Estonian biotechnology firm ÄIO has secured €1 million in government funding to advance its technology that converts industrial waste into sustainable ingredients for the beauty sector. The grant from Estonia’s Applied Research Programme will support a three-year development project focused on creating cosmetic ingredients through microbial fermentation of waste materials like sawdust and agricultural residues.
Founded in 2022 as a spin-off from Tallinn University of Technology, ÄIO has developed a proprietary fermentation process that transforms side streams from wood and agriculture industries into high-value lipids. The company’s approach addresses growing regulatory pressure on traditional cosmetic ingredients, particularly palm oil and mineral oils, which face scrutiny over environmental impact and sustainability concerns.
Funding Milestone Supports Commercial Readiness
The latest grant brings ÄIO’s total funding to €9.8 million, comprising €7.1 million in equity investments and €2.7 million in grants. The company previously raised €1 million in pre-seed funding in 2022 and €6.1 million in seed funding in 2024, with plans for a Series A round in the fourth quarter of 2026.
The current funding will support scaling up fermentation processes, optimising purification methods to meet cosmetic standards, and conducting comprehensive safety and efficacy testing for regulatory approval in European Union and global markets. The total project budget reaches €1.8 million.
Scientific Foundation and Leadership
Co-founders Nemailla Bonturi and Petri-Jaan Lahtvee bring extensive biotechnology expertise from their academic careers at Tallinn University of Technology. Nemailla Bonturi, who serves as chief executive, completed her PhD at the University of Campinas in Brazil, focusing on microbial oil production using hemicellulosic hydrolysates. Petri-Jaan Lahtvee, the company’s chief operating officer, is a tenured professor at TalTech with a research background in synthetic biology and bioprocess optimization.
The company employs 22 team members and two interns across five departments, with 45 per cent women and 55 per cent men. The workforce includes 23 per cent PhD holders and 55 per cent with master’s degrees, representing eight countries including Estonia, Brazil, Italy, India, and Canada.
Technology Platform and Market Approach
ÄIO’s fermentation platform utilises both genetically modified and non-genetically modified microbial strains optimised for converting specific substrates into oils rich in targeted fatty acids, including stearic, oleic, and linoleic acids. The technology reportedly operates 10 times faster than traditional methods whilst using 10 times less water and 97 per cent less land.
The company has developed three alternative product categories and maintains collaboration partnerships with over 120 organisations worldwide. Its ingredients can replace traditional oils in products ranging from daily-use soaps to advanced facial serums and colour cosmetics, offering performance benefits alongside sustainability credentials.
Competitive Landscape and Differentiation
ÄIO competes in the single-cell oil production sector against approximately 20 to 30 global competitors, including C16 and NoPalm. The company’s competitive advantage lies in its ability to utilize diverse local substrates, which reduces production costs and enhances appeal to food and cosmetics manufacturers.
“This grant represents more than funding, it’s validation from the Estonian government that our technology can fundamentally reshape how cosmetics ingredients are produced“ Co-founder Nemailla Bonturi. The company is actively shipping product samples to cosmetics manufacturers for testing, marking progress towards commercial readiness.
Commercial Strategy and Future Plans
ÄIO’s go-to-market strategy targets both direct supply to brands and bulk sales to formulation partners and large ingredient suppliers. The company is developing a licensing model for international expansion, allowing manufacturers in other regions to produce ingredients locally using ÄIO’s technology and expertise.
A pilot production plant currently supports prototype orders and regulatory sample batches. The company aims to establish a full-scale factory, pursue joint ventures, and secure licensing patents in coming years. Plans include entering the next fundraising round by the end of the third quarter of 2026 to support scale-up operations.
“The cosmetics industry is at a turning point. Beauty brands of all sizes now realise that sustainability isn’t just a nice-to-have, it’s an essential requirement“ Magdalena Koziol, head of cosmetics development at ÄIO.