Fengru Lin - TurtleTree - Part 3

Intro - 00:00:01: Welcome to the Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup, from pre-seed to IPO, with your host, Jon Chee. In our last episode, we spoke with Fengru Lin about her time working at Salesforce, her experience at Google, and how the idea for TurtleTree Labs came about. If you missed it, be sure to go back and give part two a listen. In part three, we chat with Fungri about TurtleTree Labs's vision of transforming the food system, her focus on people as the greatest assets to completing that vision, and how a shift in focus made the idea of commercialization earlier possible.

Jon - 00:00:54: Zooming out a little bit, TurtleTree, it sounds like you had you and your co-founder and the first scientist. And then now you're like, okay, we're doing this officially. What is TurtleTree's mission and vision of the future? And what is it that you guys ultimately seek to do?

Fengru - 00:01:07: Our vision is really to transform the food system. We want to be able to nourish and nurture people, planet, and animals. And we do that by producing better-for-you ingredients through sustainable methods.

Jon - 00:01:22: Awesome. And as you know, you are embarking on this journey and now you kind of started to get a little bit of momentum and a little bit of wind behind your back. How did you continue to build out your team? You know, obviously it takes a village to for an organization to come to fruition and execute on this mission. How did you meet and how did you bring in your early teammates?

Fengru - 00:01:44: So again, back to my corporate experience, Max and I knew from day one that people are going to be our biggest assets. So actually our hire number four, very early in the day, was our HRBP, our HR business partner, who is now our Chief People Officer, Fiona. You don't see a lot of startups doing that, but I kind of knew that it was really important to build a strong culture and HR team because they are the professional front facing image to some of the best talent in the world. If you want to attract somebody who is 20, 30 years of experience in industry, they don't want to know that they can only interface with the founder. They want to know that they have a strong HR team backing them, supporting them, helping them with any of the people issues that they might face when they hire a team. So Fiona really helped us build a really strong culture. And today we have some of the best in the world, our chief scientist, our chief innovation officer. They work in tandem. Our chief scientist focused on internal innovation. Our CIO focused on external innovation. So Aletta and Shou, they really are the core of the science for our team. They have between them almost 40, 50 years of industrial experience in companies like Merck, KGaA, Dow Chemicals, Thermo Fisher, I think. So tons of great companies. And from there, we built out the scientific team. Now we have two arms. One is that small dedicated resource for cell-based milk. But our main technology that we are commercializing in about four weeks' time is precision fermentation, where we're getting microbes to produce these high-value proteins.

Jon - 00:03:22: That's awesome. And I love to hear when people first is the focus, because I think sometimes people think that the culture is just going to sort itself out.

Fengru - 00:03:35: How did you feel now?

Jon - 00:03:36: Yeah, yeah, no, no. I actually don't think that's how it works. I think the culture starts from the beginning. And I love hearing that. It's really refreshing, honestly. Because when colleagues of mine working at these companies that were once small, got large, didn't have that focus, and then, when they got to a really big scale, it was just like you couldn't even recognize. You know, people had different priorities. They're almost like fiefdoms within the company feuding over things. And I'm like, oh, like, how did that happen? It's elegant. Honestly, just like flip that on his head to focus on the people first. And then from there, you're building on a sound foundation culturally and people-wise. And especially in precision fermentation and cell-based milk, you're bringing the brightest, most experienced scientists in and they are the core pillar of like the technology. And you want to make sure that we have a well-functioning team.

Fengru - 00:04:30: Yeah, just to touch a little bit more on that. And I think this drills back into why it's so important to have a business-centric leadership team. Because building a business is not just about the science. It's not just about the tech. It's really about the tech, the regulatory, the people, the finance, the marketing, the sales, all of these different parts, working as a big symphony. And we cannot just have one focus on each of these parts. They're all really important.

Jon - 00:04:57: Yeah, it's like music to my ears, honestly, because as we've seen, you know, Excedr, we work with the early stage folks, and then we see as companies grow. So we kind of have like the nosebleed seats. And if we're in like using an analogy, like we're in the upper rafters of the stadium, we're not on the field by any means, but just watching it. And I think a lot of the things that early stage companies struggle with, especially for folks who have been just in the lab focusing on science for maybe the past decade or more, you're kind of like feeling around in the dark when it comes to what it takes to have a strong finance department, HR department. But one thing I think that's really optimistic or like hopeful about is like, hey, look, You don't need to know it all. You as what a singular individual, you can bring someone in who's an HR professional who can compliment that skillset. Or if it's like you're coming from a business background, you can bring in the science. You don't have to do it all yourself.

Fengru - 00:05:50: Yeah, I think as the founder, I try to empower the team because they are the experts. They are the ones with 15 years of experience, 20 years of experience. I'm just here to orchestrate everything, find out where the gaps are and make sure that the gaps are plugged and overall set point on the direction of the company. But we are really fortunate to be able to bring in the best so they can help drive the organization that you're in within TurtleTree Labs. Awesome. 

Jon - 00:06:15: And so now I have this visualization in my head. There's like two teams, #CellBased and the Precision Fermentation teams. And you said the Precision Fermentation side, there's a kind of like a go-to market in the near future. What is the state of the market right now? How is TurtleTree Labs taking its differentiated approach to craft that market?

Fengru - 00:06:33: So I think if we zoom out a little bit, talking about how we started, when we first started with cell-based milk, it was such a great idea. I was so excited about it. Hey, we can produce milk. And then we started talking to the Abbott of the world, the Fonterra of the world, and told them, we have this technology. What do you think about it? So they were the ones who told us, hey, if you have milk, that's great, but it's $2 a gallon. Do you think you can get to that price point with biotech anytime soon? These guys, they were like, you should really be focused on the high value ingredients that are found in milk. Here's half a dozen, and you should look at them. Top of the list is this protein that not a lot of people have heard about. It's called lactoferrin. It's a bioactive protein that is found in milk. It trades on the market at $1,000 per kg. You should focus on that.

Jon - 00:07:24: They just told you that? They're just like, yeah, this is a great idea. Just go do this.

Fengru - 00:07:28: They did share that there is potential if you're able to make human milk. Because there are some ingredients in human milk that has the potential for therapeutic applications for at-risk babies, for premature babies, all of these. There are applications for it, but you're not going to commercialize at a price point that anyone would pay anytime soon. So we really dramatically reduced the resources dedicated to that, but focus on something that we can commercialize so we can continue showing that our team is able to execute, continue working with investors, and so on. Back to the price point. So $1,000 per kg. And if we compare that with some companies in the industry, they started off with the TAM. So when we're talking about the TAM, the biggest protein that people can think of in the milk segment is obviously whey, because a lot of people consume whey for muscle building, to bulk up. So whey, however, trades on the market at $1 to $3 per kg. So the price point, again, is difficult to get to using even a well-established technology like prism fermentation. Now there are the casein folks as well. Casein for cheese helps with the stretchiness. It trades at $13 per kg. Again, it's difficult to get to gross profit margins. So yeah, it makes sense. It makes sense commercially to focus on lactoferrin. And that's where we started to build a team around it. We sort of shifted our focus of the pre-fermentation platform. We used to want to produce growth factors for the cell-based technology, but now we're shifting it to focus on these high-value proteins, lactoferrin, so that we can commercialize earlier rather than later.

Jon - 00:09:12: That is an incredible story because obviously Amazon and Bezos is like a story that's been told a hundred times. But like, I think one of his sayings was like, your profit margin is my opportunity. And that's exactly what came to mind, right? Is this like, If it's going for $1,000 per kg, you're like, well, we just need to be a little bit better than that. Like, can we get better than that? And obviously, I'm not in the labs. I don't know how difficult it is to get it to that point. But trying to figure out a way from $2 a gallon to shave that down a little bit sounds really difficult. But when there's something like that, that's trading like that, you're like, okay, there's a lot of room for improvement here. And that's so cool. And as you were kind of like making this shift to this, what was that experience like? Because I know in any early stage venture or startup or company building, pivots can be painful. We were doing this and now we're doing that. What was your experience pivoting the focus?

Fengru - 00:10:06: We see it as more of a refocusing. We're not moving completely away from cell-based milk just because there's a lot of potential around human milk. But kind of the refocus into prism fermentation and lactoferrin meant that we had to build a team around it. So we really doubled down on the prism fermentation team. We doubled down on the partners that we can work with to accelerate our internal R&D. So Shou, Dr. Shou, our CIO, was doing a lot of that. And of course, the equipment, the bioreactors had to be purchased to focus around this technology. But fast forward to today, we made the right choice because we don't have to invest in heavy capex. If we're working on cell-based milk, it's a whole new food system altogether. There are new bioreactors to be built. There are new processing that needs to be designed. Whereas prism fermentation today is actually used to produce things like insulin, granite for cheese making, Vanillin. So it's a very well-established technology. And we can absolutely work with contract manufacturers to produce the ingredient without heavy capex investments.

Jon - 00:11:14: That's awesome. And it's kind of like, I think there's a few points looking back on Excedr, the Excedr journey, where there's kind of like those, you're almost at like a fork in the road, you wouldn't know in the moment, it's kind of getting like looking backwards, you can connect the dots, but like, you had to make a choice, like, where are we going to dedicate resource and time to? And now you're like, we chose the right direction, we didn't go in the other direction, which then obviously has ripple effects, exactly what you're saying, like, there's existing infrastructure for something like this. And as you're approaching the go to market and commercialization, How are you planning that? Like what is in store in terms of the go-to-market and commercialization?

Fengru - 00:11:52: Sure. So we always want to focus on being a B2B2C company. We want to enable the different food brands, the different beverage brands to have lactoferrin or TurtleTree made products in their end products. So our B2B focus means that we need to have a robust sales team. We need to have a robust product team to help understand how the lactoferrin interacts with their food products or their beverages. So we help them grow their business with these new ingredients. Previously, most of the lactoferrin today goes into infant nutrition because lactoferrin, it's a micronutrient found in milk. You need about 100,000 liters of milk to get to one kilogram of lactoferrin. That's why it's so expensive. That's why it's in such short supply. And there's a lot of fluctuations in pricing. Sometimes it even goes up to $3,000 per kg. There are huge fluctuations.

Jon - 00:12:49: That's brutal. What's causing the fluctuation for it to spike up to 3x, like $1,000 to $3,000?

Fengru - 00:12:55: Yeah, a lot of it is milk demand, milk supply and customer supply. Because it's in such short supply across the world, when a new plant comes up, there is that fluctuation because more supply gets into the market, but it quickly gets bought up by a certain brand. They have multi-year contracts and then the demand increases, the supply drops again. So this price fluctuation is really driven by the little amount of lactoferrin in milk. It's such a micronutrient. So if we are able to produce it at a consistent price point, at a consistent supply, we can really introduce this lactoferrin to more food products for adult applications. We can put it in yogurts, drinks, sparkling water, even regular milk, because in the pasteurization process, regular milk has very little active lactoferrin because it gets denatured. Or even plant-based milk, because previously plant-based milks just have no access to lactoferrin because it's previously from animal sources. So for TurtleTree , we want to focus on being that B2B2C company, a bit like Intel Inside. So we have this logo, our TurtleTree logo, on the outside of the food product. If you look at the logo, it looks like a thumbprint or it looks like tree rings. So it symbolizes man's print on nature. And we want people to remember that.

Jon - 00:14:15: That's awesome. And I would imagine too, in the current status quo, this sounds like a heavy burden on farmers. That kind of like volatility, I would imagine is like a painful experience, like on the food system. Obviously not just the economic market aspect, but it's like you're scaling up and then scaling down and then scaling up again, scaling down. Can't imagine that's a sustainable status quo.  

Fengru - 00:14:37: Yeah, for sure. And I think if we talk about the farmers, it's really challenging. I think over the past 20 years, the dairy cow population has not increased, but milk yield has increased by 40%. And it's really by getting the cows to be bigger, milking more milk from each cow. It's just not great for animal cruelty. It's taxing for the farming industry as well. So I think for TurtleTree , we really see ourselves as being able to support even the dairy industry or the plant-based milk industry. Our ingredients can absolutely fortify any food product out there, beverages and so on. So they don't see us as a competitor, but more as a collaborator.

Jon - 00:15:18: Yeah, I can totally imagine. It's like, it's a positive sum versus a zero sum game where everyone can coexist and it becomes a more sustainable future. And I would imagine the B2B aspect, they would appreciate the consistency too. And I think that would make infant nutrition much more sustainable and in terms of its production and actual getting into the hands of the consumer. So as you're getting to this point of commercialization, you built out the team. It wasn't a wholesale pivot. It was just kind of like making a little bit of a change here. But along the way, there's also your investors that choose to partner with you as well. And you've chose to partner with mutually. What was your experience? If I'm connecting the dots here, fundraising has been a turbulent time since 2019 until now. How have you navigated that for TurtleTree Labs? And are there any tips or advice you can give to anyone who is fundraising in an environment like we are in now?

Fengru - 00:16:14: A bit about the history about our fundraising. We closed our Series A in 2021 with about $40 million. And fast forward to today, we are looking to raise our Series B coming up in the next couple of months. It's definitely a very difficult fundraising environment, very different from 2021. I know investors are a lot more focused on revenue generating companies and eventually profit making companies. And it's going to be really difficult if we are capex heavy or if we don't have an eye to gross profit margin positivity sooner rather than later. So although lactoferrin is not as well known as say casein or whey as a protein, but our ability to get to gross profit margin positivity earlier rather than later is being seen as being quite positive with investors because they too have limited amount of resources. They too have their LPs to answer to. Today, with these market conditions, they need to be investing in companies that have an eye to exit earlier rather than later.

Jon - 00:17:22: Totally. It is a bit of a jarring transition, but I completely agree in terms of what I'm seeing out there too, is that I don't think the investors that you need to be profitable today, but at least like, please like think about it. I always have this as kind of just food for thought. And I think when it comes to these plans, just having a roadmap where it's actually on the roadmap, not just some foregone thought is beneficial. And I realized too, circumstances are different too. If you're just a purely research and development org, if you're a therapeutics company, it's a very different roadmap. But I think for those who have something that they're planning to bring to market, thinking about that gross profit margin and the opportunity there is incredibly important. And I think you've clearly found it with lactoferrin. And so as you're now moving forward and planning to go to market in the next four weeks, what would you say are the biggest challenges and triumphs you've faced at TurtleTree and any stories that you can tell?

Fengru - 00:18:19: Since we're on fundraising, maybe I can share a little bit about some fundraising stories. I think back to Max and my business background. A couple of years ago when we first started, I remember visiting this investor in LA and we told him all about this idea. We told him about our plans and he said to us, well, both of you are business folks. You have no biotech background. I'm not sure what business you have trying to run a biotech startup. How about I will invest in you if you get a Nobel laureate on your team? I was pretty surprised at that comment, but I think fast forward to today, we can explain the value of business folks, as I think we spoke about quite a bit earlier on, and the value that we bring to the organization. Being able to connect the dots, being able to connect with people, being able to run an organization. We're not just running a science part of the business. It's really getting a business off the ground.  

Jon - 00:19:14: And just real quick there, I got a little bit frustrated hearing that myself. That is super frustrating. It's almost like a smack in the face as like, you can't do it. And you're just like, and something in me, I'm just like, oh, I'm not an investor in TurtleTree , but I was like, I want to prove you wrong. I want to prove you right. I could feel that energy coming from me, but sorry, I don't mean to interrupt.

Fengru - 00:19:37: No, no, no. Thanks for that. Yeah, I felt like, but we can because we have a great team. We're growing, we're learning. And I think we have the right team to make the right decisions to deliver products to the market, to deliver what customers need. That's where we are today. We're putting that together as we're commercializing. Another fun story is maybe about the team, how we enable, empower the team and how we make decisions. So in the early days when we had our first set of scientists, they were really precious about that first patent that we filed. And we were really cautious about how much we tell the public or investors about the science. To me, I feel like if I can talk about it, it's great. We need people to understand it, to get their buy-in, to get them excited about it. And if I can communicate it, I don't think it's anything too sensitive with the IP because I'm not deep into the science, into the trenches of the science. But the scientists were like, no, we shouldn't talk about the milk at all. We shouldn't talk about the technology that we're using at all. So what we did was we sat everyone down in the room and we said, okay, you say we shouldn't talk about it, but investors are asking about it. How would you suggest that I talk to investors line by line so they understand the science enough without us sharing too much? So we wrote down line by line, this is what we're going to say, this is what we're going to say, and this is what we have to say. So in the end, the end product was exactly what I was already pitching. That experience taught people, taught the whole team that we have to walk them through the process for them to understand. We can't tell the team what to do. We have to get them to walk through the process so they can experience it for themselves so we can get their buy-in.  

Jon - 00:21:25: I have this saying at Excedr, just like, you don't know how hot fire is until you actually touch the flame yourself. You're like, I can describe to you what this fire feels like. You won't actually know until you touch that flame. And I love that exercise. We need to communicate to them in order to fund the science. They probably feel way better about it. And I think that exercise, as simple as it may sound, may not actually be happening. It probably happens less in organizations than you would expect. Or else every team would be operating on all cylinders and just kicking butt. But I love walking the team through that exercise. And one thing I love about It's that cross departmental work that's important. And we don't have an R&D team at Excedr, but sometimes the sales folks may butt head with the legal team. And they're the gas and the brake. But when you take the time to walk through, like work together through it, you have much more cohesion. And I think that's, why that type of leadership style is so important to a well-functioning organization.

Fengru - 00:22:30: Yeah, yeah, absolutely. I mean, these are really world-class folks. They probably know the best a lot of the times, but sometimes we do have a point as well. And it's really important for them to walk through some of these steps so they experience it for themselves. Like you say, touch the fire for themselves.

Jon - 00:22:47: Yeah, yeah, yeah, yeah. But in this case, hopefully it wasn't like a painful experience like touching fire.

Fengru - 00:22:51: Not at all.

Jon - 00:22:52: Yeah. And so now that we're looking even farther into the future, not just the next four weeks when you're going to market, but what's in store for TurtleTree in the next year or two?

Fengru - 00:23:02: Yeah, so it's commercialization, commercialization, commercialization. We are getting our FDA self-grass in the next four weeks. I mean, now we're working with customers, helping them to do product development, co-creating products. In the end of next month, what's the end of next month? We will be at SupplySide West, which is an ingredients conference where we have a booth and we can start to give out samples of the lactoferrin in certain form factors where people can taste and experience it. So it's really exciting. So we had another food conference earlier this year in Chicago called IFT. And it was the first time we got to speak to customers in a conference setting. Previously, we were in conferences for startups, for biotech, all in the research space. But now to actually interact with customers, it's so exhilarating. It's like four years of work distilled into this moment. We finally have something to offer.

Jon - 00:23:58: There's nothing better when you're getting an embrace from a potential customer. And you're like, okay, we're actually providing value here. We're actually providing value because you're kind of like kicking the tires. We call it, for those who are Dragon Ball Z fans, but the hyperbolic time chamber where you just go in and you're just training, but you don't have exposure to the outside for a little bit. And then when you come outside, you've got to test the water. I love what that happens. So now are you is there a kind of initiative to do more and more of these customer-facing conferences and really just starting to. Basically educate, educate the market of your product.

Fengru - 00:24:34: Yeah, educate and also be educated. It was interesting. Even at IFT, we had customers who came up to us and say, you know, we usually have backup suppliers for most of our ingredients. But for lactoferrin, I have a vegan customer. So I guess you will be our only supplier. I didn't even think about that.

Jon - 00:24:53: Wow. And I love that too, because like, I've always thought about the sales process. It's like a learning experience on both sides. It's not just like a hard sell as like, again, kind of like what the movies may portray. And that's awesome. Like your customers are going to give you real feedback. And they will tell you like, actually, I have this other pain point that I think it probably solves too. Because at the end of the day, it's like, it's problem solving. And you're like, we're trying to alleviate these pain points when you interface with prospects and soon to be clients. That's really, really awesome. And so now it seems like team wise, you're starting to make these hires on the kind of commercial team. Or is that something that's already has been percolating for a while?

 Fengru - 00:25:30: That's been percolating for a while, but we definitely are more focused around that on the product team as well as the commercial team. But yeah, we have a pretty robust team and process going on now. We're on Salesforce.

Jon - 00:25:43: Yeah, shouts out Salesforce. Awesome. Well, Fengru, thank you so much for your time. And the traditional closing questions, I like to kind of round things out with. The first question is, would you like to give any shout outs to anyone that supported you along the way?

Fengru - 00:25:56: Yeah, I think it has to be my team. Every day I wake up, I'm so excited. I learn a ton from my team every day. And like I mentioned just now, I get to really focus on the direction and the taking point of the company because my team is able to execute in the most effective manner. So yeah, thanks to my team for bringing us to where we are today. We still have a lot of work to do, but I'm really hopeful and excited about what's coming up in the next couple of months.

Jon - 00:26:25: Absolutely. And if you could give any advice to your 21-year-old self, what would it be? 

Fengru - 00:26:31: Oh, wow. It's going to be great.

Jon - 00:26:35: Yeah. I mean, sometimes that's what you need to hear. 

Fengru - 00:26:38: Yeah.

Jon - 00:26:39: Like sometimes it's what you need to hear. Cause like in the entrepreneurship, it sometimes can seem like it's just up into the right straight. It's like, yeah, it's easy. But just hearing like, yeah, it's going to work out is critically important to make you not want to throw in the towel when things get tough. So that resonates with me. Well, Fengru, thank you so much for your time. You've been really generous. I'm really excited to watch the TurtleTree journey and then see you guys flourish in the coming weeks. Thanks again. And hopefully next time you come back on the podcast and we can double click on some more business topics and running a biotech business.  

Fengru - 00:27:11: Yeah, sounds good. Thanks for having me, Jon. This has been blessed.

Outro - 00:27:16: That's all for today's episode of the Biotech Startups Podcast. We hope you enjoyed our three-part series with Fengru Lin. Be sure to tune into our next series, where we chat with Kittu Kolluri, Founder and Managing Director at NeoTribe Ventures, an early-stage venture capital firm which invests in breakthrough technologies that stretch the imagination. Kittu is a Silicon Valley veteran with a career spanning three decades as an entrepreneur, CEO, senior operating executive, and venture capitalist. Career highlights include working as an engineer at Silicon Graphics, co-founding Healtheon/WebMD, being founder and CEO of Neoteris, and investing in over four dozen successful companies as a general partner at NEA. His broad range of experience and success dealing with up and down markets make him a very important member of the Silicon Valley. He makes Kitu an excellent source of inspiration for founders. The Biotech Startups Podcast is produced by Excedr. Don't want to miss an episode? Search for the Biotech Startups Podcast wherever you get your podcasts and click subscribe. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups Podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service or company in the podcast is an endorsement by Excedr or its guests.