Estonian Startup Äio Scales Yeast-Derived Fats from Industrial Waste Streams
- Gauri Khanna
- 41 minutes ago
- 3 min read
Too long to read? Go for the highlights below.
Estonian biotech company Äio received €1.2 million from the national innovation agency to scale production of microbial fats derived from industrial byproducts
The company's proprietary red yeast converts waste from wood, dairy, and food industries into alternatives to palm oil, using 97% less land and 90% less water
Äio plans to launch its first commercial product in cosmetics in 2026, with food applications following pending EU novel food approval
Industrial waste streams rarely appear glamorous. Wood processing residues, dairy whey, and food manufacturing byproducts typically end as animal feed or compost. Estonian startup Äio has spent three years demonstrating these materials can become high-value fats through microbial fermentation, recently securing €1.2 million in government funding to prove the process works at industrial scale.
From Academic Research to Industrial Validation
The company emerged from Tallinn University of Technology research conducted by co-founders Nemailla Bonturi and Petri-Jaan Lahtvee. Their approach employs a proprietary red yeast strain (likely a Rhodotorula or Rhodosporidium species, though the company has not specified) fed with second-generation feedstocks that would otherwise require disposal. The yeast accumulates lipids within its cells, which are then extracted and processed into various fat products.
The €1.2 million grant from Enterprise Estonia, the national innovation agency, funds a three-year initiative called Ferm-Oil with a total budget of €2.3 million. The project aims to advance Äio's technology from laboratory and pilot scale to validated industrial production: specifically reaching Technology Readiness Level 6, a recognised milestone indicating a system has been demonstrated in relevant industrial environments.
Chief innovation officer Mary-Liis Kütt, who leads the project, noted that the team is tackling one of the hardest parts of food innovation: the jump from lab to factory. The company already demonstrated its Flavoured Fat performs well in prototypes, replacing ingredients like cocoa powder and brown sugar whilst adding texture to broths and sauces.
Product Portfolio and Market Entry Strategy
Äio's portfolio comprises four distinct products. Flavoured Fat, described as lipid-rich yeast biomass with umami taste, targets savoury, bakery, and beverage applications. Encapsulated Oil combines high protein and fibre content as a fat substitute for food and cosmetics. RedOil's deep red pigmentation positions it as an alternative to fish oil and seed oils. ZymaLipid Complex provides texture enhancement and emulsifying properties for formulations currently using palm, coconut, or soybean oils.
The company plans to enter markets first through cosmetics, which face shorter regulatory pathways than food products. ZymaLipid Complex will debut in cosmetics formulations in 2026. For food applications, Äio must submit a novel food dossier to the European Union which is a process requiring comprehensive safety and compositional data. The Ferm-Oil project will generate this evidence whilst optimising production at contract manufacturing facilities.
Äio completed a one-tonne production run of Encapsulated Oil in 2025, representing a 300-fold increase from laboratory capacity. The current project lays groundwork for a facility with 4,000 tonnes annual capacity. The company has raised €6.8 million in seed financing and €3 million in grants to date, with a Series A funding round planned for Q3 2026.
Resource Efficiency and Circular Economy Claims
The company claims its process requires 97% less land and 90% less water compared to palm oil production, whilst operating 10 times faster. These figures, if verified through lifecycle assessment, would represent substantial improvements over conventional oilseed agriculture. However, such comparisons depend heavily on system boundaries, allocation methods, and whether energy inputs for fermentation operations are appropriately accounted.
Co-founder Lahtvee positioned the technology as demonstrating how second-generation feedstocks can become high-value ingredients, enabling facilities currently producing commodities to manufacture next-generation lipids on-site. Whether this vision of distributed production proves economically viable depends on feedstock availability, transportation costs, and capital requirements for fermentation infrastructure.
CEO Bonturi characterised the grant as a signal that Estonia prioritises building a resilient, circular food system. The company is in discussions with over 120 potential partners globally, including food manufacturers seeking alternatives to conventional fats. Commercial success will ultimately depend on cost competitiveness, regulatory approval timelines, and customer acceptance of microbially derived ingredients.
