This Week in Startups - Venture Debt: should your startup take it on? + Mi Terro's Robert Luo | E1593

Episode Date: October 23, 2022

First up, J+M chop it up about venture debt on this edition of VC Sunday School. What are the dangers? And when should your startup take it on? (2:12) Then, Molly has a conversation with Mi Terro founder Robert Luo about how they are targeting the world’s microplastic problem. (19:33) (0:00) J+M tee-up topics for Sunday (2:12) Jason warns founders of the dangers of taking on venture debt (9:23) Harmonic - Get $4000 off at https://harmonic.ai/twist (10:42) Jason addresses when venture debt can and cannot work + PAG’s new venture wealth fund (18:05) MicroAcquire - Sell your business with no fees at https://try.microacquire.com/twist (19:33) Robert Luo joins Molly to explain how Mi Terro is solving the world’s microplastic problem (28:50) Revelo - Get 20% off the first 3 months by mentioning TWIST at https://revelo.io/twist (30:17) Robert talks about competition, his background as an entrepreneur and the future of Mi Terro FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1

All right, everybody, it's Sunday. And you know what happens on Sunday, VC Sunday School. That's right. And as the months go on, the topics are getting more and more, I don't know, they're high level to me. We're talking about venture debt today. They're granular. Exactly. And I'm like encountering companies with different issues, including whether to take on debt in various forms.

And it just so happens that once again, venture debt is in the news as we enter a downturn. So we have a nice conversation about when and. if and whether startups should take venture debt and whether you should trust the one who wants to issue it to you. Of course. Of course. And we have this week in climate. We have a great startup that's working on synthetic biology, working to use agricultural waste to replace single-use plastics and paper, like the things wrapped around like those tied pods or, you know, plastics wrapped around your vegetables or meats from the supermarket. What a great interview this is, Molly. It's so interesting. You're going to. I love it. I love these science founders. It's fascinating. It's going to be a great show.

So stick with us. This week in startups is brought to you by Harmonic. Need to speed up your growth without speeding up your burn. Harmonic gives investment, sourcing, and sales teams data superpowers. Learn how A16Z, craft, Notion, Brex, and many more source better leads and qualify them faster. Get $4,000 off at Harmonic.com. slash twist. Microacquire. The startup acquisition marketplace. Start the right acquisition conversations at your own pace.

Get free and instant access to over 100,000 trusted buyers with total anonymity. Say goodbye to brokers and meet your ideal buyer today. Go to try.microacquire.com slash twist. And Revello. Looking to affordably scale your product development with global tech talent in US time zones, hire vetted remote developers in Latin America with Revello. Get 20% off for the first three months at Revello.com slash twist. All right, everybody, welcome to Sunday.

Molly is quickly getting to her first year as a venture capitalist, and I knew this question would come up at some point because I got to answer this question an awful lot. It's around debt for startups. So I'm not sure how you can. up with this question if it came up with one of our founders, but ask away. Well, it did. Both things happened. So I had a founder talked to me about trying to find a bank that would want to issue some debt to a startup. So that was part of that question. But then also

there was a story in the Wall Street Journal today about startups filling funding gaps with debt, despite rising interest rates, was the headline that as opposed to a down round. It sounds like some startups are raising venture debt instead. And then there was a story in Bloomberg about an Indian wealth manager, I think raising a $361 million fund specifically focused on venture debt lending, $5 million to $15 million per company. And then that got me wondering about what the heck with venture debt. And is that a sign of a down market? Is that a down market thing? You know, so there's like a lot of mechanical questions in there. How does this work?

When should you do it? What's happening now? All right. You ever see the Wiley coyote, you know, from the Warner Brothers Bugs Bunny series? And he's got the big barrel of gunpowder. And like, you know, he's like going to blow up Bugs Bunny or something. And like there's a trail of gunpowder and like it's lit. And it's like he's running with the gunpowder.

It's eventually going to catch him and blow him up. That's kind of ventured at. That answers that question. Yeah. A lot of founders are like, oh, I can put $5 million in the bank, and most founders in the first founders in the early stage are not going to qualify for anything close to that, but let's just put it at $2 million. My burn is $250 a month. That gives me eight more months of runway, and I raise $4 million in venture.

So I have 16 months. So I have 16 months plus this extra $2 million gives me another 18 months. Now I've got 24 months. Great, I got 24 months, and they're using it to extend their monthly burn. Now, the problem with this is, is if you don't have product market fit and you don't have a revenue stream, you've now just taken a loan out, you have this loan that has to be serviced and has to be service in a very short period of time. These are not 30-year mortgages. These are five-year loans. These are ones where you pay debt for a year or two.

The second you get the money, you start paying the interest payments. And then you have to pay the principal typically in a balloon payment in three, four, five, five. years. The idea being some venture capitalist, you have product market fit, you can pay it down. This is incredibly dangerous if the company does not have a path to profitability, does not have an existing revenue stream, does not have product market fit. And the people who most want venture debt are the people who don't have those things. When you have those things, you know, a board will be sitting there with a company with 10 million in revenue. They've been offered $5 million in venture debt. And the CFO is like, okay, I've done this before. We have a $5 million

dollar line. I've negotiated it from three different people. I have no covenants. In other words, there's no rules that will turn the business upside down. And I can draw down, and we're going to draw down one million. In other words, we have a $5 million essential line here. I'm taking down $1 million to start. We'll start paying interest on that. We'll keep it in our bank account.

And we have the $4 million in case things go wrong. Of course, when things go wrong, sometimes this venture tech gets pulled because the market has collapsed. And so banks can do all kinds of crazy things. But, man, if you start, you should not use this to cover burn, is my basic rule of thumb. And this is something you should not do until you have a CFO in a really tight accounting group that can predict

when you're going to run out of money. Because as we've seen, Molling, many companies in our portfolio unnecessarily die or have down rounds or chaos and near-death experiences, both of those things, death and near-death and then down-rounds because their accounting is so screwed up. And when the accounting is so screwed up, famously there was a company's virtual,

and Merrim was on this program when we were investors, and she didn't have control of the accounting. This is all public. I'm not speaking out of school. I think she's a tremendous entrepreneur, but would invest in her again. But basically the accountants, her outsourced accounting firm and her board was kind of asleep at the wheel.

The accounting was not correct. She was not on top of it. She was a product person. Basically, she didn't know when she was going to write out of money. And then they told her like, hey, we don't have money. And she's like, no, we have eight weeks of money. And there was receivables and everything was a mess. So most entrepreneurs should not take venture debt.

She didn't have venture debt. But the point is most of the times companies die. They don't have good accounting controls. This is like, this is like somebody who doesn't know the rules of poker going and playing in a high stakes game. They're like, is a flush or a straight batter? And you're like, did you really just buy in for $100,000 versus Phil Helmuth and Phil Ivy and Daniel Negerano in a poker match? And you don't know the ranking of the hands. If you're not really good at accounting and projections and have a very tight business model,

and a path to profitability, do not go near this, please. Too dangerous for you. What about this idea that startups are taking on debt right now to avoid resetting their previous valuations? It sounds like 1900 US startups borrowed an estimated $22.4 billion through September 9th, 29th, according to Pitchbook. And then not only are they taking on short term. What's the top number? 20 billion?

22 billion. Okay, hold on. There is not only the risk of do you have product market fit and are you default to live, there's also the risk of rising interest rates. So you might have this incredibly high expensive debt on top of all that. And maybe you're thinking it's non-delutive or like if you, if a company came to us and we were in diligence, would you be, which is a bigger red flag, a down round or a bunch of venture debt at high? This is a great question.

And by the way, just to, you said there were 1,900 companies that took on 22 billion. Yes. That's an average of $11 million in debt. I think that some of these might be very late stage companies that have like $500 million. lot of lines and then there might be some people with very small ones, but let's put that aside. That's an incredible number. When a company comes to us and they have venture debt, this is where things can get really dicey. If you have debt, then the next venture capitalist, you better be incredibly strong performer

for them to say, I'll give you, I'll invest $20 million, and $7 million of my money is going to pay down that loan, and then you'll have $13 million in the bank. Because you start to get into what's called catching the knife territory. and it is possible to catch a falling knife by the handle or by the blunt side but I don't recommend people tonight go to their kitchen take out your knife block

you know the butcher block with all knives in it and then I'll encourage you to just as a mental exercise think about one person your partner dropping knives from five feet high and you standing there and trying to catch them at three feet anybody wanted to play that game I don't because you're going to be

you're going to cut yourself at some point It's not going to be fun. And you're going to ruin your knives, by the way. You're going to lose a toe and ruin your knife tip. Listen, Harmonic is a database that finds companies before any other provider and refreshes them daily. It's pretty amazing. It works really well for VCs who are trying to source those new startups and for B2B sales teams looking for new qualified customers, which is really important right now. For example, Brex, you know, the startup corporate card, they use Harmonic to find newly incorporated founders to sell their product to, right?

about product market fit. And we love Harmonic here at launch. Our investment team uses Harmonic to source and vet deals faster and more accurately. Because hey, listen, they've done the work. They got all the data there. And we love to use the advanced search features to find information like, hey, a founder's background, their previous companies, if they've had any exits, how much money they've raised, and more. And we create perfectly customized searches that meet our investment criteria. Maybe we're looking for B2B. Maybe we're looking for marketplaces. Maybe we're looking for people who've raised a certain amount of money. And if you're watching the video that's playing right now, you see MyComp.

team doing a really quick search for pre-seed and seed stage SaaS companies. These are critically important for us in terms of our bets as an venture firm. Get better data, make better decisions, and grow faster. You can do all of this at harmonic.a.i slash twist and you'll get $4,000 off your company sourcing and monitoring product. That's harmonic.aI slash twist for $4,000 off. What an amazing deal. Yeah, not a fun exercise. So this is a negative signal to answer your question. It's a big negative signal. And in a Dow market, it gets super dangerous. So again, now, let's say you have raised $100 million. Let's say your company's making $30 million a year and you're losing $20. Got $100 million. You decide to put a $25 million venture debt on top of you. Now you've got $125,

you're losing $20 million a year. Okay, you've got six years to figure this out. And you definitely have a CFO and a finance department. You have plenty of time to pay it down, et cetera. What happens is people have three months of runway and they're like, I need venture debt. Now venture debt is not going to happen in that case, but I've watched just people with no product market fit with 18 months of runway decide to get obsessed with this. It's typically the founders who are obsessed with this at the early stage should be redirecting that obsession with their customers and their revenue and their product. They're focused on the wrong thing.

It is a red flag for that reason. Is it more or less of a then compare it to the downright? more or less of a, because I sort of feel like if a company comes to, I mean, we're not going to be seeing companies that are taking a down round, right? Because we're early enough, likely. But if you're a growth stage fund, we might. But like I sort of feel like if a company came to us and they had raised a down round because the market, you know, went from red hot to ice cold in a six month period, that to me would be less of a red flag than we took a bunch of venture debt to try to stay alive in a tough market. I would say, oh, yeah, the market slapped you upside the head. Here's the thing. You can take, if your company is truly troubled, you can't access venture debt. The venture debt issuers, they're very savvy.

So it's kind of like in that situation, I don't think that situation would occur all too often. So if venture debt's given, it's given to people who can pay it back. There are some drive-by firms that might give this. And then what happens is you get into a really negative space where somebody, like me, a venture capitalist, has to call the venture defrainer and say, listen, this company is struggling. A little I have to have made this phone call a half dozen times. I need you to push off payments for a year. You'll get 10,000 more shares of the company as warrants.

But if not, the company's going out of business. They have no assets. Nobody's buying it. And then the founder's going to start a new company the next day. And I'm going to lose my $2 million. You're going to lose your $2 million. There's nothing here. We're going to back the founder again with a clean cap table.

That's kind of where these venture debt people then, will play ball. If they know that they're going to get zero, they will become more flexible. But in a sale, I had a friend who sold a company and the venture debt had gotten upside down a bit. When he did this, you know, $300 million sale, they said they wanted like 5% warrants or 7% warrants or something crazy. And he had no choice and wound up giving them like 3%. They wound up making 10 million in warrants on a $10 million venture debt line or something. So they can be quite aggressive and in the down market or be cutthroat. So it's again, it's dynamite. And so when we, so when we see a story about idleized wealth management backed by PAG looking to raise a $360 million dollar venture debt fund to lend to new age or high growth companies in India, India's venture debt market apparently could pass surpass a billion dollars this year according to stride ventures. Are we thinking this is like some vulture behavior?

Could be vulture capital. It could be Red Flag territory. They could, you know, in India and other regions, you could have a different framework of how the ecosystem works and a different expectation from founders. In some other markets, founders are not ruling the roost like they are here in America. Forget about founder friendly. It's even worse than it was in the early days of Silicon Valley where founders were basically assumed to be replaced by professional management eventually. Over there, it could just be like, you're the founders of the company, you own 10%, the three of you have three percent. each, we're taking over the company. And with debt, if you can't pay the debt, they can seize the

company. So I don't know this firm. I don't know the Indian market all that much, but this is red flag territory for me because they, they become senior. The debt providers become senior to all the investors, the venture capitalists, and obviously the venture capitalists are senior to all the founders and the employees. So what happens is basically the company gets seized. And that's where I think some of these people who do debt, they might be not this firm, I don't know them, but I think, I don't know,

but some of the debt folks could be looking to, if a company can't do it, extract max value, which could include seizing an asset, which has a great value. And, yeah, be careful founders. Yeah. When you sell shares,

yeah, when you sell shares and you have a board, and you follow all the standard documents, standard terms, your chances of success go way up. When you start doing funky stuff and you start having a lot of debt and a lot of notes and different terms, it gets really complicated really quick. And then it freezes you out of capital markets down the road unless you've got a money printing machine and you can use money to pay down this debt and solve these problems.

Which more startups are just not going to be able to do. There you have it. There you have it, everybody. Be careful. Be careful, folks. Absolutely love it. All right. Well, that's VC Sunday School.

Next up, because it's Sunday, we have this week in climate startups. And I have just another one of those super interesting, like super sciencey climate startup stories. We have Rob, the CEO and founder of Meatero, which is a synthetic biology and material science company that engineers upcycled agricultural waste. There's this whole like, you know, waste to value chain thing happening now into basically like a plastic. replacement. This is a really interesting company because they started out using spoiled milk to make t-shirts, literally using like dairy waste to make fabric and then ended up pivoting. And they're in commercial production. This is not like an R&D stage company making these biomaterials to replace single-use plastic and paper. And they're starting with those little laundry pods.

You know, there's like that weird little plastic around laundry pods that's now in baby food. You know, are showing up at like the bloodstreams of babies because there's so many microplastics in the environment now. It's not good, not good. So they're replacing that with agricultural waste. It's just super, it's super interesting, really, really, really smart, thoughtful, genius. I love this. I love this stuff.

It just, it feels like science can solve so many of these small issues, like literally small. Yeah. Small. And it just takes like thoughtfulness, right? Like, this is like a tragedy of the commons. Like those pods are delicious. delightful to use. They've made life so wonderful to just drop a pod in your dishwasher. But man, we don't think about the fact that they're literally encased in plastic that then

gets flushed down the drain and into the ocean, then we eat it in our fish. I mean, it's just like, what is a total circular economy thing, just take existing waste streams and turn it into that product and many more. Rob Luo, Robert Luo is the CEO and founder of Mitero coming up right now. Enjoy the interview. Okay. Enjoy. Microacquire is a startup acquisition marketplace that cuts out everybody in the middle. Basically, that means they're going to help startups get acquired efficiently. If you're a founder looking to sell your startup, your project, your side hustle, well, you should know microacquire is free, it's private, and there's nobody in the middle to screw it up.

Trust me, I've seen so many times these brokers in the middle screw up a deal. You know why? They might be looking out for the buyers more than the sellers because you sell your company once, maybe twice on a lifetime, but the buyers of companies might be buying 10 companies a year. It's the opposite of Microacquire. Microacquire has already helped hundreds of startups get acquired. This is such a great idea. I don't know why I didn't come up with this.

And they facilitated hundreds of millions of dollars in closed deal volume. Their platform includes over 120,000 buyers. Now, these buyers have skin in the game because they pay $390 a year for access to the database and this marketplace of companies looking to sell. And these startups are all vetted. So if you have thousands of vetted startups currently listed for sale and 120,000 buyers, what's going to happen? Successful acquisitions. And the founders get free access and instant access to these 120,000 trusted buyers who, you know, they pay for access.

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Robert Luo is the CEO and founder of MeTaro. And I am going to let him explain what this startup does because this is an amazing premise. Tell me what you guys are working at. Absolutely, Molly. Thank you for having me today. We are solving a problem that happens every single day to everybody, but we don't talk enough about, which is microplastic. Do you know that you and your family member might be drinking microplastic from the detergent and laundry pods that you use?

Because these transparent, flexible film are made from a synthetic plastic polymer called PVA, polybinal alcohol. When you wash it in your dishwasher, they break into microplastic that flows into the ocean. And eventually, we'll come back to the watery drink and the food we eat. So it's a huge problem. 20 billion of these pots are produced in the U.S. every single year, and 8,000 tons are just floating into the ocean. Our solution is to replace these microplastic from biobase-sourced biomass, and they can be made into biodegradable and water-soluble resins

that are good for an environment and leaves no microplastic whatsoever. So I would imagine, before we get to the how, you're talking about replacing a lot of all? What amount of things as I look around my daily life could be replaced with this new material? We are starting off

with these detergent laundry pots. Obviously, PVA is... That's the beachhead. That's the beachhead. And obviously, PVA has been used in many other applications. For example, it can be used as paper coding and bider.

It can use in textile. It can even use in our contact lenses that a lot of people wear every single day. They're also PVA inside. Wow. Okay. What are, this is the key here. I think people are going to find really fascinating. What is the biomaterial that you're using to create this new? That's a very great question. And we're very honored and excited to introduce this new technology we had developed and it's also patented. We are upcycling beer waste from beer manufacturers such as N. Hyso-Busianbeb. And we are converting their beer waste into a bowel-based

polymer that can be made from the bacteria that we designed through fermentation. And after these bacteria create the polymer, we make them into resins, which you also see right here. They look like thermoplastic resins, but they're made from BOAs. And then these resins, which I can also take it out, show you. They're kind of beer, by the way, I love your props, and I love that you have fully, like the sound is even coming through the microphone. And they're kind of beer colored.

Yes. We can make it transparent if needed. any color possible. And then these resins will then be used as a drop-in to the existing plastic equipment. Then our partners make them into pods or other type of final products. So how long did it take you to accomplish this feat? Like, this is serious science. This is a hard science that you're talking about.

Yes. We're developing different generation of our material. Gen 1 of our material was done in two years. and now we're developing gen 2 of our technology. And then which part, not super specifically, but which part is patent? Is it the designing the bacteria to sort of do this conversion? There are essentially three parts of our technology. One is the extraction and purification of polymer from these agricultural waste.

The second part is designing the bacteria. And then the third part is downstream processing, like fermentation, modification, and then make into final resins. So our technology covers all three parts. And then how hard is it you describe sort of that the resins then become this textile effectively? Do you do that part also? We also have the technology to do that. At the small quantity, we'll do it in a house, but when we scale up, we intend to license or outsource to existing infrastructures. And is it specifically beer waste or can it be other agricultural waste?

Like, how broad is your source of fuel? Currently, we have trialled with beer waste and have done a success with it. We have also trialled with dairy waste, like way permeate, which is the byproduct from ice green, cheese and yogurt production. We have also been traveling with other cellulose and lichen type of ways. And in the future, we are going to trial with plastic waste because we know there's a huge problem with plastic waste. Right.

how big a market are, I mean, you're starting with the pods, but I wonder like how many, I feel like people have no idea how widespread the use is of these pods and both dishwashers and laundry. Yes. The entire application for the PBA material that we try to replace has a commercial value of $25 billion as of today, which is massive. So people are using that much.

people are using the pods. Not just pots. Pots, there are, or just in the U.S. alone, 20 billions of pods are being produced, and U.S. is not even the biggest user, using country in the world. The number one, I think is EU, and then it comes U.S.,

and then comes Asia-Pacific. So more and more people are using these pots and PVA-derived materials. So tell me about your journey to this point, because I know you've also gotten some press for using spoiled milk, the dairy products, and turning that into fabric, like clothing textiles?

Is this a pivot for the company as the science has evolved? Yes, the science has involved and the business model has involved. We start off by creating textile fiber made from milk waste. In fact, the T-shirt I'm wearing right now is made from our own milk waste fiber.

I'm saying? Very comfortable, and we had some success with doing so, but in 2020, we decided to make a pivot to focus more on solving the microplastic issue, which we think is more urgent and has a bigger market to tackle. And so that was really, in some ways, that was a mission decision? It sounds like it was a little bit of both, the business decision and a mission decision. Yes, we actually decided to pivot toward this direction by a recommendation from our partner

because they were looking for a solution to replace the PVA and microplastic in their supply chain. And we thought our technology can be suitable for them as a some degree. So that's when we start working with Unilever and Inhysoboceanbeb to formulate the solution. And how much kind of infrastructure do you have to create in order to capture this waste material? Like, do you co-locate with beer brewing facilities? Ideally, we do want to co-locate or use their existing infrastructure, the fermenter and bowel reactor, where we grow the bacteria. So this can be done on site in their facilities. before it delivers to the next partners we have that makes the resins in the final film.

Gotcha. And so what stage are you at now? Are you bench scale mostly? We are capable of producing 10 tons annually. So it's quite a pretty big for a kind of bench scale. So we do have a production line. We call it a pilot production line that can produce the 10 tons of resins every single year. Oh, that's amazing.

And you have customers, you have paying customers. customers who are buying this resin and using it already? Yes, we do. We have customer in the U.S., in EU, and in Japan. Incredible. And then tell me about your fundraising history. You raised a million and a half at a $10 million valuation. That's it?

That was our seat round. We do have a bridge round that is going on right now. We do have partners that want to jump in, but I couldn't disclose their name yet. Of course, yes, totally. Congratulations. That's a lot of success with something that sounds. very capital intensive with not very much money. Is there also non-delutive funding in there?

Or are you just really, really good at? So we did receive 300K in non-diluted funding. And we are applying for more grants like SBR and NSF. But conception that bio material requires a lot of heavy investment. I would say to some degree it does. And for the companies that are pioneers in the space, they launched about a decade ago. At that time, they acquired a lot of investments into,

bioreactors building their own infrastructure. But the time has changed and the government is fully behind bio manufacturing and biotechnology. In fact, the Biden administration just proposed a $2 billion investment into the space. So we do not have to build our own facilities anymore. Our technology relies on the existing infrastructure so we can apply directly to what they have. That means we have a low capax to consider when we scale up. that is fascinating. I would not have thought that and I'm so glad you're right. That misconception definitely exists. Yeah. One fact that you need to know about startups. Finding engineers is super time consuming and super expensive. It's the biggest pain in the net in startups. I would say raising

money is easier than finding great developers. Well, if you're looking for qualified international developers without the crazy time differences or if you just want to scale without sacrificing on quality, Well, Revello is the answer. Revello is a talent platform that matches you and your startup with vetted full-time remote developers in Latin America. They work in the same time zone as you in the United States. Plus, it's more cost-effective than hiring in the U.S., obviously. And you'll get matched with vetted candidates within three days.

This lets you hire internationally so quickly and so easily. Revelto's engineers are, of course, full-time, and they're embedded in your team. Just like normal employees, they're proficient. and all the things that you probably have in your stack, whether it's AWS, Rust, Ruby React, Python, Nojs, and more. Revello's customers, wait for it. GitHub, 4Square, Carda, Indiegogo, Kickstarter.

I mean, this is a who's who of successful companies. So go to Ravelto.com slash twist and mention Twist to get 20% off your first three months. Plus, they offer 100% risk-free 14-day trial period. If you're not satisfied, you pay nothing. So head to R-E-V-E-E-L-E-L-E-L. orcom slash twist and mention twist to get that 20% off. How do you, given that amount of investment and the kind of relatively low cap-ex needed to get into this business, how do you think about competition?

I've certainly talked to a lot of companies who are trying to use various types of bio-waste, you know, and get sort of waste to value in some way. Is there going to be a fight for this beer waste in the future? We look at this problem in the three ways. In order for us to protect our business and technology, we have foul patents. That's one way of protecting our technology. Second is to build a very strong supply chain relationship. I think for any type of B2B business, supply chain partnership is very important.

Once we are in the door of Inhyso, Bush, Ban, and Unilever, it is very difficult for a similar company to kick us out and replace us. and the third way will be to execute execution. So time is money. We all know that. And speed is what determines the scalability and success of a company. And I know that right now, BIA has been used in majority two ways. In some regions where they can use as animal feedstock,

they will sell it for a small price. But in other regions where they can't, it's still treat as landfill. You are, and this is evidenced by the way that you're talking about your business, a three-time entrepreneur. What were your other companies and how did they lead you here? I come from an unconventional, I would say, entrepreneurial, I would say, entrepreneurial journey. The first two companies were both software companies, whereas Miteiro is a very deep tech, synthetic biology, and advanced material company. It was a fresh start when I first launched meteor.

What fresh start in climate, fresh start in hard tech, fresh start in all of that? Did you have an interest in climate solutions previously? Yes, I have always been fascinated, interest in climate solution. In fact, my second company, even though it was a software app,

we developed a mechanism where we calculated people's outdoor activities from running, biking, basically things you don't do to drive cars. We will give you credit. And this credit will exchange for discounts around university campus. That was my first way of testing out the climate tech space. And then how about the hard science part of it?

How did you, do you have a science background? How did you come to that expertise? I was not trained as a scientist, so I had to spend a lot of time to recruit our scientists, engineers, and definitely learn a lot through the process. Talk to me about the future for your company specifically. Like when you think about the addressable market now, you've obviously defined it.

How much, how many more plastics could you replace? Yes. Our goal is to produce 100,000 tons by 2030, and that will make us the six largest PVA manufacturer in the world. The first fire are in China and in Japan. There's none in the U.S., which also makes us, the largest PVA alternatives in the U.S. and in the world, which would be very fascinating. But beyond that, we think we can definitely do more than replacing PVA and mycoplasic.

We're also very interested going back into textile to help the textile industry make a change because textile has a very long supply chain. There is the raw material. There is the additive reagent that's involved to bind the fiber together. So there are a lot we can do for our solution. And it's really destructive. I mean, nobody thinks about cotton as being like a plant. Right.

Correct. I'm just, I'm so curious about how you arrive to the point that you are. So you're producing in the tons already. You have paying customers. I mean, is this, is the biology part of this, the bacteria part of this, de-risked from a science perspective already? To some degree, we have figured out what type of bacteria and how we can design this bacteria to intake different type of biomass waste.

Then we need to figure out the part where the downstream process was going to be like, how can we purify this to a high yield rate, which can help us to drop down the cost and provide a high quality product to our customer. So, yes, it is pretty de-risk, as in like if you want to expand this to other microplastics or other textiles, it won't be that much more science. There will always be science for new R&Ds, but, we have figured out a way that we can grow fast and lower the cost. How big do you think the waste of value market is?

This is definitely a growing part of this kind of, it's a version of circularity, I guess, right, in the climate space? Absolutely. The waste of value market is growing tremendously year by year. We have seen companies that suck out CO2 emission from the air, make into protein, make into diamond. And we have also seen companies that have tried to, trying to leverage different type of biomass waste,

turn into something that's valuable. It's least to say that it's very important that these companies exist and can create something that is truly sustainable and close loop. Yeah. And then how did you get connected with, it sounds like your connection to AB and Bev and Budweiser was through Budweiser China? So we were first connected through Bulwazer China. We participated a program.

And then we got into further development where we got into the 100 plus a cellulator, which was sponsored by AB and Bev, Unilever, Kokea Pond Olive, and Coca-Cola, so four for the biggest consumer companies in the world. Amazing. You're so calm about all this, but it seems like everything is really coming together for this business right now. Slowly and surely, and this goes back to a phrase I love by Steve Job. It's not word by word, but he talks about you can never plan for the future.

But when you look back, different dots will connect into line. And that's how I feel at our current stage. And so in five years, you see yourself having replaced not just tons of PVAs and microplastics, but making a big dent in the textile industry and beyond. We hope that we can make something more meaningful than what we're doing today. And textile will be one area. And contact lenses will be another area because I too wear contact lenses. And for people that wear glasses, from time to time, we might wear a car.

contact lenses. Yeah, contact lenses have microplastics in them. I mean, for crying out loud. Yes, they do. They do. And they use PBA as a reagent to create the molding of these contact lenses. And these moldings are a single use. So basically just use it, throw away.

Use it, throw it away. It's a huge problem. I feel like the longer I talk to you, the more huge problems I will uncover, but I'm happy knowing that you are tackling them. Robert Luo is the CEO and founder of Me Tero. Congrats on all the success. Please keep us posted on what you're up to next. Absolutely.

Thank you, Molly, for having you today. Amazing.