The Future of Fat

David Yocom: iSelectFund is not soliciting investment or providing investment advice in any way whatsoever. This presentation is general industry research based on publicly available information. I select is an early stage venture capital firm in St. Louis, focused on early stage companies in food, agriculture, and health.

I select invest at the forefront of innovation, seeking emerging problems, solutions and technologies. I select uses these deep dive presentations, not only as a way to better engage with and understand new science and technology, but also engage with the experts and entrepreneurs who drive and change innovation in their respective fields.

All right. Good morning everyone. And welcome to is Select’s Deep Dive series. My name is David Yoakum. You’ve probably heard from me before if you’ve been on past past deep dives. I’m a principal here on the IS Select Fund investment team. And I’m excited to walk you through today’s discussion.

Now, one theme that we’ve been researching is around the future of fat. As the relationship between the food system in both environmental and human health continues to draw more and more attention from consumers, businesses, and governments. The need for better fat products in our food has become more apparent as an opportunity for innovation.

Fats play a crucial role in the food system, delivering taste, texture, and in some cases crucial nutritional content. However delivering fat products that deliver on function, taste nutrition while minimizing environ, the environmental footprint of their production has been elusive to date from both animal-based and plant-based sources.

In this addition of isec deep dive webinar series we explore the companies and technologies that are, working on making the future of fat, healthier, more sustainable and delicious. Just to give a sense of the agenda for today we’re gonna kick things off with some speaker intros that we’re gonna talk through the future of fat in terms of definitions and trends.

I’m gonna provide some background context, then I’m gonna shut up. I’m gonna ask some questions of our speakers who I’m really excited to have on board today. And then we’re gonna have some time for questions towards the end. So with that, I’d like to start off with our speakers. If we could start off with Genu from Lipid and then Yulin from Gal Bioo.

That would be fantastic.

Jen-Yu Huang: Thanks David. Hi everyone. I’m Genu. I’m the co-founder of Lipid, which is bad alternative companies based in San Francisco. And my personal background is I’m a chemical engineer for a long time. Yeah.

David Yocom: Wonderful. Thanks Jen Yu and Yulin

Yulin Lu: Thanks, David. Hi everyone. I’m Yu Luu.

I’m the co-founder and CEO of Yali Bio. Yi Bio is a company using precision fermentation and synthetic biology to make tailored fats. And my background is that I I’m a bioengineer by training and I’ve been in the space of thin bio and food tech over the last decade. A number of different companies in this space.

Yeah that’s, my background.

David Yocom: Wonderful. Jen, you Yulin, we’re really excited to have you on board today and I’ll try and speed through this first part so we can spend as much time with you guys as possible and learn more about your company’s technologies you’re building the impact it can have on the future of fat.

But I do wanna provide some context. In terms of background and what I want to start off with is what fats are, and I realize there’s a lot of detail here. So I’d encourage you just to look at mostly the images and I’m gonna talk through a lot of what some of these basic components are.

So before we talk about the future of fat, I want to. Bring some understanding to what fat is, where it comes from. And at the most basic level, fats are primarily made up of triglycerides, which are formed by the combination of glycerol and three fatty acid molecules, which are formed by carbon hydrogen plants.

Now, for all intents and purposes, there are two main types of fats you’re gonna find commonly in foods saturated and unsaturated fats. We can’t talk about trans fats, though their, prevalence in food has decreased significantly. Particularly in the last, two decades due to health issues associated with trans fats.

And so for all intents and purposes, the main difference you’ll find commonly is that saturated fats, which are those commonly found in animal products, are solid at room temperature. This is due to their structure, which contains no carbon, double bonds versus unsaturated fats, which on the other hand, In their natural state have one or more carbon, double bonds, which makes them liquidated room temperature.

Now a couple of important nuances within sat unsaturated fats. There are two core groups. There are monounsaturated fats, which are commonly found in seeds, olive oils, nuts, avocados, and polyunsaturated fats, which are highly prevalent. Sunflower, corn, soybean, and fish. Now some of these foods that I mentioned will have both of these, but in, in varying ratios.

And so some of these foods contain both of these. A common polyunsaturated fat that you’re likely gonna have heard of in the universal supplements in nutrition are gonna be omega-3 and omega six fatty acids, which are basically named for where the bo the double bond occurs in the fatty acid chain.

So on the third carbon of the six carbon these happen to be the fatty acids that the human body cannot produce internally and must be consumed exogenously. So through food nutrition both these are important for growth and repair in the body. And have been implicated in preventing heart disease, diabetes in insert cancers.

So just take a step to just take a step back. Fats are carbon energy-rich structures found in animal products and plants that exist primarily in saturated, in unsaturated structures. So now we have some context for what fat is and where it comes from. There are some, there’s three key areas that I wanna discuss before we move on to our speakers.

The first is gonna be addressing some of the nutritional confusion around the role of fat in our health. The second is gonna be the environmental footprint for both plant and animal fats. And the third is a rising need for fats that will perform well in food without compromising on the aforementioned nutrition, taste, and sustainability.

So let’s start a little bit with the controversial history of fat in food and its relationship to our health. So humans have been consuming animal fats for thousands of years. Principally via the isolation of of animal fats. Historically, fat has been derived from t, which is rendered beef, fat, soit, which is fat from the loins or kidneys of of, beef, principally.

Lard, which is pork, typically pork fat and butter which are fat and protein isolates from churned cream or milk. Now, vegetable oils, which were originally used for industrial purposes lighting but not necessarily so much human consumption changed when Proctor and Gamble was able to produce Crisco.

A hydrogenated form of vegetable oil, and then later the production and marketing of margarine. Now, these vegetable oil-based shorteners were advertised as easier to digest, healthier and cheaper than traditional animal fats. Now following the invention of hydrogenation to create products like Crisco from vegetable oils, which allow unsaturated fats to be solid at room temperature, followed the introduction of vegetable cooking oils into the American household.

Cooking oils lightly hydrogenate in order to prevent ram acidity. Were introduced shortly after and for some for some time, both animal fats and vegetable oil products were consumed in equal parts by Americans. But the big game changer, as you can see here on the right with this type magazine cover, was when the American Heart Association stated that consumers should replace saturated fats with polyunsaturated fats found abundantly in vegetable oils in order to prevent.

And fight heart disease. And Ansel Keys, a researcher at the University of Minnesota and featured here on the cover of Time Magazine in 1961, drove a lot of the thinking around the hypothesis that eating saturated fats increased, increases cholesterol in the blood leading to increased risk of heart attack.

This simplified view became PR pervasive in the universe of nutrition and led to the demonization of animal fat, nutritional context leading to an immense increase in the consumption of vegetable oils, which persists today. And I show that in some data here on this next slide. And you can see these chart on the left showing the trend in daily calories from major food groups, where you can see substantial growth in vegetable oils over the last 50 to 60 years as the, fastest growing category in terms of average daily calories from food.

And on the right side you can see it in terms of actual total American consumption in metric tons. And in correspondence with a substantial increase in vegetable oils. The, rate of, basically diet related disease, cardiovascular disease, diabetes, obesity has also continued to climb in the US and there’s a growing body of evidence to support the presence of these processed vegetable oils.

And our, in our food plays an important role in and largely contradicts a lot of what was claimed by the American Heart Association in 1961. In doing this research for this presentation, I found a lot of conflicting information about what people should and shouldn’t be eating in terms of types of fats.

And what I generally found and where I think most of the thinking has evolved though there’s a lot of opinions on either side of the issue, is that most nutrition experts recommend consuming mono and polyunsaturated fats. Limiting saturated fats and eliminating trans fats. However, the story does seem to change when we’re dealing with processed unsaturated fats that show up in our foods and vegetables, particularly when they are heated during the processing stage.

So here’s what I will say, and it reminds me of when we dove into sugar and the consumption of refined sugars. When we process foods, we basically take them out of their original context. When we eat Whole Foods, we put them back into their context and significantly reduce the risk of disease. But all in all, Both saturated and unsaturated fats in whole food form do play an important role in regulating cardiovascular, metabolic, and neurological health in positive ways.

So now we have a little bit of context around the role that fats play in nutrition, some of the confusion that has occurred over the years. And I think some of the, I think we’ll have some insights from, you, Lynn and Jen U in terms of the work that they’re doing in these categories. I wanna speak a little bit to some of the environmental challenges in the space.

So it fats on average From both plant-based and animal derived sources account for approximately seven to 8, 700, 800 calories out of a 2000 calorie per day diet. And so just under half of, our calories come from these sources. And so with that, the production of, fats both. Both oil crops and animal fat takes up a significant amount of resources, principally landed water.

But first I wanna take a look at vegetable oils, which is what this first this first slide is focused on. Globally, vegetable oil crops take up over 300 million hectares or approximately 750 million acres. The majority of that production from a land perspective, coming from, soybeans, but mixed across a wide variety of, crop types.

Now one thing that you’ll notice especially if you follow anything in the. I guess one thing you’ll notice here from this data is that one crop dominates in terms of total volume and efficiency. And that crop is palm oil grown principally in Indonesia and Malaysia. Now palm oil is an extremely high yield oil crop.

And looking through some of this data, I was, I don’t think I was quite as aware of how high yielding of a crop it really is. And it’s, used in a wide variety of consumer applications from foods to cosmetics and industrials. It’s highly versatile. Low cost to produce. From an agronomic perspective, however, palm oils have come under significant criticism, particularly in the last five to seven years for the role that it plays in deforestation, particularly in forested regions with extremely high biodiversity and consumer awareness of the impact of palm oil is extremely high.

Has led to pushes by product companies to remove palm oil from their products and the habitat loss for highly endangered species such as the tang and the sumatran rhino has caused enough to abandon and reduce our consumption of palm oils. The paradox here, and I hope you, can appreciate it from this chart, is that is that the alternatives are not so good in comparison.

Because the alternatives are widely inefficient from a production standpoint. The amount of land needed to produce our current, and not to mention future demands for plant oils across food cosmetics, et cetera. I is also unsustainable. My takeaway from, consuming some of this data around oil, seed production was really.

Either demand needs to come down in some way, or we need to find better ways to make vegetable oils and fats that perform in the way that we expect them to. Which again, alludes to some of the exciting work that, that you, Lynn and, Jen, you are working on. The last area I wanna talk about on the environmental side is that while vegetable oils do get a lot of flack for their environmental footprint, particularly from a land use and from a water use perspective, it’s really important to note that animal agriculture still remains a much more challenging environmental problem by comparison.

And as we can see by this study here published by The Lancet, The fat footprint of oil crops pales in comparison to that by animal fats in almost every category. Carbon footprint, biodiversity footprint, land footprint, and water footprint. And this really speaks to some of the inefficiencies and really just in the inefficiencies of growing livestock since there’s, you get the double whammy of land and resources used to both produce feed, but also to produce and raise animal products.

Of course, there’s nuance in terms of the way. Different crops are grown in certain instances and the way that beef and other animals are produced in certain instances. And I acknowledge those nuances. But I will say on the grand scheme of things, these two agricultural commodities have significant land use and water use components.

But the animal component certainly is larger in terms of its magnitude per kilogram of fat produced. So the last area I want to talk about before we move into. A little bit more discussion around technology and then into the pieces with our speakers is around plant-based meat replacements.

And for context, this is a picture from lipid that they presented on our AgriFood conversations webinar of plant-based products formulated using their fats. And so the area I wanna speak to here is that basically from, 2018 to 2020, we saw this substantial increase in the level of interest and excitement around the category of plant-based meats.

And also just in the plant-based category as a whole. And though estimates vary. By 2030, the plant-based meat market is expected to reach nearly 25 billion. And in the last few years we saw beyond miko Public Impossible Foods increase its footprint in restaurants and saw a slew of copy cap products follow suit and feel how you might about plant-based meats.

But this new generation of products definitely got closer to meat than its predecessors. From a taste cooking and textual perspective, many do feel however and, I feel this way as well. That these, this is basically gen one of plant-based meats and that. Gen one leaves a lot to be desired. Some of that potentially being reflected in the fact that growth in plant-based meat sales between 2020 and 2021 were flat in the us.

And one of the issues with plant-based meats is that the fats using their formulation. Most commonly coconut oil. But it sometimes palm oil and others does not cook the same way as animal fats leading to a drier, oilier, prot finished product that just doesn’t cook the same way that meat does and doesn’t have the same mouth feel that we’re really used to.

And some of that’s due to different melting points and textural characteristics. With that a lot of us feel that there’s another stage that plant-based meats can go to and that one of the missing links propelling the category forward is Is is, better facts that perform while meeting these nutritional and sustainability goals I’ve covered a lot here in terms of the sort of main problems.

Jen, you and Yulin anything you guys want to add to anything that I’ve mentioned here?

Yulin Lu: Thanks, David. I think, yeah it’s, actually really informative the the, material you, you put together. I think one, just to add comments here one part around you, you mentioned about development of, margarine and crystal.

And, I read a little bit of history about how these alternatives or replacement are. Developed, or the inception of this, these development, a lot of it’s actually due to the lack of sufficient amount of of animal fats that or in, in the case of margarine is milk shortage that leads to the.

Industry and chemist chemists to look for alternatives. That’s how you know because vegetable oil is more abundant and, cheaper. Yes. They they look for these kind of solutions. And then the other element you mentioned about these large vegetable oils like palm a number of other options.

Yes. Palm is actually a highly, efficient Yeah. Producer for making very, large volumes of of fats that can be used in a lot of different places. That’s why we see it in a lot of product, and that’s why also like we’re seeing a lot of environmental issues because they’re so efficient.

So there’s from the society standpoint, we just wanna produce more of it and then end up using more land to, to produce it. So those are yeah, interesting facts in terms of like how we got to where we are today and yeah. These different systems. Yeah.

David Yocom: Yeah, and I, had mostly only seen palm oil be lambasted by consumers and by media for the most part.

And it was interesting just to read about any, cle, any clear cut deforestation is a terrible thing that shouldn’t be allowed to happen in the name of, agricultural expansion. But there are other cases in which there’s land that already had been cleared historically where they grew palm oil on it.

But yeah, from it, it is It’s a, it is a paradox in that you don’t want to continue to expand palm oil, but in the same token, you don’t have much of an option in terms of arable land to expand more soybean production or other seed oil production. That’s just 10 to a hundred x less efficient than Palm Palmer production.

Yulin Lu: You had a good comparison there in terms of coconut oil versus pump. Yeah. Like in terms of the, land use and the, percent of volumes that they produce. So, I think and, you mentioned the plant-based space is primarily using coconut oil as a solid fat.

Component in, in the formulations but, if you, the industry is really trying to expand to, mass and and get into those volumes that meat consumption or, dairy product con consumptions are coconut oil isn’t going to be sustainably put put supply the volumes that’s required.

Yeah. Not, even to say the, functionality issues that are associated with it, right? Absolutely.

Jen-Yu Huang: And you can see like palm oil’s already banned, not banned, but not, it’s very hard to export it right now in, in, the past two weeks news. And I, also seeing like in the future, coconut oil probably facing the same issues when people really start to use a lot to a larger volume.

Yeah. Yep.

David Yocom: Yeah, really good point. Shane, you. The last piece I want to cover here before we move into into. Asking some questions of our speakers is really around technology that’s solving for better fat. And I know there’s other vectors out there we’ve as a, as an investment team focused in the universe of food and agriculture.

I’ve, seen three principle strategies around doing innovation in fats. One is around processing. So can we alter structure? Can we. Enhance nutrition. Can we change the form so that it has a higher melting point? Can we allow it to perform better? And the reason that this type of innovation is important is because one, it can leverage existing supply chain and existing products that are in the market today.

And so has access to economical production now. And the second piece is that it can allow for the improvement of products. That have the potential to, again, chip away at the environmental footprint of animal agriculture and animal produced products. We think about, again, these plant-based meat vectors that have come into market and.

There, there’s just a continued need for differentiation in the space, and we’ve already seen just a ma a glut of copy cap products move into the market, and it’s really hard for people to make determinations about which ones they should be buying. And so there’s an incentive not only For companies that are building product in the space to wanna differentiate using existing supply chain.

But consumers are also looking for it as well because it’s really hard to figure out what the best products are in the market. This, I’d say from an advantage and disadvantage standpoint I’d say again, accessing existing supply chain. In some ways it’s not necessarily fixing environmental issues associated with vegetable oils.

Though I will say one caveat of that is you could potentially make the delivery of fats more efficient. So the per unit amount, you could make more efficient. And from a nutritional standpoint, there can be a nutritional focus, but it’s not necessarily inherent to the product. And Genu is gonna speak some of this, but there’s an opportunity to reduce saturated fats and introduce better other types of fats that are seen as healthier.

The second piece I’ll cover is, fermentation. And, obviously Yulin is gonna cover this with his work at Yali. But using technologies and organisms that we’ve leveraged over thousands of years, and particularly in the last 50 years from a synthetic biology perspective.

To produce triglycerides structures in bioreactors that have characteristics that we’re looking for. And as genetic engineering tools become more and more precise, gives us more and more levers to be able to make fat structures that, are exciting. And interesting. I’d say from a biotech perspective, there’s lots of existing infrastructure and know-how however cost, when it comes to engineering organisms, it’s always a, it’s, sometimes it’s not necessarily about a, a.

And if, but a when, and it can take a long time to get to to get to a profitable production level, especially when you’re competing against special oils, which are extremely cheap. And then finally on the cell based side we’ve seen some really exciting companies like Mission Barnes and others that are cultivating animal fat cells to produce fat products.

They’re identical or identical or superior in performance and taste to animal fat. So instead of saying, let’s make fat molecules they’re saying, let’s make cellular fat structures that are very much the same as you would hope to see from like a large product. That performs super well in a In a food science context and in a culinary context.

And what I would say about those is that there’s an optimal performance without the environmental footprint. However, cost lack of know-how and lack of consumer awareness is a challenge to those industries as opposed to fermentation where we already get a number of foods produced via fermentation.

And on the food processing side, consumers are very aware of vegetable oils, whether or not you see vegetable oils as good consumers. Are comfortable with vegetable oils and cell-based meat and cell-based fat products still have a long ways to go from a a consumer awareness perspective. What I’d like to go from here is I’d like to start off with some questions for for Gen U and we’re gonna talk a little bit about some of the work that they are pursuing at lipid.

Just a brief description. Lipid is a deep tech startup shaping the future of food. It’s phyto fatt product accurately mimics the texture and mouth field, transfer of flavor and cooking behavior of animal fats using the company’s novel formulation and Microencapsulation method. But Jen, you, can you just tell us a little bit about, a little about you the, company, the technology, and sort of the impetus for, building what you’re building at lipid?

Yeah, sure.

Jen-Yu Huang: Thanks David. For the quick introduction I think we have the idea to work on this back in 2000 nines, the end of 2000 nines, and I was in Cornell doing did my PhD over there in Camp Engineerings and doing a lot of research on the climate related technology. And what we find out over there is.

Over at that time, people are only focusing on protein part in alternative food. But as a meat eaters, we look at the difference and we know that apparently fat is the missing part. That is not really Doing well enough in the food that we eat from beyond or impossible. So that’s how we decided that we want to like, do lipid and try to provide new solution onto the market and try to solve this aspect of this overall industry.

Yeah, and that’s, how we started. And I would say Borrowing the debits flow over here. The real questions that we are addressing is, can we make a solid fat without sa fat? That’s actually the question we ask a lot of ourself as a scientist and engineers, because we think that if it’s only, if we can only make solid fat with SA fat, then yeah, probably using other approach will be most suitable.

But we do see some opportunities that we can leverage the unsatur fat or more on SA fat or polyon fat, but try to change its texture by other engineering approach. So that’s our idea and technology behind it. And. In the end we figure out, like Microencapsulation is a great way to really tune the texture and muting points and all the other functionalities

David Yocom: above it.

Yeah. Can you maybe speak a little bit to what the. What the problems are with the current Plant oil solutions. And then talk a little bit about what Microencapsulation does in terms of fixing some of that problem. And I guess maybe even just if you could tie in a little bit about what Microencapsulation means for anybody who might be new to that term.

Yeah. So just

Jen-Yu Huang: look at the bacons in the picture. Basically no plant oils can sustain cooking temperature. So all the solution right now on the market, like either coconut oils or palm oils, they will melt out after you cook the products. Yeah. So that’s the challenge and that’s why people couldn’t make a good adequate tissue product of food at this point.

So that’s the main challenge and our approach about Microencapsulation. Just to quick, quickly introduce it you can imagine as a drug delivery industry, People use capsules to protect their active ingredients so they can deliver like drugs or probiotics in certain pH condition. And over here what we are doing is to protect oils and we will release the oils and break the capsules in the.

Scenario that we design, like for example, in the Bacon, this case, they will be stable under cooking temperature like 400 Fahrenheit, and the capsules will start to break out and the oil will slowly leak leak out from the capsules. Yeah. So that’s, how we do it.

David Yocom: Got it. And, what do you think from a thinking about microencapsulation, like what.

What can be controlled in terms of fat performance that couldn’t be controlled previously? So are you guys mostly focused on melting point? Do you think there’s an opportunity around nutritional delivery in terms of flavor and mouth fuel? How do you, tune for all of those? The, all of those varying components?

Yeah

Jen-Yu Huang: That’s, actually a very. Good experiments that we found out that we can control several different factors. There are four factors over here. The, first one we do a lot is actually on texture. So Plano is usually in, in liquid formats and we find out by. Using our capsules micro encapsulations we can actually pack them in different ways so they can provide different textures.

Like they can be solid and different hotness or even be a bit of sponginess inside. Yeah, so that’s the first aspect. And the second one is, melting behavior. We want to it really depends on the applications. Like for example, in bacon, you don’t want the tissue to melt out, but in. Burger patties, you wanted to start milking when you cook the product.

So you had to tune the milking behavior to really make the products

David Yocom: Delicious.

Jen-Yu Huang: Yeah. And the third, yeah. And the third one is actually in flavors. We found out that it’s not, we found out, but oil is actually, the MO is a very important carrier for those flavors. And what we were doing is When we encapsulate the oils, we were also encapsulating the flavors so we can, we find out that we can actually deliver flavor pretty well by our system.

Yeah. And the last one is surprisingly nutritional profile. Actually, we focus a lot on nutritional profile. If you look at the impossible or beyond all the trend right now, people are trying to reduce SA fat in their products. And all of our most, of our input is actually on fat. And that’s actually a very good nutritional benefits over here that we can try to reduce the SA fat at the same in with our product.

And at the same time, we can start to add different. More nutritional stuff into like high ole acid or different type of omega3 or omega six type of oils into it. So that’s pretty interesting that we found out. Yeah. Yeah.

David Yocom: I’m, curious to your perspective on the nutritional side. So I ha I, every time I do more research on nutrition, the more confused I get about what’s actually good for you and what’s not actually good for you in terms of like customers that you’re talking to.

What are, what do they seem to be the most. Interested in from a nutritional perspective, are they still focused mostly on, on reducing saturated fat in their food products? Are they mostly interested in, flavor performance? The reason I ask about the former is that just there’s a growing number of, people who.

Things like the Bulletproof coffee movement, et cetera, in terms of incorporating like saturated fats back into your diet and people, going on mostly meat diets and having a great experience. And so I guess there’s enough like noise out there that I, guess what, are you mostly hearing from your customers in terms of what they wanna see?

Jen-Yu Huang: I will say it’s actually not noise. It’s actually fat. It’s ac it actually present how fat is so critical that it can be important in different ways. So what we hear, yeah. What we hear from our partners is that, Everyone is looking for different functionalities from fat. So some is really focusing on nutritional profile to try to produce a product with better nutritional profile.

And some of the others actually don’t care that much of nutritional profile, but care more about

David Yocom: Mouse

Jen-Yu Huang: feel like the melting point and mouse feel, how it behave when they cook the products. And the, yeah, and we also hear a lot, it’s. Just mainly focus on flavor. They don’t want to look, they don’t want to see any fat in their products, but they want to taste they, want to feel it and taste it when people eat the product.

Yeah. Yeah. So it’s, a bit of combination and I think that’s one of the very exciting part of this field, that it’s in this early stage that everyone is looking for different functionalities and so there are a lot of different opportunities

David Yocom: in the field. And, you and, lipid is partnering with with a re, with a a food service business.

Correct. In terms of, you guys, are you people can go get your product right now? Yeah.

Jen-Yu Huang: Certainly in Taiwan, yes. In Asia, yeah.

David Yocom: Can

you speak to what, the product is, what the company is that you’re working with, and just what that what the food product is that you’re serving.

Jen-Yu Huang: Yeah. This is actually a, market trials that we do together. Actually just launched it last month. We were trying burger patties with our fat in it with fat and nutritional profile and last cric fat in it to test the co consumer’s feedback over there. Yeah, so that’s, what we are working on.

And I will say in the long run, what we are really doing is not just on burger patties. But we are focusing on like some high fatt food products that we can really enable by those stable fat that be under cooking temperature. Yeah. Yeah.

David Yocom: One, one thing I think a lot of people will be interested to know about is one, how micro encapsulation gets labeled on a product in terms of an ingredient, especially as, plant-based meats come under some criticism for the number of ingredients they have in the.

The amount of processing that goes into those products. And then the second, like nutritionally how the human body processes encapsulated fat products and whether there’s anything unique about that. Can you speak to either of those two things that the consumers will be interested in?

Jen-Yu Huang: I think the first point is actually, I believe all the food is processed. So it’s not just Coinbase food. A actually, if you think about it, every food product is actually used. In certain way it, was processed, right? If you look at the meal powders, if you look at infant formulas. Yeah. All, processed food, right?

So that’s actually my first salt over here is that people it’s, like plant-based food just started and it’s so many sciences and engineering over here, but over the long run, when people get used to it I, think it was, it would not be a problem. In the long term. Yeah. And on the second part, if it’s just focusing on our own fat I will say we are using old food ingredients that was generally used already in the food.

And just imagine when you eat the drugs or eating probiotics, micro encapsulated probiotics, it will like automatically Disappear after you consume it. So I would say it’s really not a problem for encapsulation over here. Yeah. Yeah. It’s, but it’s more about how you brand or how you describe how you make the

David Yocom: products.

Yeah. Yeah. La last thing I wanna ask you about Jen is, just thinking through, consumers want better. Plant-based meat products. And, in the same token, the plant-based meat companies want to have some sort of competitive edge in what they’re in, what they’re producing. How do, so you guys are principally taking a B2B route, so you’re, presumably solving challenges for your customers from a B2B perspective, but do you have any sense of how they’re gonna communicate the differentiation enabled by lipid in their products?

Is it just gonna be something like, Creamier mouth feel or more meat like cooking experience or they’re not gonna talk about it at all and just let the product speak for itself. Do you have any, do you have any thoughts on how that’s gonna be communicated?

Jen-Yu Huang: That’s a good questions that we are actually trying to figuring out.

Definitely for us we, love to see that we, got branded into the other, people’s products because, They do use our fat to try to improve improve their own mouths, feel or taste right. But in. Based on our ex experience. That’s one thing that we have to talk through because that really depends on every different partner’s strategy in the market.

Yeah. And some even ask for exclusive activities for this specific type of products. But I think that’s also an interesting part of a startup, is that we have to explore different business models and ways to work with different partners. Yeah.

David Yocom: Yeah. I know I said that was my last question, but I had one more popup that I wanna ask you.

Yeah. So we talked a little bit about shifting perspectives in terms of vegetable oils and other plant just seed oils in terms of how they’re viewed from an environmental perspective, like consumers are targeting certain types of, and you alluded to maybe criticisms of coconut oil in the coming, in the future.

So in terms of your process, is that, is it gonna be something where you have to tune it to. The specs of your microencapsulation formula to different fat types or will that be a drop-in replacement no matter what type of oil you’re working with?

Jen-Yu Huang: Yeah. We have to tune it for different applications.

Yeah, because fat actually perform very differently in, in different products. Even. Even in just burrito patties in with burrito patties with soy protein and pea protein. That’s already a big difference of fat that would need to mitigate their old flavors or mitigate their texture. So that’s, we are doing a lot of customization for

David Yocom: different parts.

Yeah. Gotcha. Okay. If you have questions for Jen u please feel free to type ’em in the q and a box. I can ask them at the end of the presentation. And Jen u will ask, also ask you for ways in which the audience can get in touch with you at the end of the call today. Thank you so much for humoring my questions.

I’m really excited about the work you guys are building at Lipid. Thanks David. Next I’d like to talk to Yulin a little bit about some of their work that he and his team are building at Yali Bio. As we alluded to a bit previously here YALI is a precision fermentation startup. They engineer microorganisms to produce fats with both optimal performance and minimized environmental impact.

Yali is building a designer fat engine in order to produce fats. That went on taste, performance and sustainability. Yulin, we’d love to hear a little bit more about you, your story. You’ve obviously been working in the universe of, food technology for a long time and you’ve made organisms produce all kinds of things in your career.

So wanna get a sense of sort of your impetus for starting this company where you saw a gap in the market where fermentation might be a possible solution.

Yulin Lu: Thanks David. Yeah. Yeah, so I spent quite a bit of time in the food tax space with a number of the leading flagship food tech companies and seeing clear pinpoint for the space in terms of the first generation products as, we see a lot of the.

Ground meat product on the market and carving out a market. But, it’s hard to expand beyond the, current consumer base because the, gap in terms of the, consumer experience versus the premium or, meat dairy products that the bulk of the consumers have.

And the key issue for the plant-based space primarily is from the lack of novel ingredients in general. So there’s limited amount of proteins that you can work with. There’s again, very limited. Amount of fats and, oils that you can use to to formulate. So the problem with the fats problem stand out because the industry almost exclusively using coconut oil as the the white solid fat in formulations.

And it melts differently like you mentioned David and and doesn’t. Deliver any of these flavor traits that animal fats would deliver, right? So, then you have to add different types of flavor additives to emulate those specific target meat flavors for for formulating the product.

So the label is are complex and and, challenging. I have quite some experience prior to entering the food tax space in terms of actually using microbial fermentation to make large volume fermentation products. And and I see that microbial fermentation can actually be.

Used as a efficient means from a carbon conversion standpoint to make tailored fat products that can emulate those animal fat product. And that’s the, main reason for starting the company and inception of, the company. Yeah like, you mentioned David Fats are triglycerides.

It’s, a non obvious key ingredients that actually has very complex chemistry. In, in the US there’s this professional society called American Oil Chemist Society. A O C S actually are completely dedicated to fats and lipids, right? So there’s significant amount of know-how in this space, but it’s non obvious to consumers or to.

The first wave of plant companies that it’s a critical factor in ingredient to make a high quality product. So that’s, yeah.

David Yocom: Yeah. Can you say more about what it means to build a tailored fat engine? What could you tailor. And what would that mean in terms of maybe some of the themes that we talked about today?

Anywhere from like nutritional performance to to flavor, texture, sustainability. And I, put the picture of the St. Claire’s butter from from your deck there, because that was the first time I’d ever seen that product. But it looks like such a unique product to me that it creates this sense of there are unique products that can be made if you could tailor the the triglyceride structure in a unique way.

Yulin Lu: Yeah. One reason for the ability of using microbial systems to tailor fat compositions is because actually fatty acid biosynthesis pathway is a highly conserved pathway. Across plants animals and the microbial systems. It’s, actually a really elegant pathway starting from two carbons to build up every two carbon to see 16 carbons to 18 carbons are the Patic acid and ole acid that we’re familiar with.

So that’s why per the, highly conserved fatty acid Bio Vincent Pathway provided the technical foundation and visibility of engineer these pathways and, learned from how it’s made in. Animal systems and and plant systems to build it in the microbial system. So, that’s the technical foundation of making these tailored compositions.

Yeah. So when, we talk about tailoring of composition, there are chain length, right? The, saturation and unsaturation. And like you mentioned fats are triglycerides. Triglycerides meaning three fatty acids built on the glycerol backbone, right? So the positioning of how these fatty acid get built into these glyc backbones also will dictate the functionality and physical chemical properties of these materials, right?

So that’s what I mean by tailored composition, tailored fast.

David Yocom: And do you envision with that ability to tailor organisms to make fat structures to your specs, do you see that as most likely being, we wanna rep, we want to build an identical compound to something we’ve seen before, that’s a very desirable compound?

Or do you see that as are there new types of structures you could make experimentally that might do something different or interesting that we haven’t seen before?

Yulin Lu: The, compositions, the diverse compositions and unique com compositions that’s present that you can use as target in the from the animal fat side gives a strong like initial targets for identify those target compositions and, build these strands to make these compositions in.

Microbial host. But then the beauty of the speed of thin bio and how fast we can build strengths and and testing out strengths. In this day and age of synthetic biology is that you can actually try to test out different types of strand builds and and making compositions that may have.

Difference or some distance from the targets that you’re trying to make and testing out to see how they would perform both from the physical property standpoint and, then understand the nutritional aspect and and digesting aspect of these compositions. Yeah.

Yeah.

David Yocom: One thing I asked Jen U that I’m curious to get your perspective on too there’s this, there’s these views around unsaturated or saturated fats. There’s a lot of different opinions out there about what’s good for you and what amounts and what are good products, et cetera.

So we look at the St Clair’s butter as an example, right? Clearly a saturated fat product looks like an amazing product. Really interesting, like culinary applications. How do you, think about balancing out like. Focusing on unsaturated fats versus smoking ads, posting unsaturated fats, and also dealing with some of the, confusion that I think people have around what’s good for them in what quantities.

How do you guys take that into account?

Yulin Lu: I, think, yeah that’s a good point. One there’s always different opinions on the nutrition side. Like it’s there’s one school would say coconut oil is so bad for you. And then there’s another school would say it’s it’s actually a healthy or fat so it’s hard to determine like from, my perspective what the consumer wants now.

Or and, what’s gonna win? The consumers are the taste and the sensory experience, right? Like that what you were saying, like with the st cla butter, right? Like when you have that visual and, then the taste experience, that’s what gonna how it’s gonna win. Consumers and And I think evolutionary, I actually, we’ve developed Taste Bud that help us to, determine like what’s what’s good and what’s not good for us.

So that’s why like when we having some of the products on the market right now, we can clearly taste if they’re using like a low. Quality flavor additive we, can pick it up right away, right? So, that’s why I think it’s another part around the I, think the flavor and the consumer taste experience will be the, key differentiating factor for for any product to be successful and to, validate long-term nutrition and health benefits in, in the space.

David Yocom: Yeah. Yeah. Yeah. That’s a really good point. Yeah. One one thing that I, called out a little bit earlier on the technology slide and that maybe is a contrasts from what you’re working on versus what gen u’s working on and then what some of the cell-based meat companies are working on is thinking.

And that, that was elucidated to me through seeing some of the data on the land use that’s required for for C oil production is really just how much. Immense volume of seed oils and animal fat products are produced globally. It’s just enormous. And when, anytime you look at food system scale, it’s always wow.

Like I can’t believe that they make that much of this stuff every year. And so thinking about your guys’ pathway, fermentation, obviously understood from a scale perspective a lot better than what we have on the cell-based meat side, but definitely still more limited than what we have on the plant-based side.

How do you, think about the ability to scale fermentation based fats in terms of what, the, what markets you can reasonably go after, and maybe what some of the moonshot opportunities are where if there was increased capacity, you could eventually compete with some of these other commodity oils.

Yulin Lu: Yeah, that’s a, that’s another good question. With fermentation, large scale fermentation from my prior experience, I think what’s been demonstrated is that you can scale it to Several hundred cubic meter bioreactors from a hundred to 500 cubic meter bioreactors as a process.

So that’s a point of reference in terms of scalability of These kind of fermentation process and how you can take it from early stage lab concept to or lab demonstration to, large scale. But any like building of these capital assets and and scale up takes Takes a time horizon, right?

Yeah. So, I think as an industry and, as a company be real about what it takes what are the capital resources and it will take to scale it. I think that’s important to have. Because if, we. As an industry to overpromise and say we will be competing with Palm or or even coconut production in, in five, 10 years.

I think it’s unrealistic, right? It’s, again you are. Ignoring the fact of these highly efficient producers like in, in Palm and, these systems. And then trying to replace it with something in more of infancy phase, right? You have the technology dev development and then getting a too, large scale.

So, I think those are factors to. To consider for, the industry. And of course, it’s critical for the company, right? As we demonstrate technology differentiation and how it compares with the plant-based vegetable oils and, thinking about, okay, what are the commercial pathway and, timeline to, scale those and who are the partners to have to, take it to those larger scale?

I think those are important factors to consider.

David Yocom: That’s a really good point, Yulin. I guess with that in mind what, for the audience, people in the audience might be curious what do you, think is gonna be your first product in market and how is it gonna reach consumers? Do you think it’s gonna be A, a consumer product, you think it’s gonna be an ingredient somewhere else?

Still, obviously still figuring some of those components out, but if you had to make a best guess for people who might be curious to try yi’s products in the future, what do you think it’s gonna end up? Yeah

Yulin Lu: So, we’re highly interested in the applications in in dairy application. We see strong demand in that space and and great.

Price elasticity depends on the quality of product, right? You can make so those are areas we’re highly interested of and prioritizing with. Yeah. Got it.

David Yocom: Awesome. Yeah. Yulin, thank you so much for for taking my questions here. Really, exciting work and really appreciate the expertise and experience that you’re bringing to.

What’s a really important problem? We’ve got some time here for questions from the audience, and I do note that we have at least one here so far. And if you have questions, again, the best way to ask questions of Jen u and you, Lynn, is to type your question in the q and a box, and I will answer them in the order that they’re received.

I believe this first one is for you, Yulin. The question is, I’m curious as to how many agricultural acres a. Say, for example, 500,000 liter fermentor might replace. Do you have any sense of that?

Yulin Lu: I don’t, it’s a good question. I can refer to some publications that we, see in the academic side in terms of when they’re looking at using microbial fermentation.

To make oil or fats product versus the land-based approach. Yeah, so there are some references, tables comparing to for example, soybean or palm acres. So I can look it up and and send it over to To the audience, like if, they’re interested of yeah, but it’s, a good question and it’s a fair question as well.

It’s you, have to build these capital asset you have to access to, these capital Assets that are, can be expensive, compared to conventional agriculture. The reason we’re doing conventional agricultural in countries like Indonesia or West Africa is because it’s cheap.

It’s low cost from cost of production standpoint. Yeah. But, the added cost around. Environmental damage around and it’s, a large scale environmental DA damage that we’re doing. Like, how does that what is the cost there? Yeah. And how are we gonna be yeah.

David Yocom: Yeah. I’ll pause here and see if there’s any other questions from the audience. Just for a moment before we wrap things up here today.

If there are none what I’d like to ask you Lynn, and then Jen, you, what’s the best way for people to get ahold of you? If they, want, they wanna catch up with you more on this topic and what are some things that would be the most helpful to you and your company as of right now?

If you wanna kick things off. Yeah.

Yulin Lu: Yeah, my email is yulin y bioo.com. Feel free to send me an email if you want to have a follow up discussion or if you’re interested in learn learning more about the, products that we’re building. Yeah.

David Yocom: Awesome. Thank you Lynn and Jen, you?

Yeah.

Jen-Yu Huang: And my email is genuine wizard lipid.co co. Yeah. And also happy to follow up and you can actually find me still linking. That’s also a great way to connect. Yeah.

David Yocom: Awesome. Awesome. Jen, you yulin, really appreciate both of your times today. Thank you for the audience for your participation and engagement this morning.

Again, I’m David, yo. I’m a principal here at Isec Fund. We, host these deep dives, typically once a month sometimes once every two months in the themes usually alter from sort of food and agriculture to healthcare system innovation. Thank you again for your time today and we’ll look forward to see you next time.

Same. Thank you.