Estonian Food Tech Startup ÄIO Secures €6 Million for Demo Plant Construction

The biotechnology startup ÄIO has raised €6.1 million through venture capital funds Voima Ventures, 2C Ventures, SmartCap and Nordic Foodtech VC. The funds will be used to build a demo plant in Estonia to produce environmentally friendly oils and fats from wood and agricultural residues, offering an alternative to the widely used oils in the food industry.

Founded in 2022 as a spin-off from Tallinn University of Technology, ÄIO has developed a unique method that enables the food industry to reduce its reliance on environmentally harmful animal fats, palm oil and other vegetable oils. ÄIO’s solution uses specialised yeast to transform by-products from wood and agricultural processes, such as sugars extracted from sawdust, into food-grade fats and oils. This process is significantly faster and much less taxing on the environment.

Last year, ÄIO raised €1 million through venture capital, allowing the development of three alternative product categories: encapsulated oil, red oil and butter fats. These products can replace widely used palm oil in the food industry, and ÄIO's branded Red Oil can also be used in cosmetics and household products.

According to Nemailla Bonturi, co-founder of ÄIO, oils made from residues significantly reduce the environmental impact of agriculture and animal farming. "ÄIO's oils, produced from industrial residues, help reduce land use by up to 97% and water consumption by as much as 10 times compared to current palm oil and animal fat production. Additionally, the speed of oil and fat production through fermentation is 10 times faster," said Bonturi.

Why invest in ÄIO

Investors see great future potential in ÄIO for two main reasons. Firstly, ÄIO addresses one of the biggest environmental challenges of our time related to oil production, and secondly, it fosters economic growth. Nordic Foodtech VC was one of the first investors to believe in ÄIO two years ago, when the company emerged from the TalTech lab, and encouraged others to join. "ÄIO’s food industry testing has been successful, and feedback on the initial products has been encouraging. We are confident that with this funding, we will reach the next phase, and we welcome our new co-investors with joy," said company partner Mika Kukkurainen.

Hendrik Reimand, partner at the venture capital fund 2C Ventures, believes that ÄIO can turn its scientific advancements into commercial success. "Providing sustainable alternatives to products such as palm oil or animal fats is a critically important step in reducing the environmental impact of the food and cosmetics industry and we are confident in the teams’ ability to turn this scientific development into commercial success."

Voima Ventures partner Pontus Stråhlman emphasizes that the biotech startup provides a solution to the palm oil industry problem, which destroys diverse forests, such as those in Indonesia. "ÄIO’s approach addresses this issue by valorizing agricultural and forestry sidestreams into premium replacements, meaning significant reductions in CO2 or land use."

According to Sille Pettai, Fund manager at SmartCap Green Fund, funded by the European Union NextGenerationEU, investing in ÄIO offers the opportunity to support groundbreaking technologies. “By backing ÄIO, we not only address waste reduction but also provide eco-friendly alternatives for various industries to reduce dependence on traditional raw materials.”

With the investments, ÄIO plans to build a demo plant in Estonia, where they will start producing encapsulated oil, red oil and butter fats in tens of tons. The plant is expected to be completed by 2026. Although the final location has not yet been determined, the demo plant is likely to be located near a major industrial company. Raw materials will be sourced through collaboration with various Estonian and Finnish food industry companies, whose by-products will be used to produce oils. ÄIO is also working with the Estonian company Fibenol, whose hydrolysates are planned to be valorized.

There is strong interest in ÄIO's alternative oils from industrial companies. Several major food, cosmetics and household products companies in Estonia and worldwide have already signed on to develop innovative products together. ÄIO now has over 120 partners from Estonia and abroad, who either provide them with industrial residues or test ÄIO's oils and fats.

"For a scientist, the greatest achievement is when years of research result in a real product that can change the entire food industry and consumer experience. We will continue to develop the company and its products in collaboration with partners, investors and the food industry. We will also continue working with TalTech to train the next generation of bioengineers," Nemailla Bonturi explained regarding the next steps.

The entire production process is based on research conducted in Estonia, converting industrial by-products into food through a fermentation process similar to brewing beer or raising bread with yeast. The fermentation process results in fats rich in healthy fatty acids and antioxidants. Fermentation uses the "red yeast" microbe created and patented by Bonturi, which transforms agricultural and other industrial by-products into delicious and appetizing fats and oils.

In addition to securing investments, ÄIO also received a €1.8 million grant from the Estonian Business and Innovation Agency (EISA) last year to create a platform necessary for developing semi-automated strain technology, in collaboration with the Center of Food and Fermentation Technologies (TFTAK).

Latest Achievements

This year, ÄIO was also selected for the European Joint Undertaking on Circular Bioeconomy (CBE-JU) project with a budget of €7.5 million. Together with other Europeancompanies and research institutions, ÄIO will develop fat-based materials and cosmetic products.

At the beginning of this year, ÄIO established a separate innovation center called "Good Fat Wörks" for the development of alternative fats, where the company is developing new fats through fermentation and producing pilot products. In May of this year, the public could already sample delicacies made with ÄIO's pilot products, prepared by top chefs, at one of the world's first public novel food testing events held in Tallinn at the Latitude59 startup festival, in collaboration with Gelatex and Accelerate Estonia.

ÄIO Tech OÜ was founded in 2022 by TalTech bioengineers Petri-Jaan Lahtvee (phD) and Nemailla Bonturi (phD). Today, ÄIO's international team, with experience in bioprocessing, synthetic biology, and food technology, consists of 16 people from Estonia, Brazil, Poland, Armenia and Italy.