Estonian startup Äio has secured a €1.2M ($1.4M) grant from the national innovation agency to produce its yeast-derived Flavoured Fat on a commercial scale.
Ahead of a year when it plans to enter the market and launch a Series A funding round, food tech startup Äio has received a €1.2M ($1.4M) grant from the Estonian government to scale up its microbial fat for the food industry.
The investment from Enterprise Estonia, the national innovation agency, will kickstart a three-year project called Ferm-Oil, through which the startup will take its fermentation-derived Flavoured Fat from lab and pilot scale to validated industrial production. The initiative’s total budget is €2.3M ($2.7M).
It comes months after Äio received €1M ($1.1M) in grant funding from the state-backed Applied Research Programme, which is organised by the Estonian Business and Innovation Agency. To date, the three-year-old firm has raised €6.8M ($7.9M) in seed financing and €3M ($3.5M) in grants from a range of sources.
“This grant is a strong signal that Estonia is serious about building a resilient, circular food system. It allows us to prove to the world that our process can work at an industrial scale, not just in the lab, and that novel lipids can become a reliable pillar of future food security,” said co-founder and CEO Nemailla Bonturi.
Bridging the gap between lab innovation and commercial production
A spinoff from the Tallinn University of Technology, Äio is built on research conducted by Bonturi and co-founder Petri-Jaan Lahtvee. It leverages biomass and precision fermentation to turn byproducts from the wood, dairy and wider food industry into nutrient-rich alternatives to animal and plant-based fats.
These sidestreams are fed to a proprietary ‘red yeast’ microbe to produce the fats, with the whole process requiring 97% less land and 90% less water than palm oil production, and being 10 times faster.
One of its products is the Flavoured Fat, which Äio describes as “a lipid-rich yeast biomass with umami taste and functional mouthfeel”.
“With Ferm-Oil, we are tackling one of the hardest parts of food innovation, the jump from lab to factory,” said Mary-Liis Kütt, chief innovation officer at Äio and lead of the project. “We already know that our Flavoured Fat performs beautifully in prototypes, from replacing cocoa powder and brown sugar to adding a silky texture to broths and sauces.”
The project’s goal is to bridge the gap between lab innovation and real-world industrial manufacturing. It will optimise Äio’s fermentation process at lab and pilot scale, validate second-generation feedstocks, and transfer production to an industrial contract manufacturing facility.
Test batches will be used for downstream processing optimisation, quality analysis, shelf-life studies, and novel food safety assessment, the firm said, with the ultimate aim of reaching Technology Readiness Level 6 (TRL6), a key milestone signalling industrial readiness.
Through the project, Äio will test its Flavoured Fat in a range of savoury, bakery, and beverage applications, working closely with potential customers for feedback on taste, texture, and consumer acceptance.
Äio plans Series A and EU novel food dossier ahead of cosmetics launch
Aside from Flavoured Fat, Äio’s portfolio includes Encapsulated Oil, a high-protein, high-fibre fat substitute for food and cosmetics; RedOil, which has a deep red hue and can be swapped for fish oil and seed oils; and ZymaLipid Complex, a texture-enhancing and emulsifying alternative to palm, coconut and soybean oils.
The startup will enter the market with the latter next year, debuting it in cosmetics formulations, which have a shorter regulatory pathway than food. It’s aligning its product development with EU regulations, ensuring full safety and compositional characterisation.
At the same time, Ferm-Oil will help it complete the safety assessments needed to submit a novel food dossier to the EU. “This project allows us to validate the process on real industrial lines, generate robust safety data for the novel food dossier, and understand how consumers respond to these new lipid ingredients,” said Kütt.
“Ultimately, this project is about making future foods real. We want a world where essential ingredients like fats and oils can be produced locally, from local resources. Flavoured Fat is our contribution to that future, and this grant helps us get there much faster.”
This year, Äio completed a one-tonne production run of Encapsulated Oil, representing a 300-fold increase from its lab capacity. This new project, it said, will lay the foundation for follow-on investments in a facility with an annual capacity of 4,000 tonnes.
Its Series A funding round is expected to kick off in Q3 2026, and will help it notch large-scale tech licensing deals. It’s already in talks with over 120 partners worldwide, including leading food manufacturers.
“Estonia and the wider region have a unique opportunity to lead in circular bioeconomy,” said Lahtvee. “With Ferm-Oil, we will demonstrate that second-generation feedstocks can be turned into high-value, scalable ingredients. The same facility that today produces commodities can, in the future, also produce next-generation lipids on-site. That is real circularity in action.”
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