored, the more freedom a startup has to make sound decisions before the wrong scale gets locked into process development, fundraising, or manufacturing strategy.
Final thought
People often say, “we need more manufacturing capacity.”
But what startups usually need first is the right manufacturing capacity, aligned with realistic growth, capital availability, market demand, and operational readiness.
A larger fermentation plant can reduce cost per kilogram. That part is true.
But in biotech scale-up, the right plant size is rarely the largest one the model can justify.
It is the one that best aligns process economics with commercial reality, capital constraints, utilization, and the company’s actual path to market.
That is why fermentation plant size should never be treated as a simple spreadsheet output.
It should be treated as one of the most important strategic decisions a biotech startup makes.
If your team is currently debating pilot scale, demo scale, or the size of a first commercial facility, this is exactly the stage where an early techno-economic analysis can help.
Pressure-testing scale assumptions early can prevent the wrong number from becoming embedded in your process strategy, your fundraising story, and your long-term manufacturing plan.
If that is a question you are actively working through, feel free to reach out. I’m always happy to discuss how to evaluate production scale more realistically before it becomes an expensive commitment.
Gustavo Valente
Director, Sustech Innovation
WhatsApp: +52 55 3405 0552
Series note
This article is part of The Economics of Biotech Scale-Up — a series exploring the real manufacturing decisions founders and investors face when moving from lab to commercial reality.
ScaleUpReady™ note
These are exactly the kinds of scale, cost, and manufacturing decisions explored through the ScaleUpReady™ approach: using techno-economic analysis not as a standard TEA model, but as a decision framework that evolves with the process.
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