Yali Bio wants to fatten up plant-based foods

Enticing people to change their eating habits, especially to try alternative meat products, is a challenge for food tech companies because people want that product to taste, smell and feel like actual meat.

Yali Bio is one company that thinks it has cracked that code by focusing on designer fats for plant-based meat and dairy products. It is building a platform to tailor-make fats aimed at enhancing the flavor of alternative meats.

The process involves synthetic biology, deep learning and genomics tools that produce fats that are more sustainable than the current oils, like coconut, that are used in plant proteins, but also mimic animal-based analogs in terms of flavor and texture, CEO Yulin Lu told TechCrunch.

Lu and Chief Scientist Peng Xu founded the California-based company in 2021. Lu comes from a foodtech background, working previously for Impossible Foods and Eat Just scaling up technology platforms to produce commercial products. Peng works in synthetic biology in making lipids in microbial systems.

“It is clear to me that the product quality and consumer experience has reached a plateau,” Lu said. “We see successful brands in the space of meat, but it is hard to go beyond that. There are so many premium meats people like, and the key missing component is the fat to elevate the quality of the product.”

He explained that nearly all companies use coconut oil for the replacement of fat in plant-based meats. It’s not the same flavor as meat, so food manufacturers have to add flavor additives that lead to not-as-good-for-you ingredient labels. With its technology, Yali Bio aims to create a broader selection of functional fats to “unlock the market, which is limited by quality of product and consumer experience,” Lu added.

Now that it has identified fats as what is needed, the company is working on how to make fats into a product system that is highly efficient. There are different systems and approaches in use currently, including using animal cells or fat tissues.

Yali Bio is instead taking a precision fermentation approach using microbes. It is building a proprietary technology to build up a microbial strain library and test them out. Getting to the next step is to demonstrate the fermentation bioprocess by running the strains in fermentors as part of pilot programs to prove production at a small or intermediate scale.

Those next steps led to the company going after some capital. Lu participated in an accelerator program for the last six months and is in the process of building a new laboratory. The startup raised $3.9 million in seed funding in a round led by Essential Capital, with participation from new and existing investors Third Kind Venture Capital, S2G Ventures, CRCM Ventures, FTW Ventures and First-in Ventures. Stephanie Sher and John Goldsmith also participated as angel investors. The funding brings Yali Bio’s total funding to $5 million to date.

Part of the funding will go toward the lab, but also into the company’s synthetic biology component, product development, identifying business partnerships, marketing and recruitment. The company has seven employees currently and a number of open positions in the area of product, food science and fermentation that should help Yali Bio to be around 12 people by the end of the year.

Though Yali Bio’s technology will take time to get up-and-running, Lu said it is not unlike other approaches. For example, the cell-based approach was in the first wave started over seven years ago, and some are at pilot scale or have limited release in restaurants, like Eat Just, or with food makers, like The EVERY Co, which is also using precision fermentation.

“We know what we can do with the existing team and we want to add additional capabilities to take the company from the biotech R&D company to having tangible products,” Lu added. “We want to demonstrate with precision fermentation that we can get to tangible products and samples much faster compared to other technologies. It depends on the regulatory process, the finished product and the technical complexity, but we think we can do it in two to three years.”

Meanwhile, Edward Shenderovich, managing partner at Essential Capital, said most investors are new to the food alternative space, especially to the world of synthetic biology being applied to food as the technology has matured.

He believes we are at the forefront of a fourth agricultural revolution, where every one previously led to lower costs and increases in product volume and quality. This fourth one is led by bio manufacturing and will be a massive change in supply chains and value creation opportunity for those involved, he added.

“Anything that enables us to move from an animal-based agriculture to an animal-free world using bio manufacturing is a worthy pursuit,” Shenderovich said. “Yulin identified an important pain point in the adoption of plant-based, fermented and cultivated food. Most cultivated meat is just proteins, and we like to eat fat. Fat has been demonized, but it is making a comeback.”

A look at how proptech startup Knotel went from a $1.6B valuation to filing for bankruptcy

This week, flexible workspace operator (and one-time unicorn) Knotel announced it had filed for bankruptcy and that its assets were being acquired by investor and commercial real estate brokerage Newmark for a reported $70 million.

Knotel designed, built and ran custom headquarters for companies. It then managed the spaces with “flexible” terms. In March 2020, it was reportedly valued at $1.6 billion.

At first glance, one might think that the WeWork rival, which had raised about $560 million since its 2016 inception, was another casualty of the COVID-19 pandemic. 

But New York-based Knotel was reportedly in trouble — facing a number of lawsuits and evictions — before the pandemic had even hit, according to multiple reports, such as this one in The Real Deal.

Jonathan Pasternak, a partner in the bankruptcy, restructuring and creditor rights group at New York-based Davidoff Hutcher & Citron, believes the company’s Chapter 11 filing was inevitable despite it reaching unicorn status after raising $400 million in Series C funding in August 2019.

“In addition to being grossly overvalued on the market, the company overextended itself with long term leases and lavish build-outs, leaving the company in significant debt while failing to ever turn a profit,” Pasternak wrote via email. “The pandemic exacerbated their vacancy situation, resulting in more than 35% vacancies in their 2.4 million square-foot NYC portfolio. The company overextended and likely ran out of cash.”

Newmark’s purchase of Knotel’s assets is an effort to recoup some of its investment, according to Pasternak.

Anytime a company that has raised more than half a billion dollars basically implodes, it’s worth taking a look at the roller coaster ride it was on before it got to that point.


2016

Virgin Mobile co-founder Amol Sarva and former VC Edward Shenderovich founded Knotel, essentially reversing the WeWork model. There’s hype around the company in its early days.

2017

Knotel raised a Series A round of $25 million in February from investors such as Peak State Ventures, Invest AG, Bloomberg Beta and 500 startups. It marketed its offering as “headquarters as a service” — or a flexible office space that could be customized for each tenant while also growing or shrinking as needed. 

2018

In April, Knotel announced the close of a $70 million Series B financing led by Newmark Knight Frank and The Sapir Organization. In August, the company told me that it was operating over 1 million square feet across 60 locations in New York, London, San Francisco and Berlin, and that it was on track to reach 2.5 million square feet and $100 million in revenue by year’s end. Revenue growth had increased by 300% year over year, according to the company. Customers and users and clients ranged from VC-backed startups Stash and HotelTonight to enterprise customers such as The Body Shop. 

“What they’re doing is different,” said Barry Gosin, CEO of Newmark Knight Frank, in a press release, at the time of the round. “It’s a new category the industry hasn’t seen and is rapidly adopting. We’ve watched their ascent from a distance and are now thrilled to join them on the journey. It marks a shift in how owners and tenants are coming together.”

2019

In August, Knotel announced the completion of a $400 million financing, led by Wafra, an investment arm of the Sovereign Wealth Fund of Kuwait. With the round, the company had achieved unicorn status and was being touted as a formidable WeWork competitor. At the time, Knotel said it operated more than 4 million square feet across more than 200 locations in New York, San Francisco, London, Los Angeles, Washington, D.C., Paris, Berlin, Toronto, Boston, São Paulo and Rio de Janeiro. 

In a statement at the time, CEO Sarva said: “Knotel is building the future of the workplace, and we are excited to welcome a group of investors who believe passionately in our product, vision and ability to execute. Wafra will help us continue our rapid global expansion and solidify our position as the leader in a fast-growing, trillion-dollar flexible office market.”

2020

In late March, Forbes reported that Knotel had laid off 30% of its workforce and furloughed another 20%, due to the impact of the coronavirus. At the time, it was valued at about $1.6 billion. 

The company had started the year with about 500 employees. By the third week of March, it had a headcount of 400. With the cuts, about 200 employees remained with the other 200 having either lost their jobs or on unpaid leave, according to Forbes. 

“Business as usual is over,” Amol Sarva, Knotel’s CEO and co-founder, said in a statement to Forbes. “Knotel has decided to take sharp action to prepare for the worst case — a long health and economic crisis.”

In the second quarter, Knotel’s revenue slipped by about 20% to about $59 million compared to the first quarter, reported Forbes. Multiple landlords had filed lawsuits against the company.

By July, Forbes had reported that Knotel was attempting to raise as much as $100 million, according to various sources “familiar with the matter.”

2021

Knotel files for bankruptcy, agrees to sell assets to investor Newmark for a reported $70 million after being valued at $1.6 billion less than one year prior.

“Newmark’s commitment offers a path forward amidst this challenging climate,” CEO Sarva said in a statement. “We are optimistic that, through a successful restructuring, we can refocus on our mission of providing state-of-the-art, tailored flex space in key U.S. and international markets.”

To facilitate the transaction under Section 363 of the United States Bankruptcy Code, an affiliate of Newmark agreed to provide Knotel with about $20 million in cash as DIP financing to support Knotel through the bankruptcy process.

Just as the startup and VC world watched as WeWork lost a significant amount of value over the past two years, we’re paying attention to the demise of Knotel and wondering what this means for the flexible workspace sector. As much of the world continues to work from home and office buildings remain mostly vacant as this pandemic rages, our guess is that things will only get worse before they get better.