The Future of the Bioeconomy Episode 3: Sustainable Solutions

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  Speaker 1:
  Hello everyone and welcome back to our video series on the Future of the Bioeconomy. I’m Drew Wandzilak, an investor here at Alumni Ventures, and joining me today is Michelle Ruiz at Hyfé. How are you doing, Michelle?

  Speaker 2:
  Doing great. Thanks for having me.

  Speaker 1:
  Yeah, thanks for coming on. A good start for us—tell us more about you, your story a little bit, and how that’s led you to being the co-founder and CEO of Hyfé.

  Speaker 2:
  Yeah, absolutely. My background is in chemical engineering. Actually, even going all the way back, I’m originally from Ecuador. I immigrated to the US when I was seven. I think I didn’t appreciate that kind of hustle mentality enough until I came to this realization that I needed to start a company.

  I grew up with the American dream of studying really hard, trying to get good grades, going to college, and doing all those things. I studied chemical engineering at Carnegie Mellon, worked for ExxonMobil for 10 years, and very specifically spent a lot of time in manufacturing over that decade.

  At one point, I started working at an oil refinery. We would take the dirtiest Canadian crude and upgrade it to gasoline, diesel, and different types of high-value gases. But I had a really interesting kind of “aha” moment when I ran the wastewater treatment plant.

  I was an engineer in that plant and realized that the process we used to clean water is literally a fermentation process, and it’s not super efficient. It’s very much a “take, make, discard” mentality. In oil and gas, in particular, we were investing billions of dollars into extracting hydrocarbons from the ground, making a significant carbon impact on the world, only for these hydrocarbons to take a free ride through these super energy- and water-intensive processes at refineries and then end up in wastewater.

  The way wastewater treatment works is you take the stuff that’s in the water—the organic material, in this case hydrocarbons—and you feed it to a whole bunch of bacteria and fungi that eat the oil. The process of cleaning water is literally these microbes removing the oil from the water. There you go: clean water.

  But as a result, these microbes also multiply. It’s sort of like feeding a goldfish—it gets bigger and bigger the more you feed it. The way we dispose of those carbons—at this point, microbial bodies—is by throwing them in a landfill. In some cases, people incinerate them. In other cases, companies spread them in fields with all the chemicals that are entrained in that biomass.

  This is definitely not the way we need to move forward, especially as we look toward making businesses and value chains a lot more circular.

  So, that’s my background. I realized early on that wastewater was an abundant and underutilized source of carbon. When my co-founder Andrea and I met and decided we were going to make a manufactured product, one of the key moments for us was thinking, “Hey, we want to make this biomanufacturing product that is good for the planet and good for people’s health, but how do we make it compete against its incumbent?”

  In the case of PHA, we started making better flour—which we’ve since pivoted away from and we can talk about that later—but flour needed to compete against wheat if people were ever going to purchase it. People weren’t buying for health benefits; they were buying for price.

  That’s really where my background came into play. If you think about wastewater, it has such an ugly name, but think about a can of chickpeas. When you open that can, there’s all that sugary, starchy water inside. In our homes, that’s considered food, and we just dump it out. But at the factory, that’s considered wastewater.

  So I thought, “Okay, one of the major things driving the price of our bio product up is the cost of sugar. How do we get cheaper sugars?” Food manufacturers generate a ton of wastewater. They have to pay so much money for it because it’s loaded with the carbons I talked about. Why don’t we connect those dots? Let’s get the food manufacturers to give us their sugar. It’s going to offset the price of this bioprocess and bring the product down to price parity.” That’s really where the beginnings of Hyfé started.

  Speaker 1:
  That is fantastic. There are obviously a million different pieces to dive into more, which we’ve tried to do in previous conversations. On the point of price parity and bringing down that feedstock cost, can you contextualize why that matters? People might watch this and think, “That’s great—you have this wastewater, you’re solving that problem, you’re able to get price parity where it’s needed. Why does that matter? Why is that a big focus? Why are companies asking for this?”

  Speaker 2:
  Ultimately, unless a more sustainable product is at the same price as its carbon-intensive incumbent—or even better, cheaper—no one’s going to buy it. We have to think less about ourselves, who might be in space and willing to pay a green premium when the economy is doing great, and more at a macro level: every single citizen of this planet. Are they going to pay a premium? The answer is no.

  There needs to be a market driver here. It needs to be economic. It needs to make money for sustainable products to be able to stick around for a really long time.

  Speaker 1:
  That’s a great point—the green premium is almost easier to pay when the economy is doing well. In times like this, where it’s a little recessionary, it really puts a focus on where people are willing to spend. There has to be a good economic business case for everything.

  You guys are a piece of that, and what I love about PHA is it’s relatively agnostic in what it can do, and it’s really getting to the core of that problem. When you look more broadly at this bioeconomy, where are you seeing other large gaps that maybe PHA isn’t yet ready to fill but need to be filled by somebody?

  Speaker 2:
  Oh, 100%. This is a really good question. I think we need to think about the future of the bioeconomy looking exactly like the oil and gas industry.

  Think about an oil refinery—like the one I used to work at. We would take wherever the cheapest crude was coming from and upgrade it. What that means is that our reactors, distillation columns, and control systems had to adjust to the variability coming in with that crude. The crude could be saltier, it could have more sulfur—we literally just put it in our process, adjusted our parameters, and out came consistent gasoline and diesel that met the spec for everyone’s car.

  That’s how the bioeconomy is going to work in the future. It took oil and gas 90 years to get there, but now we can leverage all the information and technology that industry has to make the bioeconomy get there in 10 to 20 years. That’s super promising.

  What do we need in the base case? This is where Hyfé comes into play. We need cheaper feedstocks. Right now, the entire bioeconomy is relying on and being designed around glucose sugar as an input. We simply cannot grow enough sugar on this planet to displace the most carbon-intensive industries.

  To put that into context: if we just used biomanufacturing to displace the petrochemicals industry, we would need 20 times more supply than what we have right now. Corn wet millers, sugar cane manufacturers, sugar beet growers would have to invest more than ever before in new assets, and that’s simply not happening for commodities like sugar.

  Another way to put it into context: one-third of all arable land would have to be dedicated to growing corn, sugar cane, or sugar beets. That’s simply not going to happen, especially with 2 billion more people on this planet in the next couple of decades.

  We’re looking at a future where this promising industry can decarbonize massive sectors—but how are we going to feed it so we can actually get there? Right now, we can’t.

  Hyfé is generating alternative feedstocks from waste carbon sources, specifically food manufacturing wastewater. But that’s one part. The second part is that because bioprocesses have been designed around sugar, the way we engineer strains also needs to change.

  If you put yourself in the shoes of somebody making a target molecule—say, a protein like collagen, or squalene—there are a couple of ways you can engineer a strain to do that: either using a strain that naturally makes that molecule or altering its DNA so it does.

  If you’re that company, your key concern is titer—what is the productivity of the strain to make that target molecule? That’s where your economics matter. You’re trying to increase your titer versus your money running out. Many of these companies are VC-backed.

  You are not dedicating resources to engineering flexibility for feedstock variability. Right now, that’s because we’re using sugar that’s 95% purity. But if we ever want to decrease the cost of a bioprocess—and sugar can be anywhere from 10% to 70% of the cost of a bioprocess—the only way to significantly lower that cost is if your strains can handle a little less purity and a little more variability.

  You can totally train strains to do that, but people aren’t doing it right now because it’s not the focus.

  Speaker 2:
  And then I would also say infrastructure. So, bioreactors—moving bioprocesses away from requiring high sterility and steel tanks. I think a company to look out for is Veda, who has done a really great job of not requiring steel tanks and sterility, so they have a very robust bioprocess.

  And then lastly, Drew, I think one area that’s extremely important is corporate collaborations with startups that are bringing these innovations to the market. If you think about it, there are many different ways in which corporations can collaborate with startups. But in our space, it’s like we are turning waste into feedstocks for bio manufacturers.

  These large companies with multiple different processing sites are generating the type of waste that is perfect for bioprocesses right now. When we look at how the bioeconomy is starting to shape up with Biden’s initiatives, there is not a lot of bridging that the government is doing between corporates and startups.

  Corporates are still acting like corporations, which means slow decision-making cycles. Of course, there needs to be a really strong business case, but from a different lens, it’s less forward-looking and a little bit more within the box of today’s operations.

  I really think that’s one of the areas that thought leaders in the space should be connecting for the bioeconomy to be successful. Ultimately, what that means is, especially with our technology, if there are 30 corn wet mills in the United States, for example—not all of those are making sweeteners for biomanufacturing. Some of them are specialty corn wet mills.

  That means only a handful of corn wet mills can co-locate with bio manufacturers. So, if you have hundreds of biomanufacturing companies that want the cheapest feedstock possible and need to co-locate with somebody who makes their feedstock, there’s not enough capacity to be able to do that.

  What we’re doing is turning every pea processor, soy processor, beverage snack manufacturer—anybody who’s manufacturing food—into a co-location opportunity. But we need to get the thought leadership going on corporate-startup collaboration for sure.

  Speaker 1:
  I think that’s a really interesting point. Thank you for sharing that.

  On the corporate side, one of the things that keeps coming up when I talk to people about this industry of food and agriculture—where your customers are coming from, where your supply is coming from—these are massive industries that have been around for a long time.

  When you describe corporations, it is the epitome of a long-time large corporation. You come from the oil and gas world, so it’s probably similar, right? Maybe helpful for founders or people interested in this space listening: what have you found to be effective?

  There’s a government responsibility—you’ve touched on co-location and helping form these partnerships. In your conversations and relationships with larger corporations, what have you found to be effective? Because innovation can be tricky. A startup coming to them can be a hard conversation to start. What’s been your takeaway from that?

  Speaker 2:
  Yeah, I think there are two things, especially for any founders that might be listening. If you don’t have industry experience, you haven’t been in a factory before and worked in a factory before, bring somebody onto your team that has.

  For us, what’s been helpful is I’ve run a wastewater treatment plant. I’ve been in a factory. I’ve been inside a distillation tower when it wasn’t working. There’s cultural know-how on how to learn from people at the facility and people inside the office. Even when you’re part of a big company, you have to learn that as an engineer.

  For startups coming into these spaces, you have to know who you’re talking to and how to communicate. I think it brings a lot of credibility.

  The second piece to that is with larger companies, especially technology-driven companies like in the food manufacturing space or the energy sector: data. Drive with data, low sales tone. No one wants to feel like they’re being sold something. They want to see that you have discovered a very valuable gap in a process that can make a significant amount of money, that can reduce emissions in a way that you can back with data and calculations.

  When you lead with data and you’re analytical about how you discuss these partnerships, it also brings credibility to the table. The way we’ve structured our partnerships is in steps. You’re not going from zero to 100 all at once—you build trust by leveraging data and studies with these partnerships.

  Speaker 1:
  Yeah, it’s incredible. I want to pull this thread even more because, in your story, you came from ExxonMobil—one of the largest corporations in the world—and now you’re in the founder world.

  The first thing you said was: how do you talk to these people? Have someone on your team—whether it’s you or someone else—who can speak the language, who knows what they’re talking about in this world.

  What has been the adjustment for you coming from this larger corporate environment to now being a founder in a small team, getting things going? Pros and cons, but also I want people to get excited. It sounds like we need more people to jump ship and be on the entrepreneurial side of things from these corporations if things are going to happen here.

  Speaker 2:
  Yeah. Before I jumped, the way that I knew it was time was I felt like I had built enough skills to be dangerous, and I had a fire burning inside to have a meaningful, tangible impact on the world.

  I wasn’t getting that with this 80,000-person corporation, where you take many steps in your career and have mini impacts that maybe never really see the outside world. Add to that the things you’re passionate about and the discoveries you’re making—that’s how I knew.

  For me, adjustments have been speed. Things in corporate move slow. When you’re one of 80,000, you can sort of coast and show up with a to-do list. But in a startup, you have to move fast.

  Your idea doesn’t have to be the most groundbreaking scientific discovery—you just need to execute really fast so you get there first and do it better than anyone else can. Moving fast is always a moving target. We think we’re iterating really fast, but you don’t know what you don’t know.

  That’s been a great mindset shift for me: asking, “What is our deadline? And what is a more aggressive deadline?” That’s what we talk about in our team.

  The second adjustment for me is that because in a corporation you have a lot of rules and guardrails, when I left I had this concept of, “Is there a rule book? Am I allowed to do this? Am I allowed to raise $11 million without becoming a Series A company? Am I allowed to go knock on the door of a major corporation and say I need to talk to you?”

  It took me a couple of months to figure out there are no rules. That’s what we’re doing here—we’re creating something that doesn’t exist. So long as you don’t do anything illegal or unethical, if you believe there are guardrails, you’re going to limit the potential and speed in which you can move forward. Your legacy will never see the light of day.

  That’s been a great realization for me: just go forth and conquer and do whatever you need to make this happen.

  Speaker 1:
  There are no rules. That’s the biggest thing, right? “Move fast and break things” is used a lot, but sometimes you just have to create your own rules. You’re totally changing how things work and that requires—

  Speaker 2:
  Going into yourself. One example of that is you might have somebody who is really incredible and you think, “I think you would be a really awesome advisor.” But you get into your head and think, “That person’s really busy, they just did this, they just did that. They might say no.”

  Let them say no—but you go out there and ask them to be your advisor.

  Speaker 1:
  And that’s why I love the corporate-to-founder journey. Sometimes it’s a total culture shock because people come out the other way, move into founder life, and start a company with no experience in a specific space. Sometimes that’s helpful—you don’t even know the rules in place—and sometimes it’s not helpful.

  Going off that a little bit, building this company in the broader bioeconomy—and you gave me that term, so if I keep using it, I’ll credit you—what is one misconception or thing that frustrates you when you’re explaining either the problem space or what you’re building that you feel like the general public just doesn’t quite get?

  What do you want to grab someone and say, “No, that’s not how this works,” or “You don’t understand how big of a deal this is”?

  Speaker 2:
  I think people generally just don’t know what biomanufacturing is. We’re so early in the industry that really the only biomanufacturing sectors at scale are ethanol and pharma. Then, of course, there’s traditional fermentation biomanufacturing with beer and alcohol.

  But people don’t really connect the dots that you can program a microbe not just to make beer or insulin—you could program them to make plastic, components that go into cement, foods that we eat, and amino acids.

  Everything could be made with biology. I’m not saying it’s going to be the most efficient, but technically everything could be made with biology. The term is so big that people don’t quite grasp it.

  I think more conversation around that would be super helpful. Until people understand what biomanufacturing is, I can’t even start telling them about the deficiencies in sugar production and why waste is such an incredibly underestimated resource.

  Speaker 1:
  Yeah. It is tough to jump into because you can follow the thread and think, “Okay, this makes sense; this would be a problem.” But what’s the end goal here?

  Bringing it back to medicine and therapeutics, we can do all these different things, which is obviously important because production isn’t there, and there’s an environmental impact to how we’re currently doing it.

  There’s a ton here, and Haifa is working on a piece of it—a large and important piece. If you weren’t doing this, what would you be doing? Would you still be working in this problem space somewhere else? What do you kind of nerd out about, thinking, “Okay, if Haifa closed its doors tomorrow—which God forbid doesn’t happen—what would you do next?”

  Speaker 2:
  Yeah, okay. I have a list of three things.

  Number one: we’re making alternative feedstocks for biomanufacturing from food manufacturing wastewater. Of course, in the future, we’ll expand from that. But I think other waste streams that are very interesting are gas waste—similar to what my co-founder’s prior company, LanzaTech, is doing.

  They’re taking carbon monoxide and carbon dioxide from steel mills and oil refineries, using that as a carbon source for fermentation, and making jet fuel with it. I think that’s incredibly interesting.

  Alternatively, I would be working on strain engineering—looking at these commonly used microbial hosts and making them more tolerant to waste feedstocks, because I think that’s going to be a major unlock.

  Those are the top two for me. I’d really only be working on infrastructure unlocks—maybe I shouldn’t call it infrastructure, but enabling technologies for the biomanufacturing sector.

  Speaker 1:
  Gotcha. So you’re in the right place—you’re working on the right thing.

  Speaker 2:
  It’s what’s going to determine whether this industry succeeds or not. That’s a major climate change question mark for us. But it’s also “picks and shovels.”

  There’s a massive market. Even if you just look at displacing petrochemicals at the cheapest price of sugar today—which won’t remain once supply gets more constrained—that’s a $1.4 trillion market for feedstocks that current sugar production can never fulfill.

  It’s a little bit behind the scenes, but enabling technologies are the unlock for impact, and they have massive, massive markets.

  Speaker 1:
  Totally. You can’t overestimate the size of the impact of all this.

  I love hypotheticals, so I’ll ask you another one: you can’t invest it in yourself or your company. If I gave you half a billion dollars tomorrow and said, “Michelle, here’s money for this space and these problems,” where would you spend it?

  Speaker 2:
  Okay, that’s a fun one. So it can’t be mine or my problem?

  Speaker 1:
  It cannot be a half-billion-dollar investment into Haifa. That’s the only rule—or into your personal bank account. It can sit there before you deploy it, but…

  Speaker 2:
  Okay. If it’s not in my problem space of alternative feedstocks, I would probably invest it in strain engineering for microbes to be more resilient to alternative feedstocks.

  I think that’s something that’s really not happening and could become a big problem. Honestly, the fun part of me would invest it in some process technologies that make cool products, but I think there’s already a lot happening in that space.

  So, I don’t know that money would go the farthest there compared to another enabling technology.

  Speaker 1:
  And that’s how you know you’re in the right space—when your answer is, “The fun part of me would invest this into process technology…”

  Speaker 2:
  But the logical, forward-thinking side of me—the part thinking about the biggest gaps and opportunities—knows that enabling technologies, even if they sound unsexy or ugly, usually make the most money.

  Speaker 1:
  Totally. Does there have to be any sort of consumer buy-in for a lot of this to work? My hunch is no—you’re really making the economic case to corporations and businesses. The end consumer gets value from it, but hopefully at the same price point.

  What does consumer buy-in look like for bioeconomy participation or excitement? And what’s holding that back, if anything?

  Speaker 2:
  Yeah. I think it depends on the industry for sure.

  Alternative proteins are a little different—they’re trying to change consumer behavior while also providing a solution, so let’s set that aside.

  Overall, what’s important for biomanufacturing to succeed is drop-in replacements in the market. So, no consumer buy-in—limiting that risk and focusing on making a cheaper product that can compete.

  But that cheaper product cannot perform worse than the alternative.

  To your question: no consumer buy-in is needed for the first phase of entering the market with the bioeconomy because you should be making drop-in replacements that perform the same and are cheaper than the alternative. The consumer won’t even know.

  The company that interfaces with the consumer has an interesting role: saying, “Hello, consumer, I’m giving you a cheaper product that’s also really good for the planet.”

  Speaker 2:
  And that is how we bring people to the table where they’re already at, but then start educating them on how much better their decision is and how they’re saving money. I think phase two of the bioeconomy is making products that are better than the drop-in replacements—better performance, better tasting, better health profiles, but still cheaper. That’s going to require consumer participation, but it’s meeting the consumer where they want to be met.

  So yeah, overall, consumers cannot sacrifice anything for this industry to be successful and for us to truly tackle climate change.

  Speaker 1:
  Gotcha. Cool. So, the only thing we can do as normal people is ask these corporations to continue to invest, co-locate, look for this, and ask the government to push harder and help facilitate that. But hopefully, this becomes something we don’t even recognize on the shelves or at the drugstore.

  Speaker 2:
  It’s additive. But you actually made a really good point there. I’m thinking about it from the manufacturing standpoint and your strategy to get to market—you don’t want the consumer to be the only thing keeping you from being successful.

  But I do think consumers have incredible power in going to the corporations that make their goods and services and demanding change. In fact, we work with a lot of companies right now that are making significant investments in wastewater reduction and water use because their consumers are demanding more sustainable and responsible practices. It does make a difference.

  Speaker 1:
  And I think understanding where innovation is in biomanufacturing—it’s now not unreasonable to ask for alternative products that are sustainably created without paying a premium. Maybe a decade ago you’d say, “I’m willing to pay a little extra if you source it better,” but I think now it’s reasonable for us to say, “No, we want better products, and we know we don’t have to pay more for it.”

  Speaker 2:
  Yeah, no, I agree with you. I’m not going to make any comments on alternative proteins or alternative meals because I’m not really an expert in that space.

  But I will tell you from a consumer standpoint, one of my favorite drinks is Lalo’s draft oat latte.

  Speaker 1:
  Oh, that’s a good one. I’ve had that—it’s very good.

  Speaker 2:
  It’s so good. I don’t know what oat milk they use, but what makes it incredible is that it has this super silky foam that tastes incredible. It feels incredible—it feels like a treat when you’re drinking your coffee.

  I think that’s a really interesting example of an alternative milk that has made an incredibly pleasing product that has been super successful.

  I forgot where I was going with that, but I think in the alternative protein or alternative milk space, there are a lot of people taking risks to influence consumers to think bigger. I really appreciate companies doing that because it’s risky, difficult, and expensive. Some will make it, some won’t, but all of that sacrifice is required to get consumers thinking about alternatives to what they grew up with that are actually better.

  Speaker 1:
  Absolutely. And I appreciate the Lalo name drop—maybe we can get them to sponsor the next one of these. I’m an avid Lalo coffee drinker myself.

  This was great. Anything we didn’t touch on that you were excited to talk about or think is worth sharing with our audience?

  Speaker 2:
  Honestly, I think we covered a lot of really important topics. I think everyone thinking about their next career move should consider entering the bioeconomy. This is it—this is the next stage of global manufacturing.

  This is the place to make a legacy because we are right now, right before the inflection point of the industry.

  So if you’re in oil and gas, pharma, corporates, food, energy sector consulting—go into the bioeconomy. We need incredible talent and problem solvers, and this is going to be a really fun ride.

  Speaker 1:
  That was fantastic—a great outro to a great conversation. Thank you, Michelle, for joining us.

  Speaker 2:
  Thanks for having me.