Resources

• C16 Biosciences company website and Palmless website
• HBS Case: C16 Biosciences: Lab-Grown Palm Oil
• Environmental concerns with palm oil by the Union of Concerned Scientists, World Wildlife Fund, the New York Times
• C16 coverage by the Financial Times: Precision fermentation’ start-ups pursue palm oil alternatives
• Roundtable on Sustainable Palm Oil (RSPO), which provides a certification standard
• European Union Deforestation Regulation (EUDR): EU info and TNC’s take
• Greenpeace 2010 anti-tropical deforestation campaign’s spoof ad targeting Nestle’s KitKat bar (palm oil supply chain) and activism at a Nestle UK office.

Host and Guest

Climate Rising Host: Professor Mike Toffel, Faculty Chair, Business & Environment Initiative (LinkedIn)

Guest: Shara Ticku, Co-founder and CEO, C16 Biosciences, and HBS alumna (LinkedIn)

Transcript

Editor’s Note: The following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview.

Shara Ticku:

Palm oil production alone emits about 2% of global greenhouse gas emissions, which is more than the entire global aviation sector. It's about a 70 billion dollar industry. And yes, it's found in about 50% of products on supermarket shelves. If agriculture has failed to solve this problem, could we solve it using microbiology instead of plant biology? Could we do something like what Impossible Foods has done but for palm oil?

Mike Toffel:

This is Climate Rising, a podcast from Harvard Business School, and I'm your host, Mike Toffel, a professor here at HBS. Today's episode is the fifth in our series on decarbonizing the roots of value chains, where we're looking deep into supply chains that serve many industries. In the prior episodes of this series, we've covered green concrete and green steel, regenerative agriculture, and lab-grown cotton.

Today, we're discussing palm oil, a product that's widely used but also associated with climate change due to some palm oil plantations arising from clearing and burning tropical forests, which also release carbon from soils and destroys habitat. Shara Ticku, co-founder and CEO of C16 Biosciences, joins me to talk about how her startup is creating palm oil in a lab using fermentation, which dramatically reduces the climate impact of palm oil and avoids these many other problems.

I'll ask Shara to describe how she built her startup, decided which products to develop and which customers to pursue. I'll also ask her for advice for those interested in working at startup companies like hers. Here's my interview with Shara Ticku, co-founder and CEO at C16 Biosciences. Shara, thank you so much for joining us here on Climate Rising.

Shara Ticku:

Thank you for having me.

Mike Toffel:

So we met back in 2015, I had to go back to my email this morning to check, when you were a first-year MBA student in our core operations class, but I can't believe it's been a decade since you were a student here.

Shara Ticku:

Wow. I actually didn't realize that until you just said that.

Mike Toffel:

Time flies. Well, let's start with a quick introduction. Even before you came to HBS, you spent your first job, I think, out of college in investment banking at Goldman Sachs. Is that right?

Shara Ticku:

Yeah, I was actually on the trading floor.

Mike Toffel:

Got it. And so, what led you to leave that career direction and pursue an MBA at HBS?

Shara Ticku:

Yeah, so Goldman was a great first job. I actually loved a lot about it. I think it's a great company. I really learned how to work. I had a lot of fun perks, including a trip to Singapore when I was 24 selling the company's services, which is how I first learned about palm oil, which we'll get to in a minute. I had what I call my quarter-life crisis. I loved everything about Goldman, but it was my first job, and I think I had spent some time asking in a fairly philosophical way, what does work mean to me, and what do I want from work?

If I'm going to be spending the bulk of my waking hours at work, what's most important to me? Is it a great company? Is it money? Is it meaning? And if it's meaning, what does that mean? And so I spent about a year when I was at Goldman asking those questions because, frankly, I didn't know. I didn't know what I wanted out of work. What I had come away with was realizing if I'm going to spend the bulk of my waking hours at work, I needed it to be interesting, intellectually stimulating, and important. And I think defining important was the most critical thing.

What did that mean for me specifically? Where I had landed was really in and around life sciences and biology. And for a minute, I actually thought that meant going back to med school. I didn't end up in that direction. I did end up working in healthcare immediately after Goldman. I was working in global health, very much interested in biology and bringing biology to life and to scale, but I was interested in doing it in a slightly different way, which is how I landed at HBS in 2015.

Mike Toffel:

Got it. So you were interested in biology and global health. Most people wouldn't necessarily translate that to the pursuit of an MBA.

Shara Ticku:

For sure. There were a lot of ways I could have gone. I explored a master's in public health. I explored getting my MD. When I thought about myself and the role that I could play, what I had liked in Global Health was being able to solve the problem at scale rather than one-to-one, like you have a doctor-patient relationship. And I was thinking about how might I develop skills or find jobs that fit my skills in order to plug in that way based on what I've already done. And that's where the MBA piece came in.

Mike Toffel:

So you were here taking the core curriculum, operations, accounting, strategy, marketing.

Shara Ticku:

My favorite class being TOM, of course.

Mike Toffel:

Excellent. TOM being the Technology and Operations Management course that I taught back at that time, and I've taught since many times. We love that class where the rubber hits the road in designing and improving processes and thinking about supply chain and innovation, a lot of the topics you're just talking about. How did you decide that entrepreneurialism would be the path that you would pursue?

Shara Ticku:

Not on purpose. It wasn't really a decision rather than being a place that I landed. When I came to HBS, I was actually quite focused. I was very focused on healthcare, on US-based health care and private companies. When I was in my second year taking the elective curriculum, everything was really focused on healthcare. My internship was focused on healthcare, and I was really exploring within that very focused area.

However, if you broaden it just a little bit, there's this question of commercializing life sciences innovation, and one of the observations that I'd had was another market failure, which is why is there so much innovation that happens in academic research labs, specifically in biology labs that never gets commercialized, and what levers can we pull to help advance that from a systems change perspective? That's a small subset within US health care that I was really interested in, and I spent some time on while I was at HBS. And I cross-registered at the MIT Media Lab, for example, sort of exploring this question of commercializing life sciences.

And as I started digging into commercialization of life sciences from lab to life, that's when I uncovered the opportunity broader than biology for human applications. But beyond that, microbiology and commercializing technology beyond life sciences into microbiology, which is using yeast and algae and fungi to produce things and the exploration of what we could do there. It was really not entrepreneurship that I was interested in. It was this space that I was interested in. And the second part is actually the problem that we're solving at C16, which is the palm oil.

Mike Toffel:

Yeah. So you're interested in microbiology, you're exploring under-commercialization of academic breakthroughs. Where did palm oil come into the story?

Shara Ticku:

One of the classes I was registered in was called Revolutionary Adventures. It was at the Media Lab. This is really exploring big breakthroughs, sort of moonshot technology, not limited to life sciences, but how some of them that failed tremendously, and some of them succeeded tremendously. In this course, I had become friends with these two guys. One was David was getting his bioengineering degree at MIT, and Harry was getting his Ph.D. at Harvard in physics. And all three of us were sort of interested in this field, which is called synthetic biology. Synthetic biology is really trying to take biology and engineer it like software, turn it into code.

You've got zeros and ones in code. You've got the genetic code. How can we make it more engineerable? And there were some companies doing really interesting things at the time that we met. So this was the fall of 2016. The most interesting was Impossible Foods, which in the fall of 2016 had just launched the very first Impossible Burger here in New York at Momofuku with a Michelin-star chef. They launched a $30 burger that was made with microbiology and branded it the Impossible Burger. And so the three of us actually became friends because we thought that was the coolest thing in the world, that this burger with microbiology was on a Michelin-star chef's menu.

But while we'd become friends, Harry, my co-founder, went on a trip to Costa Rica, and he came back and was telling us about the trip, and he said, "We went to go see the rainforest, and it was basically all gone. It had been converted to these palm oil plantations." And as Harry was telling us about his experience, it triggered a memory that I had, which I alluded to earlier from a business trip to Singapore with Goldman. I was there for work with a stack of N95 masks.

So this is a decade before COVID. I did not know what an N95 mask was, and I didn't know why they were giving it to me. And as soon as I landed in Singapore, it became abundantly clear. The air was black with this haze, and the air quality index was well over 400, and anything over 150 air quality index is dangerous. So, at the time they shut down schools, they asked pregnant women not to leave the house. It was really, really bad.

And as I asked my colleagues what was happening, they said, "Oh, it's forest fires in Sumatra from palm oil production." And so I'm sitting in Boston in this class, and my now co-founder, Harry, has gone to visit rainforest, and they're gone. And I had this memory of a trip 10 years ago where people can't even walk outside because the air quality is so toxic. And so we started asking, what's up with palm oil? Why is palm oil so popular, and why can't we solve this problem?

Mike Toffel:

Just to clarify, those fires that you're talking about were land clearing in Indonesia-

Shara Ticku:

Yes.

Mike Toffel:

... of tropical forest in order to create land availability for new palm oil plantations. I know that story intimately because I lived in Singapore from 1997 to 2000 and had the similar experience you did of the euphemistically called haze, which is really smoke that, for several months a year, blankets Singapore and the surrounding areas in Malaysia and some in Indonesia.

And so it's interesting that you had that wake-up call in a way from that moment. Now, palm oil, I think people don't know in America how popular palm oil is as an oil, and I've read statistics that say things like half of the packaged goods in supermarkets have palm oil as an ingredient, which is just stunning, and it must have to do with its incredible versatility. But maybe you could tell us what was the answer to your question of what's up with palm oil?

Shara Ticku:

We also didn't know too much about palm oil other than our experiences of how it's produced and the damages caused out in the world. And so the first thing we did was try to understand what is palm oil and why do people use it. Palm oil is similar to a lot of other vegetable oils, but it's uniquely positioned because it has unique functionality, as you alluded. So today, it's about a 70 billion dollar industry, and yes, it's found in about 50% of products on supermarket shelves. Palm oil is found in everything from soap and shampoo.

It makes up the surfactants that make your shampoo and soap bubble and clean and strip dirt. It's found in laundry detergent. It's found in lipstick. It helps retain the color in lipstick. It's found in a bunch of personal care in beauty products, and then a whole bunch of food products. So everything from Nutella and peanut butter helping create that smooth, spreadable emulsion that people like rather than the oil separation. It helps bind the cream on the inside of Oreos.

It's in chocolate coating of candy that helps them melt in your mouth and not in your hands. It's used in frying oils, and it's used in a bunch of non-consumer applications such as biodiesel, sustainable aviation fuel, industrial lubricants as well. So it's really everywhere, and I think this was a big aha for us. We'd seen the construction, and then we started realizing that palm oil is just truly ubiquitous. Every single person touches it every day because it's in so many end products, and its functionality is critical.

And so the second thing we learned is that mostly every major consumer packaged goods company, almost all of them, had made commitments to stop using what's called conflict palm oil. Palm oil that engages in this deforestation that we're talking about, but they'd all failed. So they'd all made these commitments, some of them over 10 years ago, to stop using conflict palm oil by 2015, by 2016, by 2018, but were essentially all failing because they had no viable alternative. There was no way to just switch to another vegetable oil.

And that's when we asked the question, if agriculture has failed to solve this problem, could we solve it using microbiology instead of plant biology? Could we do something like what Impossible Foods has done, and what would have to be true in order to make that happen? This was sort of maybe back to your question about entrepreneurship, this was sort of the first bug of thinking about maybe we could actually solve this problem and how we first got started.

Mike Toffel:

If you go to websites of the major food companies that rely heavily on palm oil, like Nestlés and Unilever, and even some of the distribution companies like Cargill, they all have sustainable palm oil profiled on their websites. And there's even the Roundtable of Sustainable Palm Oil or RISPO, which has a standard that you can get certified to produce what they call sustainable palm oil.

So while you're saying they failed to reach these targets, is this even produced, or is it produced in a way that doesn't meet what you think actually sustainable palm oil ought to meet, like the standards too lax, or is it just not available at wide scale because going to the lab to invent a biotech alternative that you've created is such an extremely out of the box approach?

Shara Ticku:

We started with the problem. I always say we weren't a hammer looking for a nail. We didn't have a solution necessarily. We wanted to solve the problem, and what's the best way to solve what we call the palm oil problem? And to this day, we still are very rooted in that approach and not being too tied to any technical solution. So if agriculture can solve it, great. And I do think that agriculture plays a role in solving this problem going forward. It's a growing problem.

So part of the big issue is that palm oil is a 70 billion dollar industry today. It's projected to grow tremendously. So demand for vegetable oils, writ large, projected to grow about 4x by 2050. And so the real question is, we've known this as a problem. We've seen the deforestation. All these companies have had 15-plus years to try to solve it with agriculture, and they've made some progress, but they've been capped, and demand is going to increase 4x over the next 25 years. And so where's that going to come from?

Mike Toffel:

Yeah.

Shara Ticku:

The answer is twofold, which is yes, you can produce palm oil sustainably using agriculture, which means you can confirm the oil palm produces this product and that land was not previously carbon-dense peatland and rainforest. And if you can prove that the palm oil in your potato chips comes from a plot of land that didn't engage in deforestation, that's great, and that should be called sustainably produced palm oil. But the challenge is these are massively complex and convoluted supply chains.

And so what's happened is the Roundtable on Sustainable Palm Oil and others have taken big efforts across the value chain to demonstrate that, but these supply chains are just so complex, and the traceability really falls short. And so they've been limited at certifying about 19% of global supply, and they can't move beyond that. So 19% of global supply can solve a problem for one company, but it's not solving the problem on a global scale. And that's really sort of where we came into say, "How do we solve this for everybody, not just for one company's sustainability mandate?"

Mike Toffel:

Terrific. Okay, so now, with a clear understanding of the alternatives and their limitations, let's dive into your process in your company. How did you get started with the technology side, and how did you think about where are the most promising markets to pursue?

Shara Ticku:

We didn't have a specific technology, but we did have a hypothesis. It was basically rooted in the concept thought oils and fats today come from petroleum or animals or plants. And we were really looking at palm oil, which comes from this plant with a unique profile, and you extract it, and then you run it through some processing, and then you can use it across this wide range of consumer goods. Our hypothesis was animals of the plants have been making fats and oils for centuries what about the fungal kingdom?

Could we use microorganisms as factories and the way that these plants and animals are factories for producing something that looks and functions like palm oil? We started with $1,000, which we had from MIT at the time, and we started doing some basic thinking about what would have to be true to solve this. It's a massive industry. You've got to be able to get the technology to very, very large scale, tens of thousands of metric tons per year.

It's a fairly cheap product, so you've got to reach economics which are viable and thinking about the basic modeling to get a cost structure that could be economically competitive, and the product has a really specific profile. Palm oil hasn't been replaced by other vegetable oils because it has this unique fatty acid profile that performs in specific ways and really drives functionality of end products like shelf stability, melting point, et cetera.

And so we knew if we were going to use microbiology, it needed to be very robust at scale. It couldn't be a fragile system. It had to be able to be produced cheaply at scale, and we had a product profile that we had to be able to match. And we took that sort of set of criteria and mapped it against what we knew about sort of microbiology. What are the set of microorganisms again, yeast, algae, fungi, and what might be a good fit here? And our first sort of insight was a technical insight, which was in this field of synthetic biology a lot of people are doing really technically challenging things.

They are taking a microorganism, like a specific strain of yeast or bacteria, and then they're taking foreign DNA and trying to get the yeast to do something unnatural by porting it in and changing its functionality. But what if there were actually yeast that naturally made oil? If we could find those, we could actually tap into what nature has built over centuries, and then we could use the tools of biology and engineering to just boost it. And that was really where we landed.

So we screened thousands of microorganisms and down-selected to probably about a dozen that were these natural producers of oil, and that was really beneficial because it fit that three criteria. It could scale, the cost would be cheaper, and it was making the profile that we liked. And so our first proof point was a bench scale experiment in the lab, taking one of those yeast and just getting it to make a tiny amount milliliters of oil, measuring it, and proving that it vaguely looked and functioned like palm oil. And that was the first step. Then we sort of said, "Maybe there there. Let's keep going on it."

Mike Toffel:

Okay. So you have these clues which of these natural technologies might be the most promising to create a product that shares the same properties that makes palm oil so valuable? Discovering a natural process, is that a patentable thing, or how do you think about the IP here?

Shara Ticku:

Making a product that exist in nature, you can't patent nature.

Mike Toffel:

Yeah.

Shara Ticku:

So neither of those were sort of obviously patentable, but we knew that nature wasn't going to take us all the way there, and it was really about getting to scale and economics. We knew we would need to apply technology, process innovation specifically around growing that yeast to be able to protect it. That's the work that comes in later, although in the beginning days of the company, maybe it should have been, but patentability wasn't really top of mind.

It was just like, "Can we even do this crazy thing? We're taking on a pretty audacious task of replacing this vegetable oil, and we're trying to create a totally novel way of making it. Can we even do that," was really the first question. So patentability is important, but I think we were just excited that we demonstrated a technology that could possibly take this on.

Mike Toffel:

Right. I guess my question about patentability is taking the perspective of funders, which is to say, "If we're going to give you a bunch of money to develop this, is there a moat that we can imagine?"

Shara Ticku:

We didn't think of ourselves as entrepreneurs, and we weren't thinking of this as a company. We were just curious.

Mike Toffel:

Oh.

Shara Ticku:

We were three people who had all been working in and around biology in some capacity, were interested in this technology, and cared about this problem. We were also students, and so we had the benefit of being able... and the space and the resources to be able to explore a question, a problem that was intellectually interesting without the pressure of thinking about, "Do I need to quit my day job? How do I get funding?"

And I think that was a really important part of our story, and of our entrepreneurial journey was having the space in the university setting without any intention of becoming entrepreneurs without the pressure of it, but actually just exploring the problem because none of us were in grad school with the intention of becoming founders at the time, and so we really needed that space. And so we weren't thinking that way yet.

Mike Toffel:

Got it. Talk to us about the pivot. So you had this inkling that one of these 12 or maybe a few of these 12 had promise, and so far, you're here as you're describing, just sort of curious as to whether you could find an inkling of hope, and it sounds like you've got that hope.

Shara Ticku:

We've got the hope. So the first part was technically, is this even possible? What would it take to make an oil that looks and functions like palm oil using microbiology? And so we've got the first proof point that we could make something that kind of looked in functions like palm oil. Then we started really exploring some of the other questions of what would have to be true to solve this. And so this is where we start thinking entrepreneurs. We don't think of ourselves as entrepreneurs yet. We're still just experimenting. A lot of the pitch competitions were really helpful for us. I think they forced us through a set of structured questions.

We had feedback from people both positive, saying, "Hey, if you can get this technology to work, it's really interesting," but also critical. Like, "You guys are crazy. This is a huge industry. Good luck taking it on." But having sort of the mentors and the judges and the structure of a lot of these pitch competitions was really helpful, and we started to get some feedback that this was actually a very interesting proposition. We were runners-up in the Harvard President's Innovation Challenge. That was our first big check. So we actually have one of those really large checks with $25,000 that we won, which is sitting in one of our conference rooms. And so that was good validation but also funding for us to keep going.

Mike Toffel:

Right.

Shara Ticku:

Even those little pockets of funding helped us get a dedicated lab bench and hire an intern to keep working on the science of it while we also built out the basic business model questions.

And we had sort of a year and change of that, of basic development of technology and basic development of business model and enough of the sort of validation and development of that concept so that by 2018, when all three of us were finished with school, we all had different plans for our careers.

And as we looked at each other in sort of the spring of 2018, we said, "Climate change is the definitive problem of our generation. We have a real shot at making a dent in a material contributor. Palm oil production alone emits about 2% of global greenhouse gas emissions, which is-"

Mike Toffel:

It's incredible

Shara Ticku:

"... More than the entire global aviation sector."

Mike Toffel:

It's incredible.

Shara Ticku:

"Just this one ingredient is more than all of global aviation. So there's a real dent in climate. If we can't take the risk on this, who is going to take risk on technologies like this?" And so, by the sort of middle of 2018, we'd all abandoned our more secure career paths and decided to jump in full-time on starting the company.

Mike Toffel:

So, at this point, you must be thinking, "Okay, we're going to give up our salaried positions in order to pursue this entrepreneurial one. It would be nice if we can get some funding."

Shara Ticku:

Yes.

Mike Toffel:

"Because at the end of the day, rent has to be paid and so on."

Shara Ticku:

For a company like this, which is material sciences, biotechnology, it costs money.

Mike Toffel:

Yeah.

Shara Ticku:

You need space. You need materials. You can't just sort of scrappily force your way to progress. You do need money. And so even if we were willing to not take anything, we needed some funding to get this going. So that was very important. So we'd had some important funding along the way from Harvard and from MIT. And then a big proof point was Y Combinator accepting us into their summer 2018 batch. So Y Combinator known for mostly software startups. They'd started to invest in a few biotech startups, but it was still early. Climate wasn't really top of mind, but biotech was.

And so we got into their summer 2018 batch, which was, I think, at the time, $125,000 in funding to sort of get us started in. But also, I think the reputation of Y Combinator, the promise of their demo day at the end, which would be a platform for fundraising. And again, I think support and network and community for furthering the idea over three months that summer. That was an important proof point for us, and that was when we jumped in. And we spent that summer commuting from Boston in the East Coast over to Mountain View, where Y Combinator is based, and developing both the tech on the East Coast and the pitch for investors and the business model on the West Coast in which we got on stage.

We had two minutes to pitch the company and the proposition. One of the things that was really important was this is a big concept. This is great, but we've got to make it real to get investors excited. And so our big goal for the end of the summer was to be able to produce enough of our palm oil alternative, hold it up on stage, and say, "This is palm oil, but it's made from yeast and not trees." It may sound like an easy task, but in the early days of science, we could only produce tiny, tiny amounts. And so we need to be able to produce enough to be able to hold it up on stage. And that was our big goal for the summer that we were working on.

Mike Toffel:

Yeah, holding a thimble that would not be as impressive.

Shara Ticku:

Can't see it in the back of an auditorium with thousands of people. It needs to be a little bit bigger.

Mike Toffel:

So were you able to develop enough of it by that time?

Shara Ticku:

We did, and it was fun because I think that was... One of the things Y Combinator is really good at is this deadline that you're working toward and getting all the energy and brute force and just passion into meeting that deadline. We had some challenges with our lab space, where it was getting contaminated. We ended up going over to the house of a friend who was an at-home beer brewer and using his equipment that was sitting on his porch in Somerville to produce a bigger batch of, we called it, porch yeast.

Mike Toffel:

Nice.

Shara Ticku:

It was just one of those things where it's like it really drove creativity because we knew we had this milestone. We just had to figure it out. We were running up against obstacles, so these were sort of our scrappy science days. We made enough, we flew it out to California, we drove it around at our rental car for a week.

We stood up on stage with that small bottle of oil, but bigger than a thimble, and we were able to raise $4 million in seed funding on the back of that in a period of about two weeks. Now, we had real resources to go and hire the team, build out the initial lab, and really get this company going.

Mike Toffel:

Got it. And around this time you must've named the company C16.

Shara Ticku:

Yes.

Mike Toffel:

And just tell us the backstory. What does that name?

Shara Ticku:

We actually named the company back in 2016 when we were first thinking about it. It's very technical. One of the really important things is the specific profile of palm oil. That's why it can't be replaced. And so it's got this chain of fatty acids that make its profile really unique. One of those fatty acids is palmitic acid, the namesake, which is C16, a 16-carbon fatty acid. That is how we came up with the name. And it's been interesting. I think, as a company, we've evolved a lot over the last six years.

We've really thought a lot about the importance of building a brand and the role that plays for our customers, who are consumer packaged goods companies where marketing and brand is very, very important. And so we've evolved how we talk about ourselves and even the name when we work with those companies. But at the same time, C16 has been a very good name for us because in the early days, before we'd even launched, these big companies were reaching out to us because C16 tells them exactly what we do. And so, in many ways, it actually was very good for sort of top-of-funnel generation in the early days in a technical sales way.

But when you want to start engaging with the marketing folks, even C-suite, and if you want to talk about the story to end consumers, C16 was not necessarily the best name, but we did launch last year the Palmless platform for sustainable ingredients. And so which we've trademarked is the brand that we use to really sell products. Our customers put Palmless on their packaging, and that's how we talk to end consumers about what we do.

Mike Toffel:

Super interesting. So let's fast-forward a bit. So you have this $4 million in hand. You've got some technology breakthroughs on your own that allowed you to make enough, at least for the demo, and I'm sure you're now pouring some of that money into technology improvements and working with contract manufacturers for your next steps. Is that where you're heading in order to get enough for commercial scale?

Shara Ticku:

So if you think about funding as milestones for businesses, which is one way to think about it. That first funding was huge problem, big industry, huge total addressable market, and viable technology. Make something that vaguely looks and functions like palm oil. The next really important milestone was really technical, so let's build out, let's de-risk the technology, let's further refine our ability to make it, filing our first set of patents was important.

Now we started thinking about defensibility and IP increasing the scale to some extent and a better model on the economic viability of the technology. And so, about a year and a half later, we raised a 20 million dollar Series A off the back of those technology de-risking metrics. Where do you position yourself, and then what's the value prop, and do people want it and will they pay for it and can you scale it up?

That's the stage where we are now, addressing and de-risking all of those fun questions that don't really have a playbook. And I think building this business has been really interesting, especially on the commercialization side. Lots of companies are taking different paths, and so it's been a series of experimentation for us and a lot of customer conversations to understand where the best value prop is and where we can capture the most value in the value chain.

Mike Toffel:

Talk us through some of the criteria that you're weighing. Some of the criteria I would think you might be using are how important is reputation to the brand and the idea that deforestation might really hurt their reputation, and it's less so for a no-name palm oil that you purchase in the grocery, much higher risk for high-end brands and maybe also when they're not using that much of the product. So even if you're selling at 10x, it doesn't add much to the cost of goods sold.

Shara Ticku:

Yep.

Mike Toffel:

I'm just starting to brainstorm, but what's your brainstorm?

Shara Ticku:

Yeah, the first question is, where are we selling in the value chain? Are we B2B selling to these existing consumer packaged goods companies? Are we launching a D2C company where we're making our own brand and selling it? On the latter, you can get to market really fast. You can build brand value, which is valuable, but it's expensive to build brands, and it's not really solving the problem that we set out to solve, which is supporting all the people that are already buying palm oil and making better decisions. And so, we made the decision to be a B2B company to go as close to the consumer as possible.

So not up at the sort of supplier or agribusiness part of the value chain, which is where we may be able to have big impact over time, but it also requires the most amount of money, the cheapest [inaudible 00:34:33] structure, and scale things that a startup is not inherently poised to beat large scale and companies on. And so we thought a lot about what do we have that's different and novel, and who cares about that? We sell today to the consumer goods manufacturers themselves, personal care products companies, food manufacturers, the brands that make these products and sell them to customers. It's a huge industry. How do we segment those customers, and where do we start? We've always had this framework of we're a startup. Where do we have an advantage versus incumbents?

And second, how can we get revenue and now profitable as fast as possible? A lot of companies have had the benefit of being able to raise lots of money and spend the long time horizon before they even reach revenue, much less profitability. But I think we, very early on, wanted to build a company that had revenue and didn't have to rely on funding as quickly as we could. And so I think that was a really important frame for how we've thought about building the business is not going after the biggest opportunity first, which is how many people have advised us to think about this. What's the biggest impact? But actually, how do we build a long-term sustainable business?

Mike Toffel:

Yeah.

Shara Ticku:

That led us, for example, away from biofuels and even away from food as a first market and instead toward beauty and personal care, which is a really innovative, fast-moving, and high-margin end market for us to sell into. So that was one set of criteria. And then the second is the customer segments within that criteria, and I think you hit on some of those things, but really it's who has the biggest pain point and how good is our product in their end application. Where do we outperform essentially?

And pain point for customers can be multiple things. It could be product performance. They really need something that's actually better than the way that palm oil provides today, which is something that we are able to do, but sometimes it's brand and marketing and storytelling. It's about innovation. It's about fresh innovation and biotech and beauty is a really big piece of innovation, moving away from just natural and thinking about sustainability.

Sometimes it's ESG. Sometimes it is the C-suite of the company has targets that they really want to hit, and so what we've learned is we've got a set of customers and their criteria for this pain point is often different, but who's really feeling it, which is qualitative, right. It's not so easy to suss out, but that's really where we've had the most success.

Mike Toffel:

Your discussion about Pain Point reminds me of there were campaigns decades ago about the issue of palm and deforestation. I remember this KitKat faux ad. It was pretty gruesome, and that was an attempt to create a pain point in the business as usual. But I haven't seen palm be the issue that it was, even though, as you're describing, it hasn't been really solved at scale in the ensuing years. So I'm wondering what the role is of NGOs in all of this to sort of highlight this.

Shara Ticku:

I think they're very important. The KitKat campaign showed a KitKat bar. It was sort of, Give me a break," and as they were snapping the KitKat, it was these orangutan fingers.

Mike Toffel:

Yeah.

Shara Ticku:

We talked about the climate impact of palm, but it's also got major biodiversity impact. So these tropical rainforests are home to thousands of animal species, including all three species of orangutan, which are now all critically endangered. And it's essentially 100% because of palm oil slash and burn clearing of rainforest. They often directly kill the orangutans that they find, and if they are able to escape, they don't have an environment. So orangutans have been a big rallying cry for people around palm oil and some of the NGO efforts. The other example is Greenpeace has been very active in scaling the walls of I think they did it was either Nestlé or Unilever in orangutan suits on the day of a big shareholder meeting.

So they've definitely played a role in pressuring boards and C-suites. But no, we haven't really seen that move the needle. A couple of just observations since we started the company. In 2018 when we started the company, climate tech was not a word that was being used. The first IPCC report on climate change had not been published. Even since we started the company in 2018 climate change has come from an idea that people were aware of to something very tangible on top of mind. And palm oil's role has been mentioned, but it's sort of been just an ESG checklist issue.

What's really encouraging is actually last year, we saw the EU pass a couple of pieces of legislation, some on supply chain due diligence, but most excitingly, they passed this landmark legislation called EUDR EU, Deforestation Regulation, which governs seven crops, among which is palm oil. And companies are now responsible for confirming that the palm oil that they're importing to that country not coming from deforestation, and if they can't prove it, they can actually be fined up to 4% of annual revenues, which is a really material stick. NGOs have played a role. Regulators are now playing a role. We believe consumers play a role too.

We've seen a lot of consumers, especially children and sort of pre-teen-age kids who find out about palm oil from the zoo, for example, learn that it's in their favorite snacks or that it's in Girl Scout cookies that they're selling and get pretty angry and take activism toward the company's manufacturing. This is a really big problem, and it requires all the players. Nothing is a silver bullet. We need all of these players moving things forward, and of course, we need the big buyers to actually switch their behavior and convert to more sustainable alternatives.

Mike Toffel:

So where can we find C16 products right now or soon?

Shara Ticku:

So we launched commercially about a year ago, and we launched the Palmless platform for sustainable ingredients, which is our sort of B2C platform for selling ingredients. We did launch our own first product D2C, which was mostly a marketing effort.

On the Palmless website, which is gopalmless.com, we launched nourishing oil, which is a topical oil you can use on your face, on your beard, on your hair, on body that's made with our ingredient. We gave it a sort of cheeky and bold name, which is Save the F-ing Rainforest, but we put some butterflies and trees on it.

Mike Toffel:

Nice.

Shara Ticku:

And it sold out within two hours. We had a billion media impressions from the launch while spending $0 on marketing. And then, most excitingly, we had 150 inbounds from the world's largest consumer goods manufacturers across personal care, home care, and body. We've evolved in our storytelling and marketing from the days when we named the company. We've spent the past year working on that funnel, and today, we've sold products with a handful of companies, manufacturers in beauty and personal care.

So we launched a soap with two UK-based brands last summer. We have launched a handful of products with consumer brands in beauty and personal care. The first sunscreen is going live in a week or two, and all of these products label sort of our Intel Inside, which is made with Palmless. So you can find a handful of these on shelves or online. We have a product that's launching in Sephora soon, and more coming.

As we've now started to get the basic inkling of product-market fit in beauty and personal care, the value prop is clear, the pricing is working. We have a consistent sales cycle. We've now decided to move into food. And so we've just closed our first pilot there and are working with a handful of companies in the food space to bring Palmless products to grocery store shelves near you in probably a year. Food is a longer timeline, but probably next year.

Mike Toffel:

Yeah. So did you decide to do food second because of a longer timeline, maybe the regulatory requirements that you have to go through?

Shara Ticku:

Yeah. It's back to how do we actually build this as a sustainable business and how can we get revenue in faster. And with food, the sales cycles are longer, the buyers are more cautious in terms of price, supply, de-risking. A lot of the food customers we talk to really like the strategy of launching in personal care because someone else is de-risking it first and then regulatory. So there is a longer regulatory process, and so while it's a bigger market, we knew it's important to chip away at that, but we wanted to be able to bring in revenue from personal care first.

Mike Toffel:

So you mentioned the Intel Inside, which is also what it reminded me of with the labeling of something that you don't necessarily see or think about initially, but now you will more so think about it. Is it a requirement with your customers that they incorporate the Palmless mention in their labeling, or if they want to be silent about it, that's okay with you?

Shara Ticku:

All of our customers to date want to use Palmless on their package. The name Palmless is really important. I think because it's not competing with brands, Palmless acts more like a certification, and it adds this layer sort of amplifying brand values, and I think it's an important part of that consumer poll, at least in the early days.

Mike Toffel:

Terrific. Well, it's been a really interesting to hear your journey over the decade since you were here at HBS. As you reflect back and think about the meetings you now have with students and other folks who are thinking about working in either the biotech space or ag or climate, what are some of the common themes of advice that you find yourself coming back to?

Shara Ticku:

I wish it weren't, but funding is always a really important question, and thinking about funding sources and pitching. That's an important one. And, of course, trying to build a startup in a non-zero interest rate environment funding is much harder. That's one that always comes up.

My encouragement, especially for people that are in academic settings, is use those resources, use the grant funding, use the pitch competitions and awards. Those were super critical in helping us get started and in de-risking the concept for the three of us.

Mike Toffel:

Yeah. The learning process that you described in the pitch competitions, I've heard other entrepreneurs talk about when making pitches to venture capitalists or other funders, the questions that they get they hadn't anticipated those exchanges being as impactful to their learning as it turned out to be.

Shara Ticku:

There's this saying about startups, which is 1% idea, 99% execution or something like that. That's sort of hard to learn until you actually go through it. In the early days, you may be really attached to your idea, or you may not be attached to your idea. Is this a good idea?

I think the idea of just getting out there and getting reps in and talking to people and getting feedback and building it, the reps can be whatever it needs to be, whether it's building multiple prototypes, whether it's reps on multiple fundraising pitches, whether it's talking to anybody you meet on the subway or airplane about your idea and hearing what they ask.

All of those are really important in helping iterate and build. It's sort of just this concept of exposure. Getting the reps in on the feedback and questions will educate you so much and will give you confidence or not to pursue the idea because you'll feel bought in on it or you'll feel not bought in on it, and then you'll know whether or not to take that jump.

Mike Toffel:

That describes it as a much more social process than I think people who haven't done entrepreneurship might think. It's a lonely process where you're trying to think of all the solutions and challenges by yourself, but you've just laid out a very social process.

Shara Ticku:

Yeah. And I mean, I would say as somebody who's been building this company, the most valuable set of resources I have are my peer founders, people who have started companies that actually look kind of similar to mine. Maybe they're a stage or half a stage ahead of me.

Again, that might feel like a competitive threat in some way, but it's not. I learned the most by talking to people who are actually building something really similar to me. And without that, I think there's no way I would be where I am today. I both helps make it less lonely, but it's made me a better company builder as well.

Mike Toffel:

Well, Shara, thank you so much for spending time with us here on Climate Rising. It's been a really wonderful opportunity to get to see you again and to share your story with our listeners.

Shara Ticku:

Thank you. It was fun minus the reminder that I'm a decade out from HBS. Thanks so much for having me.

Mike Toffel:

That was my interview with Shara, co-founder and CEO at C16 Biosciences. This was the fifth episode in our series on Decarbonizing the Roots of Value Chains. If you haven't yet, you can check out our prior episodes on green concrete, green steel, regenerative agriculture, and lab-grown cotton.

You've been listening to Climate Rising. I'm your host, Mike Toffel. Sophie Wong produced today's episode. Craig McDonald is our audio engineer. We'll be back in two weeks with another episode of Climate Rising. See you then.