C16 Biosciences wants to change palm oil, a critical contributor to deforestation and climate change, with a lab-grown substitute. But CEO Shara Ticku faces a tough resolution in bringing the product to market. Might possibly well furthermore fair composed she originate exiguous, with the lower volume personal care market? Or also can fair composed she dive horny into the booming lab-grown meals market, with an interested investor? Harvard Industry College Senior Lecturer Jeff Bussgang discusses his case, “C16 Biosciences: Lab-Grown Palm Oil.”
HBR Items is a network of podcasts curated by HBR editors, bringing you essentially the most productive industry ideas from the main minds in administration. The views and opinions expressed are entirely these of the authors and find no longer necessarily replicate the reliable policy or space of Harvard Industry Overview or its affiliates.
BRIAN KENNY: Right here’s a miniature Cool Call trivialities for you. What find lipstick, pizza dough, and biodiesel gasoline procure in well-liked? And the answer is palm oil. Palm oil is one of essentially the most typically frail ingredients within the arena. You’ll procure it in 50% of the merchandise on grocery store shelves from laundry detergent to cookies. People enjoy about eight and a half of pounds of these items yearly. 85% of the arena’s present is made from palm trees grown in Malaysia and Indonesia the put deforestation is a rising challenge. That’s precisely the chance that Shara Ticku and her co-founders saw after they created C16 Biosciences, a startup whose aim is to be to palm oil users what Impossible Burger is to meat enthusiasts. The chance is loyal and so are the challenges. As of late on Cool Call we’ll allege about Professor Jeff Bussgang’s case entitled, “C16 Biosciences: Lab-Grown Palm Oil.” I’m your host Brian Kenny and you’re being attentive to Cool Call.
Jeff Bussgang is half of the entrepreneurial administration unit at Harvard Industry College. He’s co-founder and general accomplice at Flybridge Capital Partners, and he analysis lean startups to boot to procedure and administration challenges for founders, all of which is completely acceptable for at the present time’s conversation. Thanks for becoming a member of me, Jeff.
JEFF BUSSGANG: Pleasure. Sizable to be here.
BRIAN KENNY: I presumed this changed into once a in actuality, in actuality keen case. I had no thought that palm oil even existed but interestingly it’s an actual immense ingredient.
JEFF BUSSGANG: It’s amazingly pervasive in our meals, in our cosmetics, in lotions in each place. It’s unheard of how great expend we all procure of the oil.
BRIAN KENNY: I deem of us would in point of fact enjoy hearing about C16 and what they’re seeking to find, seriously within the wake of the Impossible Burger and various developments like that that appear to be taking situation. But let me demand you to originate by telling us what would your cool name be to the category in this case?
JEFF BUSSGANG: Successfully, you teed it up a miniature bit with your observation about Impossible Burger. Right here’s an organization like many hard tech corporations pioneering a market the put they settle on to grab what’s my first application going to be? Shara’s preliminary thinking changed into once, let’s originate with the easy application, which is cosmetics, and there are a assortment of complications with that different, until she begins to worship and records involves the fore that Impossible Meals and Past Meat procure raised an unheard of amount of capital at unheard of valuations. Her vision had in any admire times been to find into meals. That’s the put the immense expend of palm oil is. She had thought, effectively, I’ll find there in a stepwise vogue, but now with this records, the demand that Shara has, and this is the cool name that I requested the category, is: Would you win profit of the fun and momentum that’s happening horny now and jump into meals all of a sudden as heroic as it is, or find you stop serious about personal care first with the scheme of going into meals later?
BRIAN KENNY: K, and that’s what’s going to unfold in the present day about this case. How did you hear about C16? Shara changed into once a graduate of Harvard Industry College. Is that how this came to your-
JEFF BUSSGANG: Yes. Shara changed into once no longer in my class, Launching Tech Ventures. Unfortunately, I didn’t procure her in my class. I deem she changed into once no longer ready to find in, she urged me. But one of my various college students who changed into once a classmate of hers prompt her to me. Shara went by the Y Combinator Accelerator Program the summer season after graduating from HBS after which pursued, after raising a miniature bit of cash, pursued the industry and after a 300 and sixty five days or so one of my various college students brought her to my attention.
BRIAN KENNY: How does this case expose lend a hand to the issues that you just peek at as each any individual who’s a practitioner but furthermore any individual who is now doing analysis on these very identical matters?
JEFF BUSSGANG: Successfully, my class specializes in pre-product market match startups and quite a bit of of the classes, the circumstances in Launching Tech Ventures are serious about abilities corporations which could be tool corporations and tool corporations procure this magical means to iterate in a short time. Now not easy tech corporations like C16, an synthetic bio-basically based fully company is much less simple. It’s much less simple to iterate as swiftly. You’ve got to present strategic selections which procure longterm implications and market different is the perfect preliminary strategic resolution. So I presumed it changed into once a in point of fact keen blueprint of seeking to unpack and deconstruct for these that’re deciding on that first application, what’s the rubric that you just battle by? And furthermore for a tough tech company how find you step lend a hand and replicate on the implications of that different recognizing that your freedom and flexibility aren’t fairly the identical as for these that’re building an app?
BRIAN KENNY: So let’s allege a miniature bit about palm oil. I teased it a miniature bit within the intro but why is it in such broad demand?
JEFF BUSSGANG: So palm oil has a assortment of characteristics which procure made it very well-liked. Those characteristics procure the temperature at which it melts. It retains its shape in warmth temperatures. So for storage applications it’s very efficient. So let’s convey, peanut butter on the shelf, you’ll undercover agent within the ingredients palm oil in end to all of our peanut butters that inspire it defend its consistency and viscosity without melting. It’s furthermore extremely cheap. So there’s a plethora of palm oil forests one day of Malaysia and Indonesia, and there are some sorrowful implications of palm oil which we’ll find to I’m determined, but which you’ll want to per chance extract the palm oil from the trees and find it into the meals merchandise and our personal care merchandise very effectively.
BRIAN KENNY: K, and how did Shara more or much less glom onto this notion? It appears to be like prefer it’s kind of out of left field.
JEFF BUSSGANG: Yes, it’s a relaxing one because Shara’s background like a kind of our college students and quite a bit of entrepreneurs is now not any longer a scientific background in this field. She changed into once no longer precisely a PhD in synthetic biology. She changed into once a liberal arts major, grew up in Texas, labored in investment banking, came to Harvard Industry College and took a class at MIT that changed into once an entrepreneurship class that she changed into once impressed to win the put one of her classmates changed into once that PhD in synthetic biology and exposed her to this means to find molecules in synthetic vogue very like computers can find tool. She changed into once impressed to accommodate palm oil for two causes. One, the environmental causes. There changed into once an comely destructive affect to the ambiance of deforestation. You’re developing a kind of carbon and air pollution within the air and you’re furthermore taking away trees which could be in turn spirited carbon. It’s furthermore many, many members deem a human rights self-discipline on story of the labor complications. It’s very labor. It’s very painful. It’s very harmful work. And Shara, who traveled to Southeast Asia and saw the smog in Southeast Asia as a outcomes of the deforestation, of us carrying masks and all these air pollution complications, she changed into once impressed to expend this synthetic biology platform and means to this environmental challenge.
BRIAN KENNY: You’ve studied a kind of entrepreneurs, a kind of founders. Is this blueprint of serendipitous self-discipline a fairly well-liked ingredient the put any individual like Shara who’s impressed because she’s been there and viewed it, has a gamble detect with any individual in a class who’s got the science background after which horny kind of magic occurs?
JEFF BUSSGANG: It is long-established. That serendipitous and that magical moment is fairly well-liked. I deem what is keen to me is when I undercover agent founders, and a kind of our young college students procure this dynamic, they’ve the ready mind. They provide thought to complications in a in point of fact creative and analytical blueprint. They expend their left mind and their horny mind, and so after they find exposed to a bother, they deem, effectively, no longer horny isn’t that unsightly for the nation? Isn’t that unsightly for the arena? Isn’t that unsightly for the ambiance? They deem, how find I solve that challenge? Is there a strategy to systemically solve that challenge, no longer horny in a exiguous blueprint, but in an heroic blueprint? In case you believe about it, here’s this young entrepreneur without the sexy tutorial or technical background, she learns of a scientific means at a fairly high degree, synthetic biology. She will be able to get exposed once more at a fairly high degree to a critical environmental self-discipline, the deforestation of palm trees one day of Southeast Asia, and she has the wherewithal to deem immense and deem, you know what? This broad industry, why isn’t it lab-grown? Why aren’t we horny developing this molecule and offering this ingredient within the lab in a completely sustainable blueprint?
BRIAN KENNY: Yes, and I deem with the appearance of Impossible Burger, now all people sees that it’s which which you’ll want to per chance mediate to find one thing like this at scale, you know?
JEFF BUSSGANG: Yes. One among the issues that’s very keen, and we allege about this at Flybridge quite a bit when we allege about our investment selections, we demand ourselves the demand, why now? I deem the ingredient that’s so impressive about this conducting that makes C16 so compelling is that it has so many dimensions to the “why now?” demand. You’ve got the sustainability plod and this sensitivity now to the ambiance which is going to develop each person and producer demand. And likewise you procure, as you famed, these examples of synthetic biology corporations developing very treasured meals merchandise that can elevate a broad deal of capital and produce very treasured franchises. So you procure got these two very keen forces, one on the almost cultural aspect and the more than a few on the technical aspect coming together at the identical moment.
BRIAN KENNY: So let’s allege regarding the economics of palm oil for the reason that case points out that one of the issues that makes palm oil so comely is that it’s rather simple to extract and to process and to work into all of these merchandise as you talked about. It sounds even though just like the scientific means that they’re seeking to supreme at C16 is a complete lot more refined. So how find the numbers work out because the C16 group is attractive about what the chance here is?
JEFF BUSSGANG: It’s one of the broad tensions for deep tech or hard tech corporations. After a kind of time and capital, you believe you also can find to a degree on the associated price curve the put you’re aggressive with the feeble well-liked methodology. But to find there it is a must settle on to clearly elevate a kind of capital and win a kind of time. So for a tough tech company with an unsure pause final result and with a broad deal of scientific threat, how find you elevate that capital? How find you expose that yarn? And the usage of the lean startup methodology and experimentation find, which we allege quite a bit about here at HBS within the entrepreneurship department, how find you check your blueprint and iterate your blueprint there? That’s in actuality the stress of the case here. Shara’s preliminary thinking changed into once personal care, class seriously is a distinct phase market, but it’s a procedure of getting started. Little batches, high willingness to pay, and means to originate to check out that first product. Food, with the total FDA rules, with the high volume and the cheap requirements, feels almost too heroic to originate with. That’s the stress that she has. The vision and the fervour she has is to vary the industry. In case you’re perfect supplying a few vials of lotion, you’re no longer in actuality altering and impacting the ambiance and the sustainability challenge. She wants to impress the arena, but to find there, it takes this circuitous route and the staunch blueprint she will be able to be able to navigate that route is to raise the exiguous amount of cash to show cloak the science, elevate a miniature extra cash to show cloak the preliminary market and the preliminary product and stepwise her blueprint there.
BRIAN KENNY: Yeah, and to boot they don’t in actuality procure a product to notify per se. Is that-
JEFF BUSSGANG: Yeah, which you’ll want to per chance negate regarding the investor meetings. You’re no longer showing the relaxation.
BRIAN KENNY: Appropriate.
JEFF BUSSGANG: You’re pointing to a few scientific labs and papers. Your early conversation is quite a bit about vision and miniature or no about what you’ve in point of fact produced.
BRIAN KENNY: Create merchants, find they care regarding the kind of altruistic aspect of this? The reality that what they’re seeking to find is each going to develop prosperity, but at the identical time it’s going to accommodate an actual foremost societal self-discipline.
JEFF BUSSGANG: I would convey categorically, no. There are exceptions. There are affect merchants and these are exceptions, but for these that peek at the hundred billion dollars of capital that goes into ventures, it’s all about how find I return that capital as effectively and as effectively as which which you’ll want to per chance mediate. You focus on regarding the fiduciary duty that these merchants procure isn’t to find appropriate within the arena. It’s to near lend a hand as great capital as which which you’ll want to per chance mediate so that the house owners of that capital can grab what to find with that capital and optimistically find appropriate within the arena. Capitalism is now being challenged to furthermore address sustainability complications and environmental complications. What in actuality attracted me to this case changed into once that it addressed a starvation that college students procure, which is to peek at ventures which procure this double final analysis dynamic. It’s a capitalist scheme applied to a sustainability conducting. There’s no demand that Shara is making an try to raise capital and return that capital very like Impossible and Past Meat procure completed in a in point of fact a hit vogue, but there’s furthermore no demand that her mission, the fervour that infuses the conducting, is the find appropriate ardour and the environmental affect it’s going to procure.
BRIAN KENNY: I would furthermore deem that the prospects that they’re promoting to, so whether or not they lope into personal care merchandise or to meals merchandise, it advantages these brands to be ready to claim, “We’re no longer the usage of palm oil anymore. We’re no longer contributing to the deforestation challenge.”
JEFF BUSSGANG: It’s a broad point and that changed into once my earlier observation regarding the “why now?” and the cultural implications. In case you thought that this lab-grown palm oil will be 10% more costly but procure every various attribute the actual identical, if consumers don’t care, they’re no longer going to pay that 10% top class, there’s no industry. As of late a kind of our mammoth bottled water manufacturers are fighting this self-discipline. Coca-Cola owns Dasani. Dasani has near up with this plastic that has a fraction of the plastic, because all people’s afraid about plastics within the oceans and the affect, a fraction of that plastic is plant-basically based fully. But consumers are no longer showing their willingness to pay larger for the plant-basically based fully bottle than the plastic-basically based fully bottle. I changed into once chatting with a few Coca-Cola executives no longer too long within the past who procure been fretting about that challenge, that they in actuality feel like they’ve completed the sexy ingredient, but consumers aren’t reacting within the model they’d hope. Now they’re in a worry with a larger cost bottle and an lack of means to cost more for that. Though consumers convey they need their corporations to behave sustainably, are they willing to pay for it? That’s one other rigidity that Shara faces.
BRIAN KENNY: So does C16 procure any competition? Is there someone else accessible seeking to find this? Are they in a slump to find to the market sooner than any individual else does?
JEFF BUSSGANG: The palm oil industry is so massive, it’s tens of billions of dollars. The loyal slump is, can she finance this and produce it in a procedure that is ready to change the deforestation resolution? So there aren’t a kind of various corporations. Essentially, I don’t know of any various corporations which could be taking an synthetic biology procedure to developing lab-grown palm oil. Your demand about competition is furthermore a in point of fact keen one within the context of the cool name because if there’s no competition, if in actuality the slump isn’t about beating the three various Silicon Valley competitors which procure the identical notion, but fairly seeking to disrupt an industry in a critical blueprint that has this double final analysis affect, what’s the frenzy? Why no longer stepwise your blueprint slowly, fastidiously and thoughtfully into the immense vision? That’s the stress. The hype and the hoopla and the capital on hand to switch after the meals industry is horny, but there’s no longer the identical aggressive strain to pursue that direction. So this rigidity for Shara is even though the capital procure been on hand, is that the sexy ingredient to find or is the sexy ingredient to find to stepwise your blueprint by the maze of non-public care and class and enviornment of interest merchandise, produce the group, produce the product, find some reps underneath your belt sooner than you win on the meals industry and that extremely aggressive and cheap curve?
BRIAN KENNY: The various ingredient that comes all the blueprint in which by from the case, we allege about deforestation and human trafficking and quite a bit of of the unsightly issues that appear to near lend a hand alongside with the palm oil industry. At the identical time, what C16 is making an try to find would disrupt an established industry that employs many, many members all the blueprint in which by the arena, how find you change that half of the economic system for these that lope on a extraordinary blueprint?
JEFF BUSSGANG: It’s an keen demand and it’s one that we discussed within the category. Must you try to find appropriate in this vogue and you disrupt an industry, there are some unintended consequences. We’ve viewed this from various disruptors in various industries. On this situation, you’ve got complete villages and communities which could be very dependent on the palm tree industry, many jobs, a broad deal of wealth and wellbeing. In case you procure been to find rid of this, even though it’ll be appropriate for the ambiance and globally, it’ll be unsightly for the communities locally.
BRIAN KENNY: Is it a capital-intensive endeavor what they’re seeking to find?
JEFF BUSSGANG: It is miles a in point of fact capital-intensive endeavor, seriously if she wants to vertically combine and be a producer. So if she procure been simply drawn to licensing the abilities or offering the recipe so as to talk, and the basics that then she would quit to the mammoth palm oil corporations, it could presumably no longer be as capital intensive. But as which you’ll want to per chance take into consideration, fairly than allow the entrenched corporations to either squash the abilities or expend it in perfect enviornment of interest scenarios, her aspiration is to in actuality be transformative and disruptive. In consequence of this reality, the long breeze is the capital intensive breeze to develop a manufacturing means.
BRIAN KENNY: What does C16 indicate by the model? The put does the title near from?
C16 Bio is, as I understand it from Shara’s description to me, is a particular description of the chemical compound that’s made out of palm oil. It’s one of the palm oil derivative chemical descriptors.
BRIAN KENNY: K, and she doesn’t intend for this to be a secret kind of title that no-one knows about. She wants C16 to be most modern even within the merchandise that once it starts to change into half of a neighborhood of merchandise.
JEFF BUSSGANG: Yeah. In case you believe regarding the tip sport, for these that like to procure consumers pulling on this cultural boost to be willing to pay more or no longer no longer up to the identical and worship and grab an synthetic or lab-grown palm oil-basically based fully product, you undercover agent the no GMO plod is one other instance of this blueprint of a ingredient the put consumers from a cultural standpoint find swayed to grab one product over one other motive they deem it’s the sexy ingredient to find, her hope is that she will be able to be able to develop a an identical plod around synthetic palm oil.
BRIAN KENNY: K, so what are most certainly the most challenges that they face because the case unfolds?
JEFF BUSSGANG: Successfully, this rigidity about what to accommodate first, what market to accommodate first, whether to present your individual designate as you procure been hinting at and alluding to a minute within the past or to accomplice in a white stamp vogue, whether to work with mammoth companions or to work with smaller companions or challenger brands, these are the picks that she has in front of her. So it’s a market different, it’s a product different, and a industry boost different all within the context of this financing ambiance the put a procedure, meals is terribly hot and very horny, but per chance a siren music for her to, at the threat of going too a ways in my mythology metaphor here, crashing into the rocks by pursuing it too hard.
BRIAN KENNY: What’s the success charge of these science-basically based fully forms of startups? It appears prefer it’s a worldly, in the case of startups typically speaking, this isn’t like launching a particular carrier or promoting an individual product. Right here’s a miniature more intense.
JEFF BUSSGANG: When researchers peek at startup success charges, the numbers realized peek one thing on the deliver of 20 or 30% success, 70 or 80% failure. In the case of C16 and various corporations prefer it, you’re compounding that threat with tech threat and with financing threat. So the success charge is even lower than that. So it’s a in actuality highwire act that she’s pursuing. And as I talked about earlier, this blueprint of lean startups and experimentation all sounds very appropriate for these that’re designing an app and which you’ll want to per chance change it daily. Must you’re building an synthetic biology-basically based fully product biology and chemistry are no longer as simple to vary. So her find cycles and her iteration cycles and her finding out cycles are great longer. So the picks you produce procure in actuality profound strategic implications.
BRIAN KENNY: Does that produce it quite a bit tougher to find merchants to settle on to win a gamble on one thing like this?
JEFF BUSSGANG: Entirely. In case you peek at the giant majority of merchants and the put they’re putting their capital, they’d as any investor, great fairly pursue equally comely markets and industry objects with lower threat. So for these that’re presenting your self as many hard tech corporations find as a larger threat conducting on story of the tech threat and on story of the financing threat, then you indubitably’ve got to present the argument that you just procure a larger return. So that’s half of the magic of this case I deem furthermore, which we allege about within the category, which is at the tip of the day it’s a commodity. So if she’s wildly a hit, as immense as this market is, it’s composed a commodity market and how treasured is a commodity company at the tip of the day? Can she express a worth proposition that is such that it’s a platform, no longer horny a commodity, that it’s a product with some parts that can presumably produce it more comely to in actuality show a more treasured conducting at the tip of the day.
BRIAN KENNY: So, a one final demand for you. What find you adore to procure of us to place in mind from this particular case if there’s one ingredient that stands out?
JEFF BUSSGANG: So I deem if I procure been to focus the takeaway, and I try to find this at the tip of class and typically the following day, in this case the takeaway for me is regarding the proven reality that your different of the experiments that you just slump is your procedure. In an organization like C16 it in actuality brings residence the purpose that your assortment of your experiments, your check option, your sequencing, that is your procedure. So be very, very thoughtful and strategic and in actuality peek interior in the case of your individual personal ardour and ambition, what more or much less an organization are you seeking to develop and that can result in a more in-depth find and sequencing of the experiments you procure got to slump.
BRIAN KENNY: Sizable advice to the total entrepreneurs who’re listening. Jeff, thanks so great for becoming a member of me at the present time.
JEFF BUSSGANG: Pleasure it’s mammoth relaxing to be here.
BRIAN KENNY: In case you enjoy Cool Call, which you’ll want to per chance like various podcasts on the HBR Items Community. Whether you’re procuring for advice on navigating your profession, you adore to procure the most contemporary thinking in industry and administration, or you horny settle on to hear what’s on the minds of Harvard Industry College professors, the HBR Items Community has a podcast for you. Earn them on Apple podcasts or wherever you hear. I’m your host, Brian Kenny, and you’ve been being attentive to Cool Call, an reliable podcast of Harvard Industry College on the HBR Items Community.