This Week in Startups - When to take a meeting (VC School) + Fungi Flour: Hyfé Foods Founder Michelle Ruiz (Climate) | E1488

Episode Date: June 19, 2022

For this week's VC Sunday School,  Molly asks Jason about when to take a meeting with a founder (2:18). Then for This Week in Climate Startups, Molly speaks with the CEO and Founder of Hyfé Foods, Michelle Ruiz (16:43). Finally, as we're off tomorrow, we wrap with a couple of Juneteenth book recommendations (44:15). (0:00) Jason and Molly intro today’s show! (2:18) VCSS: When to take a founder meeting (12:00) LinkedIn Marketing - Get a $100 LinkedIn ad credit at https://linkedin.com/thisweekinstartups (13:18) Investing internationally: Sequoia announced an $850 million southeast Asia fund and a $2 Billion India fund (16:43) TWiCS: Michelle Ruiz, CEO + Founder of Hyfé Foods (21:15) Embroker - Get an extra 10% off insurance for your business at https://Embroker.com/twist (22:28) Breaking down the process of wastewater + how Hyfé Foods capitalizes (32:13) BairesDev - Go to baires.dev/twist and get $10k off when you sign your first contract (33:27) More on Hyfé Foods’ process to make flour (44:15) Outro: Juneteenth book recommendations

Hey, everybody, it's a big Sunday show for you. That's right. First up, we're going to talk about how VCs should prioritize taking founder meetings. And it's a great discussion, I think, a question every VC will have to face at some point, which is, do I take this meeting? Yeah. And we're going to use that as a segue, too, into talking about different corporate laws in different countries and international investing. A lot of great climate companies in Europe and Scandinavia. But also just this question of where people are finding opportunity in a downturn.

I think it's going to be great. And then for this week in climate startups, I'm sitting down with Michelle Ruiz of Hafei Foods, which is so cool. It makes, they make low carb high protein fungi, like fungi flour. And they're using waste streams,

just like sugary water from food production, growing mycelium on it and turning that into flour. It's like, peace out, we're growing. It's a whole new agriculture universe. I mean, this is the kind of stuff that makes you so hopeful about the world.

So interesting. Ag tech is just amazing and there's so much possibility. I really love how you're selecting these guests and educating the audience every single Sunday. So fun. All right. And then before we get started, we want to mention we will be off tomorrow on Monday. Today is June 19th. We will be observing that on Monday, Juneteenth.

And so we'll see you all Tuesday. That's right. We'll see you all on Tuesday. It's going to be a great show today, though. Stick with us. This week in Startups is brought to you by LinkedIn Marketing. To redeem a free $100 LinkedIn ad credit and launch your first campaign,

go to LinkedIn.com slash this week in startups. Embroker. Embroker's startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at imbroker.com slash twist. While you're there,

get an extra 10% off, using offer code twist. And Byrace dev. Hiring a team of experienced developers doesn't need to be hard, slow, expensive, or risky. Go to buyrace.dev slash twist and schedule a 20 minute chat to get a development team you'll love and get $10,000 off when you sign your first contract. Okay, let's get into VC Sunday school. I actually came up with this question.

Love this. Because I struggle with this one myself, even in, year 12 of being an angel investor and a venture capitalist, which is, should I take this meeting or not? Now, I assume, starting to have this question, yes? Yes, 100%. I mean, I love this because it is one of the things that you always say that, like, not to sound like a cultist, but I think about a lot is don't, it's never underestimate anyone. And I've already had the experience of thinking that a meeting was going of a dud going into it and then being like, oh, wow, that was amazing. and then also this question of sort of like how to evaluate because sometimes maybe it's not

the business that they're pitching even. It's the person. Like there's a million ways, I think, to decide who to meet with and why. All right. So let's start with where you are in terms of your career as an investor. If you have an empty calendar and you're trying to get deal flow, there is very little downside, especially in the age of the introductory Zoom meeting being a 20 to 30 minute experience at max of being, you know, very open to taking a meeting with founders. And if you do choose to take the meeting, be gracious, be thoughtful, listen intently, and just say to yourself, I've committed to a 30-minute slot. I told them it's a 20-minute meeting. If we go over, fine, I can always tell them at

minute 29. I have to go. I have another meeting. And you're framing it. So, So everybody has the right expectation. This is an introductory meeting. It's going to be 20 minutes. You show me, this is what I do, introductory meeting. Show me what you're working on for 10 minutes. I'm going to ask you questions. You can ask me questions for the following 10 minutes.

It's a nice little format. And there is an overriding concept here. You want to make sure that the expectation is set before the meeting. And two, you want to be, you don't want to waste the founder's time. So even if you have time to waste, it's year one, you got an open calendar. and you're going to do it. You don't want to waste their time. So it's important for you to have a list of the hard nose where you won't invest.

As one example, I do not invest in countries where I don't speak the language. Embarrassingly, I speak one language, English. I cannot, with a company that operates in Japanese or Chinese or whatever language it is, French, German. I can't evaluate the product. I make my decisions by using products. So it is not a xenophobic thing. It is a practical reality of, I can't have a translator on staff to translate a Japanese app for me and give feedback.

It's just crazy. And what that means is I can't compete with the Japanese investors who understand Japanese culture. So if I don't understand the culture, I don't speak the language, I'm not going to invest. And if I don't have boots on the ground on the continent, you know, or I'm not there, on a regular basis, it's also hard. So I will tell people that. Now, if they say, hey, listen, we're based in Japan.

And we've got a million users, but we just did that. And I speak English fluently. And here's our English version of our product. And we're coming to America. Okay, that's completely different. And it has to be a Delaware Seacorp for us to invest for any number of legal issues. So I will tell somebody, if I was interested, okay, great. We can do this, but just know.

I'm probably not going to invest because I don't speak the language and you're not in a Delaware LLC, do you still want to take the meeting? Because I don't want to waste your time. Now, for me as a celebrity in this industry at this time in my career, everybody wants to take a meeting with me,

so I don't have to deal with that. But that is just one rubric or caveat to take a bunch of meetings is just letting people know. Now, there's a second vector to put this against, which is the stage. If it's a late stage company,

and this is their pre-IP around, and your check size is 100K as an angel, or 500K as a seed fund, they may not want your money. So that's where just doing a basic amount of research and looking at the online databases or doing a search for the funding history or asking them their funding history

or looking in their document for the funding history, it might be out of your window of investing and you can be up front with them. Hey, I'd love to meet you. Let's say you do want to take the meeting. You're fascinated. You're into solar. And you say, I'd love to take the meeting with you. You seem really interesting, but my check size is 250.

And you're raising 250 million. and I'm a 250 check. Would you want me in the round even if I could get to the valuation? And you could just have that candid discussion over email before you get. So those are two important caveats. I think other than that, I like the idea of meeting a lot of people because never underestimate anybody. Somebody has a terrible idea, but it's executed. Somebody has a bad idea executed well.

I actually kind of like to meet them. This is one of my little secrets. Somebody's like, I'm going to make the travel planning app where a group of people can do their plans in an app as opposed to using a Google sheet or an Excel spreadsheet or a chat thread message. I get pitched that idea every six months. Nobody's ever figured it out. If somebody does, God bless. I don't think it's going to work because people don't do that activity too often.

They're not willing to pay for it. The existing tools they have work, yada, yada, people don't want to download it. I get it out for that. But I might take it if it was executed brilliantly. And literally somebody just had one of these like, this is a place for you to share your favorite restaurants and hotels with other people. And I'm like, like Facebook or Twitter or? You know, my blog, or group channel.

So I was like, okay, whatever. But I did like meeting them and my team met with them as well because I can tell them, here's why I'm not investing. This is my concern. And they might, it might incepting them. Wait a second. And I always give them the speech. You know, you're going to spend 100 hours a week on this as the founder.

You're going to be obsessed with it for 10 years. And nobody's ever made it work and it's a small market. If you don't see traction after 18 months of doing it, you might want to pivot and you might learn something along the way as you bang your head against the wall like the Now there are 1,000 people have tried this idea. I hope you are the 1th and 1 who figures it out. But in the case or not, maybe you find an alternate path. You know, like I think Christopher Columbus was trying to go to India when he discovered the

new world. Is that right? Or is that I think it might have been right? Some people have gone off course and found things that are better than where they were ahead. Yeah. Anyway, that's as much as I can tell you. That's my answer. Any follow-up questions or thoughts?

Not. No. I mean, I think it's good to know, it's sort of good to, I like the idea of establishing your filters up front and then being clear about that. And then also I would add to that that, you know, a pithy piece of advice that our new president, Mike Savino gave me was, if you want to be a great investor, listen to 100 pitches. Like, volume is not only the key to finding companies that you want to, like, start by listening to 100 pitches, right? Then don't stop. But the 100 pitches is like the minimum to be like, okay, I see patterns here. So when you think about. about taking those meetings, like, can you identify some of the patterns that are really useful to look for in those first 100 meetings? That's a great framing.

You know, if you're just starting out, the first 100 meetings, the first 500 meetings, first 1,000 of meetings, all of these will add up to your signaling and your knowledge base. When you're sitting across from a founder, you're going to learn something. You might learn what not to do.

You might learn where the future is. You might ask them a really good question, like what is the hardest thing about, you know, being successful in this. And they might say, oh, well, it's just, you know, storage space online is really expensive. You know, if it was YouTube back in the day. And we were really, you know, concerned about that.

But storage space has gone in half. The cost of storage goes down by 50% every 24 months for the last four cycles. So we just projected that forward four times. And then this is where it's going to be after four more halvings. and then that might in your mind be like, wait a second, what else could be stored if this is the case? Or processing power is too little. Or the band, when mobile phones came out,

it was like, my God, if everybody had GPS on their mobile phone, you know, that's why Uber, that was the Uber's why now. And so once you heard that, you're like, oh, what else would work really well with GPS? So it's building your knowledge and your mental frameworks of what works. And then also you might find a business plan. You might understand marketplaces better. You might understand SaaS better.

One of the great things about this job, Molly, you get a free education every time you take a meeting. So I always default. I lean towards take the meeting. You will at some points immediately regret the meeting and say, this is going to be a waste of time. In that moment, do not do email, do not lose your cool. Just assume this awkward person is, if you're correct, and this is a bit of, a terrible idea, which you might not be, but okay, let's say you are correct. This person is going to fail up this idea and the next two.

And they're 23 years old. And they're going to fail three times in the next years. And when they're 25, they're going to hit it and create the next, you know, DoorDash, Uber, Google, Tesla. And you're going to have been the person who was super kind to them when they were awkward and strange. Just like somebody who might take a chance as an agent or a director and they give some part to somebody who's acting isn't that great. but then that person turns into Tom Cruise or Tom Hanks or whoever, Julia Roberts, and that Julia Roberts is like, you know, you gave me my chance. Of course I'm going to do your next film.

Like, I'll give you payback for that, you know. So there you have. Hey, everybody. I'm here with my pal, Tom Eshbacher. He is the senior sales manager at LinkedIn Marketing Solutions. And today we're going to talk about marketing for startups. And LinkedIn did a great new internal report called Today in Startup Marketing. Welcome to the program, Tom.

Thanks, Jason. We've been talking about ICP, ideal customer profile. This is a critical concept for all founders. How can LinkedIn help with the startup figuring out who is their ideal customer? One of the great ways that LinkedIn is able to help is by providing you additional insight on who's visiting your website. From all channels, organic, paid, search, what have you. Our website demographics feature looks at the professional attributes. And I'm talking about the job function, job seniority, company,

industry, company size, even company name to help you hone in on the audiences that are most engaged with your site. We can look at this down to the particular page so you can get product level insights. And what you're going to do is take that, share it back with your sales and product team, and add that to the anecdotes that they are bringing to provide a really holistic view of what an ICP can and should look like. You can go to LinkedIn.com slash this weekend startups and get the report for free, as well as a hundi, $100 from Tom. So earlier this week, we're not going to cover this in depth or anything, but Sequoia announced this big, big Southeast Asia fund, $2 billion for India.

I am definitely, I'm in some Slack groups with climate investors and I'm seeing that it's very clear that there's like a lot of activity happening in that sector in Europe. And I know that there are kind of various legal reasons for like not investing internationally. And I guess my question is sort of like, minus the issues of language and culture. How hard is it? And is that it, are we going to see, do you think over time, especially in a downturn, that we might look for places where there's actually more growth opportunity than there might be in the U.S.?

Yeah. So if you're going to do that, you need to really commit. And if you look at Sequoia for their China and India operations, they had dedicated funds, dedicated LPs, dedicated teams who are native to the country. So if you want to do it, I would look at the best venture capital firm in the history of venture capital, Sequoia, and then say, how did they do it? They didn't do it everywhere, and they didn't do it often. They did it selectively. They took their time.

And they built domestic teams with deep domestic knowledge of culture and law, traditions, finance in that country. Because you can imagine if a bunch of Americans are just throwing money at Chinese companies and then all the crazy Michignaa that, happened over the last three years with D.D. being delisted, Hong Kong being taken over the Uighurs, education startups not being allowed, startups not having to give all their data over to the government and go through these audits. How do you navigate that if you were thousands of miles away and you don't know, you didn't go to high school with the person who works in the government, but if you did go to work with the person who worked in your high school buddies with the person who is working at the security exchange that does the data privacy audits,

well, I mean, you're going to have such a competitive advantage over the person who does it. So you really have to remember, it is a competition. So the domestic team, the domestic resources, and the knowledge and the network is going to just trounce you. You need that network. You need that knowledge. So that's my, that's my. And then if you do get invited by people to be in the deal, if there's room in the deal, understand that if it was a really truly great deal, they would have taken the whole position themselves.

So be careful. See, that's why we go to school. That's why we go to school. How much are you putting into this deal? It's like, oh, no, we're leading it. Yeah, what person? So it's a $10 million round. How was you putting it?

I'm putting it in 500. It's like, oh, you're 5% of the $10 million around. You want me to put two million in. Okay. I'll tell you what. We'll put in 50% of whatever you put in, which is something I do. You know, I'll look at like what the lead investor is doing or somebody's bringing to me.

And I'll just be like, oh, okay. So, you know, this seed fund wants us to help their company. And I'm more than happy to take that call. and if it's a great opportunity, we'll do it. But I'm like, how much are you in for? You're in for $7.50 and you want us to come in for three. And your fund's bigger than ours. You have to look at the bet size.

And why aren't you putting a bigger bet in? Or maybe I'll do half of whatever you do. Pretty good way to challenge it, you know? That reminds me that in a future episode, I really want to ask you about co-investment vehicles. Sure. But for now, right? We'll put a pin in that one for a future VC Sunday school.

For now, though, let's get to our interview, yeah, with Michelle Ruiz of Hafei Foods. I can't wait to listen. Turning on Sundays with a lot of food. I love it. That's so cool. So cool. Enjoy everybody.

Enjoy. See Tuesday. Michelle Ruiz is co-founder of high-fay foods, which is a low-car. They're creators of a low-carb protein-rich fungi flour. Michelle, welcome to this weekend climate startups. Thank you for having me. And the first question is pretty obvious. What is that and how do you do it?

Yeah. So we are using what is called mycelium. I have a sample right here. I figured you'd appreciate that. Amazing. This beautiful powdery material is the root network of a mushroom. Like a mushroom that you see at the grocery store, this is its roots. You don't identify it here, but if I were to cool this and spray some water on it, like an oyster mushroom will come out. And this is just like something we had as a sample. We are turning this into flour because. It is really rich in protein, really rich in fiber, and it has no refined carbs, right? It's not a grain. It's not a nut or a legume where you literally have to strip out the healthy fiber to create starches and turn that into a pasta. We are creating this whole fiber into a pasta as well or a bread or a flat bread. We'll see. And then this is where things get really interesting because it's not like you're just growing

mushrooms and then turning it into flour, not even close. No. So what we're doing is the way that we grow this in an industrial scale is by using fermentation, similar to what you would do to make beer. And we're using fermentation to upcycle wasted sugar water that's produced in food manufacturing. This is an area that not a lot of people think about when they consume their food. But I have other samples here when you drink beer. Your props, you guys, if you are listening to this on the podcast, I'm going to tell you now, go to YouTube immediately, YouTube.com slash this weekend and look at all her props. This is fantastic. This is an actual, like, beaker. You have a beaker. Yeah.

So what I'm holding is an Erlenmeyer flask with brewery wastewater. And, you know, wastewater sounds really ugly. But what I was kind of talking about with Rachel and Nick earlier is that this is literally sugar water that came out of steeping grains at a brink. brewery. Typically, a brewery would take this and put it into a fermenter and turn it into beer. But because there's inefficiencies in food processing, for every one gallon or one cup of beer that you consume, eight gallons or cups, you know, depending on what unit you want to use, one to eight, goes down the drain. And this is fresh sugar that somebody had to farm, that somebody

had to ship, that somebody had to steep. There's a lot of money, a lot of energy. and a lot of carbon emissions associated with getting carbon in this water that I'm holding right now, and it just goes down the drain. Why don't we make something more useful from it? I think another area that people don't normally think about when they think about water that's wasted is how does it get cleaned? You know, before I even got into wastewater treatment back when I was working for ExxonMobil, which is another topic of conversation, I just kind of thought that water was cleaned by like throwing some bleach at it, maybe filter it and just like, it's fine, I can drink it.

But in reality, let's talk about the food chain, right? Like, if you're not going to drink this beer and consume these carbons, another organism will. And the problem is that when you go to wastewater treatment plant, the organisms that we're using to clean that water are fungi and bacteria that are small enough to be able to access the sugars in the water. And they like quite literally go into the water and just like eat the sugars. But what happens is as they consume the sugars, they clean the water, but they also grow and multiply because you're feeding an organism food, right? And you're giving them heat and oxygen.

And eventually wastewater treatment runs out of space. You scoop up all of those organisms and you throw them in the landfill. And so if you are a CPG brand or you're eating a sandwich, there is a mystery. carbon footprint associated with the water that was thrown down the drain to make that product. And most brands don't capture that impact when they look at their life cycle analysis. Because how are you going to know how water is treated? I'm going to be very quick today. You need to understand what cyber insurance is.

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Twist, TWIST. So, okay, let's sort of pull this apart into multiple pieces. Okay, you've got your brewery that has all of this waste sugar water. They maybe just discard it completely, or do they try to clean it first? And then, I mean, I don't know that breweries are also a wastewater treatment plan, right? So you have sort of lots of things happening at once here? Yeah, you know, some breweries are really good about trying to recycle as much as they can. and there's like some videos on YouTube that go like deep into best practices, but that's not the case.

Last year in 2021, U.S. breweries, just microbreweries contributed 63 million pounds of methane to the atmosphere through their wastewater. And the problem actually, if you're a brewery, is that it's not like you're dumping water down the drain and then like you never think about it. You're paying sometimes about 20% of your operational cost to pay for that water to go. go down the drain because it's expensive for the wastewater treatment bugs to come in and eat that sugar. The more sugar there is in water, the more effort it's going to take to clean that water and that's very expensive at the wastewater treatment plant, very energy intensive. And so then you come along and you say, hey guys, give me that sugar water. Pay me instead. Pay me instead. So wait, and do they pay you to take the water away?

That's what we're working on with the partners that we're working on right now. in the industry, especially food manufacturers, pay surcharges because the biological oxygen demand, which is how you quantify sugar in water, is so high that wastewater treatment plants have to spend more to clean it, right? And so the model for us is pay us, pay us less, you save some money, we make money, and we're producing this nutritious food product

that can be produced in a decentralized manner around the world, wherever there is a food factory. And you help offset the cost of that flour to make it accessible to anybody who eats flour in their culturally ingrained foods. Gotcha. Okay. So you take the water, you grow the mushrooms,

or the mycelium. The mycelium. You turn that into flour. Yeah. And then tell me about that product. What does it taste like? What will the product be that you ultimately sell? This is where we should say,

you're still effectively an R&D, right? We're still in R&D. We raised our pre-seed round two months ago. And before that, we pretty much just played with the mycelium at a very small scale and made tortillas and made pasta. The tortilla is really interesting because if you heat the mycelium, like, you know, just make it into a patty and heat it. It actually inflates just like a tortilla. And it doesn't taste like anything. So there's a lot of really interesting food science that we're about to dive into over this next year.

but really what interested me when it came down to starting this company was, how can I make something that tastes just like wheat, just like wheat flour, that can make my mom's pre-diabetes go into remission instead of turning into full diabetes because it's really difficult to stop eating refined carbs, right? They're everywhere. You can't avoid them. And that's what we're really excited about. You see a lot of people are like using mycelium to make alternative meats.

Fair. It's fibrous. It kind of looks filamentous. It has a lot of protein. But I was sitting here like, does anybody not see the refined carbs are like non-existent? So how did you come to this? So you mentioned that you worked at Exxon and then there's wastewater. And then how does that turn into both biotech and food science?

Yeah. You know what? It was a people first thing. You know, I am a chemical engineer in my background. I worked at Exxon in one of my roles there. was in wastewater treatment. And I had the perspective of like, hey, this process is so wasteful. We're literally at the plant.

I was throwing away 50,000 pounds of like food bugs to the landfill every day. That's 4,000 pounds of methane, right? That's like way worse than CO2 every single day. And that bothered me, but I didn't know what to do with that information yet. And I think like for me and it's something I've learned a lot about myself as a founder. I am really motivated by making people's lives a little less stressful. And so when I went home during the pandemic and spent some time with my mom checking in, that's really where I got kind of this firsthand experience of like how difficult it is to deal with diabetes

and how that's potentially in my future. My grandpa died of diabetes. And my entire family in Ecuador has diabetes, you know what I mean? And it's not unique. 80% of the world struggles with a chronic illness that is driven. by what we eat on a regular basis over compounded years. And I think, like, for me, it was very much that emotional stressor where it's not as easy as saying, like, oh, just eat zoodles, eat something else that, like, is a constant reminder

that it's not what you actually want to eat. It's an emotional and psychological barrier to say, like, I have to change my life because I have a disease that's very scary, and it's just not easy. And so I wanted to make something that you couldn't notice the difference that would make my mom's life easier and less stressful. And that's really where mycelium comes in where I was like, wait, look at all these interesting companies doing stuff with this like organism. It doesn't taste like anything. You can manipulate its taste, color, texture in a bioreactor. And wait, the bioreactor is literally a mini wastewater treatment plant.

Like, that's how we can make that. Yeah. Right. Okay. Mm-hmm. Like my bioreactors were 10 million gallons. This one gallon. But same concept.

Same science. So one gallon now? Like one gallon at the R&D stage? Like, how big will you eventually want a 10 million gallon wastewater treatment plant? Like, what does the scale become here? There's a couple of moving parts. And ideally, you try to decouple co-location with a food manufacturer as much as possible, and you try to reduce your real estate needs as much as possible.

And so right now, our plan is to co-locate and to essentially take a pipe full of water and take it straight into our continuous fermenters. That means that you are putting water in and you're harvesting mycelium at the same time. So you can make it a very industrial, scalable process. but I think that there is interesting technology that you can adopt from different industries to make that process even better.

TBD, yeah. There's a lot of work happening in that space this year for us to really define what that becomes. I feel like you almost told the secret there. Is that what happened? You know what's funny though? What? Sorry, go ahead.

I didn't want to interrupt you. Oh, no, no, please. What were you going to say? So I was at this corn wet mill. That means somebody who takes corn and dissolves the fiber, right, to make like all this stuff. And they make high fructose corn syrup

and corn oil and other types of sugars like table sugar. Fun fact, if it doesn't say cane, like you know how sometimes the sugar packet will say like 100% cane sugar? I was always like, why do you have to specify that? Isn't all sugar from sugar cane?

No, it could be corn or beats. Yeah. Life ruined. Good to know. And so this one facility we were out, we're like, hey, you have so much real estate here. like we have no constraints for how big or bioreactors could be or how many there could be, can we build over there? And he was actually like, actually I wouldn't put any,

anything heavy over there because that is an empty well, like an aquifer, because industrial players, I don't know if this is true anymore, like if this is allowed anymore, but like 50 plus years ago, you were allowed to like fully purchase a well as part of an aquifer, like a public aquifer and like suck it dry for your industrial purposes. We had him at my refinery, you suck three dry. And at this corn refinery, corn refinery, oil refinery, very comparable. Same problem. And so he was saying, like, I wouldn't put anything heavy there because it could cave in.

And we have concerns about that area. And so, like, this kind of starts to uncover. It's such a beautiful journey. It starts to uncover some hidden truths about heavy industry in across the world, not even just in the U.S. that is very consistent across different industries like oil and gas and food. Wow. Yeah, no. I mean, I think many people are only recently learning, for example, how much oil, how much water it takes to refine oil and how all of that is effectively a subsidy. It's just like they get to use it for free, which is. Water is super subsidized, but I'll tell you something. I ran an oil and gas, like an oil refinery. We were making gasoline and diesel at that refinery. I ran a wastewater treatment plant there. We were making a fraction of the wastewater, and that wastewater had a fraction of the concentration of organic waste than food manufacturing.

Like, food manufacturing feels safe because it's like, I eat it, it's safe, I don't die. But it's like really bad for the planet. And so there's a lot of inefficiencies there that I'm like, as an engineer, like, trained to see and be like, that means money. That means money. Love it. Love it. All right, listen, great startup outcomes are almost always coming from, you guessed it, great developers. But here's the problem. Hiring full-time engineers is expensive and time-consuming. We all know this. So you need to check out Byraise Dev.

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couple of years. Great. That sounds perfect. That sounds perfect. Because you are describing something that is, you know, you don't need agricultural fields. You don't need pesticides. You don't need labor. You don't farmers, you just need this bioreactor process. And when you say bioreactor, I just want to clarify, is that you're literally talking about the part where the sugar water's in there and then the little bacteria and everything, the mycelium come and they eat it. And that's a bioreactor. Yeah. It's like literally a brewery fermenter. Like you put some air in there so that the, you know, fungi can breathe and then they breathe and then they eat. It's kind of like when you go to a restaurant and then like you eat a ton and then you're like, whoa, I haven't breathed for like two

seconds. And then you breathe and there's like oxygen everywhere. Like same thing, but underwater. And like water is interesting to me because, again, we mentioned there's a lot of water waste. Water is a scarce resource for heavy industry and it's very freaking expensive once you run out of your free aquifer water. And then the other part is also that it's highly scalable. I mean, like instead of having to truck for a fermentation process, tons and tons of sugar to dissolve it in water and ferment something, you can literally go to a pipe and like open the pipe and all of a sudden you just transferred a million gallons of water in like three hours or something. You know what I mean? Like highly scalable. Yeah. Chemical engineering. Pipes. So good. So good. So fancy. How does the pipes? I mean, honestly,

glam to reinvent the pipe. You're in good shape. How long does the process take? So it depends on what scale you're at. But really, when you're at scale, you could be turning over your facility. And when I mean scale, I also mean like optimize. Like you could do it at a small scale, but really at commercial scale, you can be turning over an entire plant. And that means like harvesting all of your mycelium in 24 hours and then regrowing all of it and then harvesting it again. And so, you know, like we could be making millions of pounds of flour in a year. And so think about one of the things that really like gets me going in the morning, even if I'm tired, is like, look at the state of the world today with staple crops.

Like, this isn't unusual. This isn't going to go away. And as climate change worsens and people's basic fundamental needs keep getting disrupted through politics or climate change or how they're connected together, we're going to have continuous disruptions in people's like basic food supply. And so where do we fit in that equation when we can scale up and produce. millions of pounds per facility per year, you know, and turn over an entire facility in 24 hours and you don't have to do it only in the U.S. You don't have to do it only in X country.

You could do it anywhere because fungi are resilient and they'll just eat sugar wherever it is. How? Okay. So you are, it's so funny because dear listeners, you should know that occasionally I look at these notes that I took from my first meeting with Michelle and I'm like, when is she going to take my money. So this seems like a good time to specify where you are in the process. You recently raised $2 million in an oversubscribed pre-seed round is my understanding. Yes. What is your path to commercialization? Like how long do you think it takes before you're producing those millions of pounds of flour?

We're planning on it being five years. Like very possible. And you know what is one thing that was game changer for us to get there is the fact that we got a grant with the Department of Energy. That's the most I've ever written. I wrote 22 pages. Oh my God, kill me. But it was part of it. And the Department of Energy will give us access to Argonne National Labs. And in Argonne, there is a PI, a principal investigator called Meltem, Orugundamirta's, which is literally like a bioprocess expert, wastewater, valorization expert, so upcycling wastewater, and mycelium for food production expert. Like literally everything that we do, she's an expert.

She's been doing it for 20 plus years at Argonne. And she has like a ton of bioreactors, but also pilot scale bioreactor. And so this year, we are essentially preparing for pilot. Next year, we will start pilot. And then pilot will run like one, one and a half years probably, like really going through the learning curves of scaling up a bioprocess, which is like the hardest part. And we've already been engaging early partners.

And so they're going to start coming into the equation at pilot. And then we commercialize. Then we go and build a facility, like we lease a space in their facility. And we're ready to go. And those partners are some sort of wastewater generator. A food manufacturer. Yeah. The food manufacturer, yeah.

Across various different industries. So it's very interesting. And I have to say like a nod to prior mycelium fermentation companies that, you know, existed five years before us. I would say like the first ever mycelium company was corn in the UK. They were like, hey, you can make food with mycelium. And then we were all like, wow, that's interesting. And then their patent expired. And then came the first wave of innovators.

and that first wave of innovators really de-risk commercial mycelium production. And they focused on meat. And they derrists this idea that mycelium could be made into food quickly at commercial scale. And it's not unheard of, right? Like corn had done it, but it was like a really long time. And then like a wave of people came and did it.

And now I really see our responsibility as this like third generation of mycelium innovators to figure out how to make that actually sustainable and scalable. Because right now, half the cost of a fermentation is going just to the sugar, right? Yeah. And sugar still has a ton of carbon footprint and a lot of vulnerabilities in the supply chain when it comes to climate change. And so how can we think through decoupling those fermentation companies, us and the people who come after us from agriculture as well and reduce their water usage and footprint?

So what are the major blockers? It sounds like what you're saying because of the derisking is that you're not headed for like a scientific cliff. That part is already known. What are the parts of this road that are unknown? I think the part that's, it's not unknown, but is going to be the hardest part is partnering for co-location. And that's why we're focusing on a couple of key activities to de-risk that area and really thinking about our milestones as like what are the key risks in your. company and how do you develop technology to manage those risks? But you know, you're asking a company that's been around for 50 years that has real estate constraints and maybe not the

startup mentality to be like, hey, let's be partners and give me your wastewater. And I think that's tough. But what's on our side is that there's a financial incentive for companies to partner with us. I mean, like, won't identify a company, this particular partner that we're working with, but, you know, their company as a whole globally made $117 million of net income last year, but one facility pays $10 million just for wastewater treatment a year. Like, that sucks. Like, if you're the CEO and you're looking at your net income and then you look at how much you paid to just throw water away, right? It's really expensive. Right. And that hurts, right? And so for us, It's like if we can help you save that.

And then also like their cost of using fresh water is a thing as well. So we can help you reuse water and reduce your cost of wastewater treatment. Like that's a little bit more appetizing. So once you have turned their wastewater into bioreactor and grown the mycelium in it, you can return some of that water. You can actually reclaim it as fresh water. It's clean because like think about how it is in wastewater treatment, right? Keeps on giving.

I know. It's beautiful. Who knew waste water would be this great. These are, I mean, this is the type of solution I love. Like the more like sort of boring sounding or dirty, like the better and usually the most of it. The not glimmer stuff is where it has to all start. Sometimes that's how you like learn where the gaps are. I mean, like I started my career selling industrial lubricants.

Just think about how many jokes I got about that. Then I moved into wastewater treatment and crude oil refurb. finding. And it's funny because like this potential person that we're trying to bring on as her first tire, she is distilling tar right now. She's a chemical engineer and she's in an industry that distills tar. And so one of the things we talked about were like, the people in ugly industries have some nuggets. And if we put our nuggets together, we can make some beautiful things happen for the planet, right? And so like, how would I ever know how wastewater treatment works unless I looked under the hood? Well, I know we're close to, at the

end of our time with you, but what do, what will the future business model look like? Do you think? Like, do you imagine that is this going to be a product that you sell direct to consumers? Do you think you're B2B? They're going to figure out how to make all the tortillas? Yeah, we're B2B. Why? We have a lot to work on. We have a lot of tech to build. And so we need to really focus on that. But honestly, like, think about it logistically. Do I want to spend my time, my effort and my dollars and my investors' dollars fighting for shelf space? Or do I want to supply everybody who's already on the shelf? right? And so we're B-to-B. So we'll be selling to

anybody who uses flour and CPG products, restaurants, and meal delivery kits that made pasta and tortillas and that's where we'll start. Amazing. Michelle Ruiz is the co-founder of Hafei Foods. We cannot wait to visit. Get a field trip

and hear a lot more. Yeah, look at that. We just got a love my ceiling dance. It's incredible. Thank you for having me. It was such a pleasure. pleasure. All right. Thanks for listening. Everybody. Remember, we're off tomorrow for June 10th. And we actually have some book recommendations. We were talking about this in our producer slack before the show, sort of like, how can I spend June 10th in a productive way? I was saying my sister-in-law and I watched Michael Chey's comedy special where he, because he taped it in Oakland. And he was saying like, yeah, it's really great that BLM got us June 10th. But I sort of feel like, you know, white people cause this. Now they get a day off to go shopping. And it's kind of unsathing. Comedy is the best. And so then Nick was saying, you know, like, you could do some reading. So anyway, a book I read that was amazing from here to equality, reparations for black

Americans in the 21st century. I interviewed these co-authors, William Dherty and Kirsten Mullen, who just talk about all the financial and policy decisions that happened post-slavery that created the income inequality in black America, like up to it including, you know, they were all promised 40 acres and didn't get it. And so couldn't become landowners. Like it's really a very specific, logical, logical case.

Really specific. I'm open-minded to reparations. And I think that would be a very cool concept in terms of trying to heal these wounds. And I think, like, there's a way to execute them. That would be super interesting to people who maybe are like, why should I have to pay for this, right? Or, like, this had nothing to do. do with me and like it's over a hundred years like what are we talking about here you know there's

like a and whatever if you think those are valid arguments that's fine maybe they are maybe they aren't but i think there's like a next level of like well what would this do to society if there was a path to make it more fair and equal and thinking about that outcome is what gets me excited to see you talk in the book about that kind of things of how to execute on them because that's where people seem to get tripped up people do seem to get tripped up and they do talk about multiple proposals for, yeah. But I mean, I love the point that you're making, which is like, look, if you can create this economic parity, then you create more economic success across the board.

Yes. And that the parody was not an accident. It was like super. Well, I mean, just throwing out one idea. I don't know if it's in the book, but I'm going to definitely buy the book right now. You know, if you were to say, hey, we're going to start with, you know, the STEM education program that's open, you know, every summer to. anybody who has any lineage back to this.

Who's going to argue against that? It's like an extra three months of school available. That could bridge the gap. That could get you into other schools. All right. Great. There's a good starting point. Oh, it's only available to people who are descendants.

I mean, are you taking a DNA test? Whatever. Does it really matter? If somebody has to be smarter and they applied for it. And let's say, in the worst case scenario, somebody's Irish and, you know, or whatever. And they lied on the forms. and they got to take the extra three months of education or year of education.

Would anybody care? So, like, I always think about that, you know, like, can the, you know, if you were say, hey, we can give $10,000 to somebody? And then they're like, well, they cheated and they got the $10,000. And they actually were in a descendant and they didn't suffer in this lineage. Like, that's the thing I always hear from people, like, privately. I'm just like, can we offer some things that nobody would feel bad about people taking advantage of work? Right.

Utilizing. And even in the most cynical case, if they did. Who cares? Right. Who cares? Who cares? I love those guys. To me, it's like giving away free cheese. When I was a kid, I was fascinated by this thing we had in Brooklyn where they were giving away free cheese bricks to people. And I was like, I asked my mom, can we get the free cheese? So it's not for us. There's people who really need it. And I was like, but it's cheddar cheese. I love cheddar cheese. Why don't we get it? So we have cheddar cheese here. I'll buy you more shoes if you want. And then I just thinking about it, it's like, they seem to be willy-nilly about giving them out. They weren't like really making sure you needed to have like this brick of government cheese. I don't know where the concept of government cheese came for it. But anyway, who cares if somebody got a couple extra calories?

Like, there's no harm there. This was American cheese manufacturer. So people in Wisconsin did better. If one percent of people got a $10,000 that they were not quote, unquote, entitled to, and 99% of people got $10,000 and turned it into like massive economic opportunity, who gives a shit. Exactly. Exactly. Okay, great.

There's a second recommendation here. And then there's right. This one actually is from Nick. who read Black Wall Street from Riot to Renaissance in Tulsa's historic Greenwood District. And this is that, you know, until Watchman came out a lot, a lot of white people, including me.

Who did not know about the Tulsa. And I was on the Wikipedia reading about this. Me too. I literally went to the, that's what I always do. I'm watching the show. I pause the show. I go to Wikipedia.

I read the page. Wow, great. By Hannibal B. Johnson. So go ahead and check it out. We'll see everybody on Tuesday. And thanks for listening, everybody. See you then. Bye-bye.