Saving the f#$%ing rainforests with Shara Ticku of C16 Biosciences

Palm oil is a wonder ingredient, used in almost everything from toothpaste and oat milk to biodiesel and laundry detergent. But to keep pace with rising global demand, producers have burned down millions of acres of rainforests to create more palm oil plantations, worsening climate change and making the air hazardous for entire countries in the process. C16 Biosciences has a plan to save those rainforests – and to shake up the behemoth palm oil industry while doing it. Since founding the company in 2018, Shara Ticku and her co-founders have cracked the code on its first beauty product made with lab-generated palm oil. And once they brought it to market? It sold out immediately! This week on How I Built This Lab, Shara talks to Guy about how introducing C16’s initial product to a secondary market laid the foundation for even greater commercial success. Plus, Shara shares how a tight budget, scrappy science, and home-brewed beer were the keys to unlocking substantial funding. This episode was produced by Carla Esteves and edited by John Isabella, with music by Ramtin Arablouei. Our audio engineer was Katherine Silva. You can follow HIBT on Twitter https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis, and email us at [email protected] mailto:[email protected]. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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• 0:00Guy Raz?

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• 4:27Guy Raz?

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• 5:12Guy Raz?

  Hello and welcome to How I Built This Lab. I'm Guy Raz. So chances are, if you brushed your teeth today, or did the laundry, or swiped on deodorant, or ate a protein bar, you came across palm oil. It's in almost everything, more than 50% of products on supermarket shelves, to be exact. And there's a good reason for that. Palm oil is the reason toothpaste and shampoos foam up so nicely. It's why chocolate melts in your mouth rather than in your hand. And it's a really effective, natural preservative for tons of food products. It's a dream ingredient for producers and consumers across so many industries.

• 5:50Guy Raz?

  But there's a big reason why palm oil is also problematic, and it's not because of the ingredient itself. It's totally plant-based and biodegradable. It's perfectly safe to use in food and household supplies, cosmetics. The real problem is the way palm oil is made. The way most of it is harvested today is incredibly destructive to the planet because the trees that produce the magic ingredient only like to grow around the equator. And palm oil producers burn down rainforests to make way for more palm oil plantations, which disrupts habitats and makes the air toxic for entire countries in the process. There's a company called C16 Biosciences that wants to change all of this.

• 6:35Guy Raz?

  It's doing that by producing a palm oil alternative. Sharatiku helped cofound the company just a few years ago in 2018. But it was an early experience in her career that opened her eyes to the problem of palm oil. She was sent to Singapore for a business trip, and her company also sent her off with a pack of N95 masks with no explanation. And it's only when she landed that the reason became clear.

• 7:02Speaker 01

  As soon as I landed in Singapore, I understood why. The air was black.

• 7:08Guy Raz?

  Wow.

• 7:09Speaker 01

  And I quickly learned the air quality index was over 400. And anything over 150 is dangerous and over 300 is toxic.

• 7:18Guy Raz?

  Yeah.

• 7:19Speaker 01

  And I was confused. And I started asking my coworkers what was going on. And they sort of shrugged and said, oh, it's burning season for palm oil. And that was the first time I'd ever heard about palm oil.

• 7:34Guy Raz?

  And people just sort of kind of said like, oh, yeah, it's just, you know, this happens all the time. Or like, this happens every year. Like, yeah, this is normal.

• 7:41Speaker 01

  Mm-hmm. They did, and they weren't happy about it. I mean, I think they were deeply upset about it. When I was there, the government had closed schools and had advised pregnant women to basically not leave the house, not to walk outside.

• 7:54Guy Raz?

  Wow.

• 7:54Speaker 01

  So people weren't happy about it in Singapore, but they were certainly used to it. It was something that felt inevitable and like the normal course of a given year.

• 8:04Guy Raz?

  All right, when you start to ask questions about burning season, I'm assuming they weren't burning things in Singapore. What was going on?

• 8:12Speaker 01

  That's right. So my colleagues in Singapore started educating me and said, oh, you know, our neighbors in Indonesia and Malaysia, essentially, they're burning forest. They're clearing tropical rainforest to convert that land into oil palm plantations to make this vegetable oil called palm oil. And the way that the winds were blowing that year were blowing the smoke heavily into Singapore. And they were sort of bearing the brunt of the consequences. So it's one of these things where you see this action, which generally, you know, the cost of emitting carbon dioxide emissions, those frequently go, you know, unaccounted for.

• 8:53Speaker 01

  But here they were, having this very, very tangible cost on the health of people in Singapore.

• 9:01Guy Raz?

  All right. So this is the first time you encounter, sort of encounter anything around palm oil. And you, you kind of had this experience and you probably, it was probably lodged in your brain, but you kind of went on with your life.

• 9:14Speaker 01

  Yep.

• 9:14Guy Raz?

  Like, you know, most people who encounter this.

• 9:19Guy Raz?

  And a couple of years later, you, you decided to go to Harvard Business School and you, I guess you, while you were there, not intending to do anything around palm oil, this idea came back into your brain. What, what, what happened?

• 9:33Speaker 01

  Yes, that is, that is absolutely right. And I think like many people, I sort of saw this shocking thing happen. I was surprised, I was confused, but then I just went on with my life. And so a few years later, I was, I was getting my MBA because I was interested in this sort of little sliver of why there's so much innovation in academic research labs, particularly in biology, that doesn't get commercialized. And what levers could we pull to improve it? And I became friends with two people, Harry McNamara, who was getting his PhD at Harvard in physics and really sort of studying this field called synthetic biology.

• 10:18Speaker 01

  And David Heller, who was an undergrad at MIT studying bioengineering. And we became fast friends over the launch of the Impossible Burger. So the month that we met, which was in the fall of 2016. The very first Impossible Burger had just launched at Momofuku in New York.

• 10:37Guy Raz?

  Hmm, in Chelsea, yeah.

• 10:39Speaker 01

  Mm hmm. And so, you know, here there is this sort of plant-based burger that's using biotechnology to make a plant-based burger better, taste more like meat. And it's launched with a Michelin star chef, and we thought that was the coolest thing in the world. So a few weeks later, Harry had gone on a trip to Costa Rica, and he'd gone with some friends from grad school. And when they're down in Costa Rica, they went to go check out the rainforest. And as they sort of show up, it's it's basically gone. There is no rainforest in the place that they'd been looking. And in its place, they had found these massive industrial agricultural oil palm plantations. And Harry had come back from Costa Rica and told us this story, and it instantly triggered deja vu for me from

• 11:24Speaker 01

  that trip to Singapore a few years prior.

• 11:26Guy Raz?

  Wow, wow. All right. So you meet these guys at this in this class. All you all kind of bonded for Impossible Burgers. We had Pat Brown on the show a couple of years ago and and from Impossible Foods. It's a great story and how he built that that company, an amazing product. And Harry goes on this trip to Costa Rica and discovers that like some of the rainforests are being being burned down to make way for palm plantations. So let's let's just pause and talk about palm oil for a moment, because palm oil, I didn't know this until I started reading about you and this researching for the story. It's in everything. It's like everybody listening to this right now will interact

• 12:11Guy Raz?

  with palm oil today in some form.

• 12:13Speaker 01

  Absolutely.

• 12:14Guy Raz?

  What what's it's in toothpaste, it's in cosmetics, it's in food. What else?

• 12:19Speaker 01

  It is in 50% of products on supermarket shelves. And

• 12:24Guy Raz?

  Wow.

• 12:24Speaker 01

  Like, like you said, every person touches it every day, including me, who tries not to. But it's ubiquitous. And it is in everything from soaps and shampoos to lipstick and laundry detergent, to most of the foods that you find at the grocery store, from peanut butter to cookies to frozen pizzas.

• 12:46Guy Raz?

  Wow. And I guess we should, at this point, emphasize it is safe. It's not like plastics in everything. It's not like, you know, I always think about the clothes I'm wearing because apparently plastic is in everything. We ingest it all the time. Palm oil is not bad for you. It's actually a great ingredient because it's odorless, it's tasteless, colorless. So it doesn't like change the way food tastes or smells. And I guess it's a natural preservative, too. So it's great as an additive.

• 13:14Speaker 01

  That's right. And that's what's so interesting about palm oil. It's the most popular vegetable oil in the world for a reason. It's actually really good at driving critical function in all of those products. It makes color retain on lipstick. It enables surfactants and laundry detergent to actually clean your clothes. It helps keep peanut butter or Nutella really spreadable and really smooth and really shelf stable.

• 13:41Guy Raz?

  Yeah.

• 13:42Speaker 01

  And it's not bad. It's a natural product. The only problem is the way that it's made.

• 13:48Guy Raz?

  And I guess, I mean, the other thing about it is in the last like 30 years, really in the last 10 years, the palm oil production has just exploded. I was reading that in 1970, it was like 2 million tons.

• 14:02Speaker 01

  Yep.

• 14:02Guy Raz?

  Today, it's 70 million tons. By the end of this decade, it's going to be $100 billion business. So I guess it's been more efficient to extract palm oil from palm trees rather than extracting similar oils like soybean or rapeseed oil from their plants, right? I mean, what explains this huge increase in palm oil use around the world?

• 14:23Speaker 01

  It's efficient. It's productive, so we can make a lot of it. But the reason that it has grown so explosively and will continue to grow over the next 30 years really comes down to the performance of palm oil as compared to other vegetable oils. And, you know, without getting into chemistry class, essentially, it's got this profile, which is this profile of fatty acids, which gives it a melting profile, which enables things like chocolate to melt in your mouth and not in your hands. And so the fatty acid profile of palm oil is broader than any other vegetable oil. And it's unique because it's sort of half saturated and half unsaturated fats.

• 15:08Speaker 01

  And you just can't replicate that with any other fat and oil. And over the last few years, Demand for a product like that has really, really grown, especially in food products, because it's just so good at what it does. If you tried to stop using palm oil, you couldn't. Because if you used soybean, for example, the product performance would be totally different. And no company wants to do that. And no customer wants that.

• 15:36Guy Raz?

  So palm oil is this great product, effective, useful, except there's one huge problem with it. Can you outline the massive problem that palm oil presents?

• 15:47Speaker 01

  Yeah. It fundamentally comes down to the way that the tree is grown. It can only grow within about 5 to 10 degrees of the equator.

• 15:57Guy Raz?

  Oh, wow.

• 15:57Speaker 01

  And so as this demand for palm oil has exploded, the industry has had to find new ways to produce more of it. And so to do that, they need to find this land around the equator. And when you look around the equator, that is the densest concentration of primary forest that we have on Earth.

• 16:15Guy Raz?

  It's rainforest everywhere around the world, pretty much.

• 16:18Speaker 01

  And so to meet this growing demand, growers have been slashing and burning tropical rainforest, burning both the trees and the peatland, which is full of carbon that emits billions of tons of carbon dioxide emissions into the air, which is problem number one. It results in the killing, directly or indirectly, of the wildlife that lives there, because these rainforests are massive biodiversity hotspots. And it displaces the indigenous communities which are in that land, and it contaminates both the air, as I mentioned from my experience in Singapore, and the water. Because as the land is converted from these tropical forests into industrial agriculture,

• 17:01Speaker 01

  you've got massive amounts of fertilizer going into the water.

• 17:05Guy Raz?

  All right. So Harry comes back from this trip, and he's talking about what he sees there. And all of a sudden, the gears in your head and Harry's head and David's head start to turn, and you're thinking, palm oil, maybe this is the thing we can tackle?

• 17:22Speaker 01

  Yes, I think it really started with that firsthand experience where Harry and I had both seen firsthand the massive destruction that was being caused.

• 17:31Guy Raz?

  Yeah.

• 17:32Speaker 01

  And it was being caused to produce a vegetable oil. And it just felt insane that we were continuing in this way. And as we looked into it, we realized a few things that were quite interesting. And at this point, we're not interested in being entrepreneurs, by the way. We're just, you know, we're just digging in.

• 17:50Guy Raz?

  Yeah.

• 17:50Speaker 01

  But it's a massive industry. It was $60 billion industry palm oil alone in 2016 when we met. It's everywhere. And perhaps most interestingly, there was a really clearly articulated problem statement or demand statement. When we started looking at this problem, there were over 200 large consumer products companies, and there were nine countries which had made public commitments to their stakeholders that they were going to stop using this conflict palm oil, which engaged in deforestation.

• 18:25Guy Raz?

  Hmm. And you're talking about like the Unilevers and the Procter and Gambles of the world?

• 18:30Speaker 01

  Correct. Some of the largest consumer products companies in the world.

• 18:34Guy Raz?

  Yep.

• 18:34Speaker 01

  Had made these commitments. But every one of them was failing because there was no viable alternative. And we first started to sort of look at agriculture and say, could you switch to another product? Could you switch from palm to soybean? Could you produce that more sustainably?

• 18:50Guy Raz?

  Yeah.

• 18:50Speaker 01

  And it became very, very clear that there was no existing viable alternative and that agriculture couldn't solve the problem. But there was this clear demand statement from the biggest buyers of palm oil. And that seemed like a problem we could solve, and it seems like a problem worth solving.

• 19:07Guy Raz?

  All right. So you start there thinking, okay, let's see how we can tackle this problem. You explore alternative oils, but you keep coming back to the reality that palm oil is superior. It's a great product. Then the next question is, well, can you grow more sustainably? And the reality is, you can't for the reasons you laid out. So where did you go next?

• 19:30Speaker 01

  So next, we realized, you know, if it's not agriculture, you've got to think sort of radically different. And remembering that the palm oil itself is great. So getting a product which can look and function like palm oil, that's great. But how could we produce it differently? And watching what was happening with the Impossible Burger was an inspiration for us. And so we sort of said, OK, if that's an oils today come from animals and plants, what about the fungal kingdom? What about microorganisms like yeast and algae and bacteria? Could we use those to make an oil which looks and functions like palm oil,

• 20:13Speaker 01

  but with a supply chain that's more scalable, more sustainable, more predictable, that uses the sort of concept of biomanufacturing instead of agriculture? And that's where we got started.

• 20:26Guy Raz?

  We're going to take a quick break. But when we come back, how a feeling of deja vu and a bond over Impossible Burgers inspired Shara and her colleagues to start C16 Biosciences, the company whose product, Palmless, could help save rainforests across the world. Stay with us. I'm Guy Raz, and you're listening to How I Built This Lab.

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• 24:28Guy Raz?

  Welcome back to How I Built This Lab. My guest today is Shara Tikku of C16 Biosciences. It's a biotech company that's created a palm oil alternative that could transform palm oil production into a sustainable and eco-friendly venture. I read that in 2018 alone, and it's probably even worse today, the changes in land use in Indonesia and Malaysia in order to create more palm oil plantations resulted in more carbon emissions, CO2 emissions than the entire aviation sector, global aviation sector of that world.

• 25:02Speaker 01

  Isn't that shocking?

• 25:03Guy Raz?

  Yeah, I mean it's-

• 25:04Speaker 01

  And it's a vegetable oil.

• 25:06Guy Raz?

  It's a vegetable oil, yeah. And not to obviously knock Indonesia or Malaysia, there are, I mean, it's a business opportunity. We live in a world that is run on principles of capitalism, and so the incentives are there to make more of this because there's a demand for it. And so, you know, they're burning, burning land, clearing peat, releasing carbon, and then building these plantations because they can make more money. Is there, first of all, is there a sustainable way to do this? Because sometimes you see like sustainable palm oil or, you know, there even, there's even companies that sell palm oil and it, you know, says we grow this sustainably. Is that- Is that true or is that kind of smoke and mirrors?

• 25:49Speaker 01

  It's been attempted and it comes with really good intentions. But the reality is it's really hard to confirm that the palm oil in your product has been grown sustainably. And it just comes down to these very complicated supply chains where if you were buying a bag of potato chips, it's nearly impossible to trace that palm oil and confirm if it came from land, which did or didn't engage in deforestation. So palm oil can absolutely be produced sustainably. Most of it is not, less than 20% of it is. And it's really been capped at that amount. And it's really hard to have confidence if it has been produced sustainably.

• 26:34Guy Raz?

  Okay, so producing palm oil from trees in a sustainable way obviously is challenging. And it's not really a feasible solution to the problem, which explains why so many companies have sort of fallen short on their commitments to stop using products that lead to deforestation. So you guys set out to become like, I guess, like the impossible foods of palm oil, right? So where did you even start? I mean, first of all, I guess you have to figure out if this was possible. And was it clear to the three of you even before you began that you could actually create a synthetic alternative that would be as good as palm oil?

• 27:12Speaker 01

  Oh, no, absolutely not. It was just a guess, a hypothesis at this point.

• 27:17Guy Raz?

  Yeah. So how did you start?

• 27:20Speaker 01

  So we looked to science, but we also looked to nature. So using microorganisms like yeast and algae and bacteria, that's been used for decades at this point to make products like insulin, to make flavors like artificial vanilla. And what we had started looking at was, In nature, perhaps there are these organisms which are actually doing the work for us. You know, we want to use biotechnology as part of this, but nature herself is a scientist. And so we looked out into the natural universe and we started finding a group of microorganisms,

• 28:04Speaker 01

  which were naturally oil-producing. And so they'd actually evolved for centuries to make oil, just like the oil palm tree had evolved to make oil. There was a yeast strain that we eventually sort of down-selected as a really compelling option. And when we started to look at that, we realized, okay, perhaps we could make an oil, which has got all of the properties of palm oil. Perhaps we could make it at scale. This is interesting. And at this point, we only had about $1,000. So we were, we were pretty limited in resources, but we started doing some early trials and some early R and Ds and we could make only a few milliliters of oil, but sure enough, it looked like palm oil.

• 28:44Guy Raz?

  And you guys were doing this in like labs, like, like you just like rent bench space or something?

• 28:50Speaker 01

  Labs is generous. We were doing a lot of this like in, in basements at the time, in kitchens.

• 28:55Guy Raz?

  Or kitchens, yeah. And, and can you do this with off-the-shelf, you know, like ingredients?

• 29:02Speaker 01

  If you're a trained scientist, yes. I think, I think if you were, at your average consumer, it would be a bit challenging.

• 29:10Guy Raz?

  Yeah.

• 29:10Speaker 01

  You need a sanitary environment and things like that.

• 29:13Guy Raz?

  Right. But you could, I mean, there, you could order the different components and, and if you knew what you were doing, you could start to experiment, basically.

• 29:21Speaker 01

  Yep. And it's fermentation fundamentally. And so in the early days, we did work with conventional equipment and it wasn't right, but you know, we got a fermentation tank from a beer brewing company and we got a lot of our ingredients from the sort of local beer brewing company. And that was the way when we didn't have much money, we could start sort of doing scrappy science to get some basic proof of concepts to see that there was something worth pursuing here.

• 29:47Guy Raz?

  Now, I know with, and of course, the analogy is limited, but with something like Impossible Foods, for example, they use the leg hemoglobin, it's this nodule, you know, the bottom of a soy, the root of a soy plant, and then, you know, with yeast, they can kind of create this textured protein that, you know, tastes like a burger. Is it a similar type of principle? Like, is that kind of what you were doing?

• 30:14Speaker 01

  It's similar. The difference is, we actually found a yeast which was doing all the hard work. So the yeast was naturally making an oil like we wanted to. So instead of sort of finding the DNA responsible for producing oil in the oil palm tree, and then importing that and genetically inserting it into a yeast, we actually found a yeast which could naturally make the oil that we wanted. And we've worked with it. We've used sort of the tools of biotech to improve that, but we found a yeast which was sort of the workhorse for us. It was doing a lot of the hard work.

• 30:48Guy Raz?

  How long did it take you guys to get something that you thought, hey, this is kind of maybe cool?

• 30:55Speaker 01

  Pretty quickly. We realized there was something interesting here, probably within, you know, the order of a few months. And like I mentioned, we had just $1,000 on it.

• 31:05Guy Raz?

  Wow.

• 31:06Speaker 01

  It took us much longer to be able to make something cool at meaningful scale. But pretty quickly, we started to see that there was something worth pursuing.

• 31:15Guy Raz?

  And how long? I mean, from sort of, once you kind of landed on the process, like, how long to make the oil? Like, days, weeks, months?

• 31:26Speaker 01

  So, we, our process today, we can start, we call it a production run, and in six days, we can extract oil.

• 31:34Guy Raz?

  Wow.

• 31:35Speaker 01

  That's orders of magnitude faster than what it looks like for palm oil today, which is on the order of years from planting a tree to being able to extract oil.

• 31:43Guy Raz?

  Wow. All right, so you, 2018, I think the three of you decide to make a go at it and to found a business, which you call C16 Bioscience. Just explain the name, C16?

• 31:59Speaker 01

  Yeah, C16 is a 16-carbon fatty acid called palmitic acid, and it's one of the major components of palm oil, and it's one of the main reasons that palm oil is so good at its performance. So, not the best sort of consumer brand name, but spot on for our customers, right? Our customers knew exactly what we do, and it was actually quite effective in that way.

• 32:24Guy Raz?

  Essentially, I mean, the goal, I guess, then, and probably still now, is to is to serve these large consumer CPG companies that probably account for the lion's share of palm oil consumption, or, you know, palm oil purchases.

• 32:41Speaker 01

  That's right. I think, you know, there's a lot of big buyers. They've all made this commitment to stop using conflict palm oil, but they haven't been able to. And so we exist to serve that need, and in the meantime, can become a very large company, multi-billion dollar company, can have a massive impact on net zero emissions by reducing or removing hundreds of millions, or perhaps a billion, tons of CO2 emissions per year. And the best way to do that is really by working with these existing global brands to help them solve this problem.

• 33:20Guy Raz?

  All right, so you guys incorporate, the three of you, and you apply to Y Combinator, the famous accelerator. You get accepted into it, and you start raising money, because you need a lot of money to make this work. This is not like, I don't know, a cookie business. I mean, it's like... You need you need a facilities, you need like scientists, you need labs.

• 33:42Speaker 01

  Yep, and we're tackling a massive industry. So we've got to be able to grow something pretty big. So when we get into Y Combinator, we need to raise some money on the back of it because at this point, we just had a few thousand dollars. And so we had to, you know, prove why someone should give us money to go chase this. And so one of the really important things was for us to be able to sort of stand on stage on on demo day, you have two minutes to talk about your company and say something compelling. And so we needed to be able to produce material amount of oil to show up and say, this is palm oil, but it doesn't

• 34:21Speaker 01

  come from trees. It comes from yeast, it comes from these bioreactors. And we spent all summer working to be able to create enough oil to hold in a bottle that looked big enough. We started having some challenges because, like I mentioned, we were we were scrappy at the time.

• 34:38Guy Raz?

  Yeah.

• 34:38Speaker 01

  And we were just having problems in the lab and we just couldn't get the process to work. And one of our one of our early partners, he brewed beer at home. And we were having so much trouble in the lab, we ran over to his house and we started using his at home beer fermenter outside on the porch of his house. And we made what we called sort of porch yeast. And so we just threw it in there and crossed our fingers. And sure enough, it worked. We made enough oil, got up on stage for two minutes, held it up and gave our pitch. And in about two weeks, we were able to raise $4 million to get the company started.

• 35:16Guy Raz?

  We're going to take a quick break, but when we come back, more from C16 about how they're trying to create an alternative solution to palm oil. Stay with us. You're listening to How I Built This Lab.

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• 36:45Guy Raz?

  Welcome back to How I Built This Lab. I'm Guy Raz and my guest today is Shara Ticku, co-founder and CEO of C16 Biosciences. It's a company whose eco-friendly palm oil alternative could solve palm oil's sustainability problem without involving a single palm tree. All right. You make enough this product and you were able to present it and raise some money, I think about $4 million. And from what I understand, early on, you decided that you were going to start by pursuing the personal care market, not food, even though palm oils and ice cream and a lot of other delicious, the chocolate.

• 37:26Guy Raz?

  You thought, let's tackle, let's make a product that can be used in the personal care market first. Is that just because it's a bigger opportunity or it was more realistic to make oil, it was harder to make food-grade oil or what?

• 37:40Speaker 01

  It's actually, the personal care sort of applications for palm oil is actually a smaller market opportunity. Food is the bigger market. And so conventional logic would tell you, go chase the big market. But I think there were a few holes in that that we saw. And, and again, I think fundamentally, we were looking at what we're doing and recognizing that what we're doing is, is pretty radical. It's pretty ambitious and it's, it's pretty hard. We've created a new technology. We're competing against these massive global players and we have a lot to prove. And so we really wanted to pursue a strategy of bringing this technology to market that was going to set the company up to succeed.

• 38:25Speaker 01

  How do we, what is our best chance at making this business successful at scale? And when we looked at food, there were a bunch of roadblocks, hurdles. There's a long regulatory pipeline for getting your product approved for use in the food system or, or green, green lighted to get in the food system. The customers in the food industry are highly risk averse and slow. And the cost and the margin of products are, are quite low. And then when we looked at the beauty and personal care industry, and also the home care industry, it's still massive. It's a massive opportunity. It's five to seven billion dollars for palm oil alone today.

• 39:06Guy Raz?

  Yeah.

• 39:06Speaker 01

  And it's full of innovation, really fast R and D sales cycles, and it's a profitable industry. So it became really clear that this was an opportunity to get a product into the market quickly, which can be a challenge with science-based businesses. It takes so long to get your product into market.

• 39:25Guy Raz?

  Yeah.

• 39:25Speaker 01

  And we wanted to get something quick. And as soon as we started talking to customers in the space, they were so excited to take what we had and bring it to market.

• 39:34Guy Raz?

  It's interesting because you are, I mean, essentially you are a science, a biotech company and your goal in, in the business model is to.

• 39:44Guy Raz?

  Is to serve these larger CPG companies eventually, but you guys decided to, at least initially, to create your own product, your own consumer product, like a brand. But I guess the idea was, let's make this oil, make our own product and just like, show this as a proof of concept, that this can actually work as a consumer product. Was that the thinking?

• 40:10Speaker 01

  Yeah, I think there were two, there were two big reasons why we made the decision to launch our own product. The first was impact. Just get a product out there, get our brand out there and sort of, you know, dominate the headlines.

• 40:25Guy Raz?

  Yeah.

• 40:25Speaker 01

  And we did that. And the product that we launched was sort of modeled in the vein of a protest poster. And we gave it this sort of cheeky name, which has a curse word, but it has butterflies and a tree in it.

• 40:39Guy Raz?

  Save the effing rainforest.

• 40:41Speaker 01

  Save the effing rainforest nourishing oil. And, you know, we sort of, it's a nourishing oil for skin, for hair and for instigating change. And so we launched it with this sort of big, bold protest to the industry, basically saying, time is up. Everybody's made these commitments about palm oil, but you haven't done anything because there's been no alternative. Now there is, it's time to take action. So that was a really important part of that strategy. It's a part of our brand DNA. We're here to shake things up, right? We're not here to just plug into existing ecosystems. We're here to say, let's change, let's move faster. And then the second was demonstrating to our customers how the product works.

• 41:24Speaker 01

  It was really introducing the ingredient and the product for the first time.

• 41:27Guy Raz?

  Yeah. Yeah, I mean, it's interesting because essentially you were going to produce this product that was going to be, and I think you're still in your eastern intention, to be purchased by larger.

• 41:43Guy Raz?

  Companies, but you're all of a sudden also have to become a consumer facing brand, right? Not a B to B brand. And so that's a different, like that requires a different kind of marketing and a different kind of branding. Sort of walk me through how you, how you guys kind of manage that because that's, that's not easy.

• 42:04Speaker 01

  It's not. And it's, it's part of the reason we haven't necessarily launched a full fledged consumer brand. That being said, we launched this product. We spent $0 advertising it and it sold out in three hours. And it was a limited launch. It wasn't meant to be sort of a revenue driver.

• 42:25Guy Raz?

  Yeah.

• 42:25Speaker 01

  But it was an interesting experiment that we ran where consumers loved it. A lot of the people that bought the product were brand managers and owners at our customers. So our customers bought it and the media loved it. And so the, the brand that we launched it under, which is called Palmless, really resonated.

• 42:45Guy Raz?

  So, so the idea this comes out and you get some attention. And so just to be clear, like what, I mean, with you and your, your partners, like have any of you guys thought, you know, maybe we should just kind of lean into this consumer brand and maybe we should just like do a line of things?

• 43:02Speaker 01

  We have. And one of the things that happened with this launch was we had about 100 brands fill up our pipelines.

• 43:08Guy Raz?

  Wow.

• 43:09Speaker 01

  So we currently have basically every major consumer packaged good company.

• 43:14Guy Raz?

  That wants your, now they want your oil to make their own product with it.

• 43:19Speaker 01

  And that's why, and that's really why we exist.

• 43:21Guy Raz?

  Yeah.

• 43:21Speaker 01

  And so for now, we're focused on that. But we are, we are paying attention to the market, to consumers saying they like what we've got. There's something unique and differentiated here. And, and it's not off the table, but for now, we've got a pipeline of all of our dream customers that came in, you know, zero marketing dollars spent aside from launching this product. And that's where we want to focus.

• 43:46Guy Raz?

  All right. Now, just for a moment, take off your entrepreneur hat and just put on your critics hat. This is hard because it's your company. But, you know, just the other day I had some chickpea pasta. It was really good for you. It's high in protein, high in fiber. And I made it and you know, it's, it's, it's, it's pretty good. But I mean, there's nothing like, you know, good old fashioned, you know, semolina, white flour, Italian pasta. It's so delicious. It's just not as good for you. And or like a burger to me is still better than an Impossible. I like Impossible. I just eat them. But it's still, we're not, it's not a one for one exchange quite yet. I think we'll get there with meat and food products, which is not there yet.

• 44:30Guy Raz?

  Is it one to one exchange now with, with the oil that you're producing? Can it absolutely replace palm oil and it, and it's undetectable to a consumer?

• 44:39Speaker 01

  So what I'll say first is you absolutely have to perform as good or better to win in this market. That's true for plant-based burgers. It's true for alternatives to pasta. It's true for palm oil. What I love about working on the palm oil problem is, you know, it's not, it's not a burger. It's not meat.

• 45:02Guy Raz?

  Yeah.

• 45:02Speaker 01

  It's this really important functional ingredient, but it's generally pretty neutral. And so we can enable that core functionality. And there are other sort of parts of it. Essentially, you know, we don't have that sort of consumer preference part that's attached to it. It's more neutral.

• 45:19Guy Raz?

  Yeah.

• 45:19Speaker 01

  At the same time, I actually think that's one of the biggest opportunities that we have. And when we talk to, for example, large food companies, what they tell us is we actually don't have the oil profile that we want from the existing vegetable oils. We want something which can function like X, but existing vegetable oils or animal fats, existing vegetable oils can't do it and we can't use animal fats because consumers don't want it. What they like about what we're doing is we have this platform where we can tweak the profile of the oil to actually be more uniquely suited for their needs, better performing than what

• 46:04Speaker 01

  natural vegetable oils have produced. And so in many ways, there are ways to create. New products that are better than what exists from a performance perspective. And that's one of the biggest opportunities here.

• 46:14Guy Raz?

  And I mean, I have to assume that the price per gallon, or however it's measured, of palm oil is still much cheaper than than your oil right now.

• 46:23Speaker 01

  It is, but it depends on which market. And so because it's used in so many different markets, they pay different prices. And so we've still got a way to go on cost. But in our first market, we're already gross margin positive. So in the beauty industry, we've got people willing to pay high prices for this because they love the story. They love the innovation and they love the product and they'll pay high prices. And we have a positive profit margin on it from day one.

• 46:53Guy Raz?

  You've raised, as I mentioned, 24 million, which actually is not that much. I mean, it's I mean, for what you're doing. And and I mean, with that, will you will you eventually need to raise more? Or do you think that that can take you to profitability?

• 47:09Speaker 01

  I think there's a there's a big question here. So historically, companies like ours, and when I first started the business, I was looking at the companies that had sort of grown up ahead of us. And they raise a lot of money and they take a lot of time, most of the time over a billion dollars, right? Billion, two billion dollars. And they take over 10 years to get revenue in the in a way that feels meaningful, much less profitable. And, you know, I think we we chose to solve this problem by building a business. And, you know, I think we look at we look at climate change as a market failure. We look at the palm oil problem as a market failure.

• 47:50Speaker 01

  And yet we chose to solve the problem through the lens of a for profit company based on innovation. And fundamentally, it's because we actually believe the best way to solve this problem is to make a better alternative.

• 48:05Speaker 01

  And you demonstrate that by making money. But I think the big question is, as is true with most businesses, profitability or growth, right? I think we could run to profitability actually pretty quickly here with not a lot of additional capital. If we want to really think about, you know, the global vegetable oil industry is going to be almost a trillion dollars by 2050. So if we want to really try to chase the big market, it will take a lot more capital and time. And we're at an interesting sort of fork in the road where that's a big question that we're, that we're asking and that we're thinking about.

• 48:41Guy Raz?

  When realistically are you going to be able to produce a palm oil alternative that will be in chocolate and ice cream and toothpaste?

• 48:51Speaker 01

  So we're in some beauty products. We're in our beauty product today. By the end of this year, we'll be in a handful of other personal care products. So think skincare and body care products. Other brands featuring palmless as the sort of innovator. And within two years or so, we will be able to be in food products.

• 49:15Guy Raz?

  So one of the things that, that could be a driver of growth for you is, is legislation. I think the EU has passed legislation this year that will require companies that, that trade in palm oil to like verify.

• 49:29Speaker 01

  That's right.

• 49:29Guy Raz?

  That it doesn't come from deforested land. I can imagine there's going to be quite a bit of fraud there, but the reality is it'll be harder, right? It'll be harder for them to, to source palm oil. And the price of so-called sustainable palm oil is going to go, is going to get expensive. So this could be a huge market opportunity, this, you know, this like, right? I mean, alternative oils.

• 49:52Speaker 01

  That's right. And we have, we have quite a few tailwinds working, working in our direction. When we, when we started this company in 2018, The IPCC report wasn't out.

• 50:02Guy Raz?

  Yeah.

• 50:03Speaker 01

  You know, climate tech was not a word that people were using. The world was was pretty different. Today, as you mentioned, the EU has passed this landmark legislation, which we sort of called it the deforestation ban. You also see retailers like Walmart and Whole Foods taking really serious action, holding their suppliers, brands that make, you know, your favorite peanut butter accountable for palm oil explicitly. So we've got legislation. We've got retailers taking action on palm oil. There is a lot of supply chain risk. As we've seen in the past couple of years, Russia's invasion of Ukraine has really dried up supply of sunflower oil.

• 50:47Speaker 01

  And Indonesia last year decided to ban exports of palm oil. They make 60% of the world's palm oil supply. And overnight, they said, we're going to stop exporting it. We're just going to keep it for ourselves. And this has caused a lot of stress among these big consumer products companies as they're realizing something that they've taken for granted, these agricultural supply chains, this palm oil supply chain, this abundant supply is in fact very fragile and perhaps will not suit the next 30 years. So I think there's a lot of tailwinds moving, which could make change actually very, very rapid in this space.

• 51:24Guy Raz?

  It's a really, really cool idea. Sharatiku of C16 Biosciences, thank you so much for joining us.

• 51:31Speaker 01

  Thank you for having me, Guy.

• 51:33Guy Raz?

  That's Sharatiku, co-founder and CEO of C16 Biosciences. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and it's totally free. This episode was produced by Carla Esteves with editing by John Isabella. Our music was composed by Rumpin Arab-Luoi. Our audio engineer was Katherine Silva. Our production team at How I Built This includes Alex Chung, Chris Messini, Elaine Coats, J.C. Howard, Liz Metzger, Sam Paulson, and Kerry Thompson. Eva Grant is our supervising editor. Beth Donovan is our executive producer. I'm Guy Raz, and you've been listening to How I Built This.