UP021: GenoPalate // personalized nutrition recommendations from your DNA

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Sherry Zhang: 00:00:00

Because the cattle farming, Northern Europeans actually debtors or spot on the global map developed almost the same time, about 200, 300 years next to each other, so they independently developed this mutation so they could digest milk sugar because that gives these people 60 to 70 percent of it the bondage of surviving environment.

Jay Clouse: 00:00:25

Startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them talk with them and discuss the upside of investing in them. Welcome to upside.

Eric Hornung: 00:00:52

Hello Hello Hello and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my co-host, Mr Instagram story himself, Jay Clouse. Jay, how’s it going man? You have been all over the Instagram stories lately. Multistory back to back. It’s been a lot.

Jay Clouse: 00:01:13

Well, I got to give people what they want and people are responding whilst the Instagram stories. So if you guys want to want to see what’s going down on Instagram, you can follow me at jclaus.

Eric Hornung : 00:01:23

Do you use a filter or makeup or something? Because the lighting looks, it looks like you’re wearing makeup

Jay Clouse: 00:01:29

Two things, I do often put on one of the filters, usually like a pretty low level one. Second thing is I think my cheeks are just generally rosie. It’s kind of really written in the face.

Eric Hornung : 00:01:40

Red in the face, long in the tooth. I don’t know. That’s all I got.

Jay Clouse: 00:01:47

Eric, my friend. How was your weekend going?

Eric Hornung : 00:01:49

My weekend is being consistently interrupted by my full time job, so it’s going. It’s pretty much the week.

Jay Clouse: 00:01:57

Yeah. We’re on a podcast blitz this weekend. There is no weekend.

Eric Hornung : 00:02:00

You, you put a hold on my calendar for two full all day events just in all caps. Podcast blitz. So that’s what kind of weekend we’re having.

Jay Clouse: 00:02:09

Production schedules are hard, man. We got to do it. We got to do to give the people what they need and that is a weekly episode of upside, where we are talking to founders outside of Silicon Valley

Eric Hornung : 00:02:18

And that was good.

Jay Clouse: 00:02:20

Good segway, right? Eric and I both believe that it’s a great time to be a founder outside of Silicon Valley and so every week we’re here on upside talking to those founders, people who we believe are building scalable companies with upside. People who are intelligent capital efficient and have identified opportunities that sometimes our geographic advantages to being outside of Silicon Valley. We are going to talk about the format or a podcast a little bit.

Eric Hornung : 00:02:42

Yeah, so we do our podcast and a three part format. First Jay and I will talk through some independent research we do about the founder and the company and the opportunity. Then we dive into an interview where we examine those three things again, but with the founders answers and our questions and finally we go into what is Jay and I’s part of our podcast. The deal memo, the deal memo is a as j makes pointy gun excitement. What would you even call that? Like that’s..

Jay Clouse: 00:03:10

That’s my phew phew phew emotion

Eric Hornung : 00:03:12

So that’s where we shoot our shot and we take our understanding of the opportunity of the founder of the company and we put it into context as if we were angel investors looking to invest in this company. Would make some comments about the things that we talk about, some areas that we have concerns, some barriers that we see a lot of upside and wrap up with what we want to see from the company in the next 6 to 18 months

Jay Clouse: 00:03:38

And the third section of our show is where we want to hear the most from you guys. So as you’re listening through this, as you guys have thoughts about this company, this opportunity, we’d love to hear what you agree with and in terms of our analysis, what you disagree with, what we’re missing, and you can communicate with us on Twitter at upsidefm or on our preferred podcasting platform, Breaker. You can comment directly on the episode in real time to where you’re listening and let us know your thoughts. We’d love to hear from you and this way we can both get smarter. Today we’re talking with Sherry Zhang, founder and CEO of Geno Palate. Sherry has a Phd in molecular biology from Marquette University and has used DNA technologies to understand obesity and metabolic disorders in the past, which leads into Geno Pallet. Geno Pallet analyzes individual’s genetic data, demographic and lifestyle information to deliver personalized insights for optimal healthy eating via DNA based profiling. Basically, do you know how its DNA analysis? It gives customers genetic based recommendations for foods that are scientifically best for their diet

Eric Hornung : 00:04:40

And I just want to start thinking about this in the context of how big the market opportunity is here. We’ve seen 23 and me, we’ve seen ancestry.com. There’s a few others out there in the
gene sequencing, gene reviewing gene testing space.

Jay Clouse: 00:04:58

Genetic health testing.

Eric Hornung : 00:04:59

Yeah, but it’s such a huge space. I have that. It’s going to be $22,000,000,000 by 2022 is the number I found and I think that comes down to a simple thing is that, everyone has genes and no one understands what theirs are. So there’s, there’s such a ubiquitous demand for this.

Jay Clouse: 00:05:15

I’m glad you found some market sized data because I struggled to find that. I did find that Helix, which is a competitor to 23 and me raised $200 million dollars recently, so I assumed it was a fairly large market. I want to get a couple things from you Eric cause I know you have a couple opinions on this, but real quick wanted to say Geno Palate was founded in 2016 and is based in Milwaukee, Wisconsin. They are an alum of generator, the generator accelerator who led their seed round funding of $307,000. So something that you and I talked about off air Eric was that you were afraid of DNA testing or testing your DNA and I’d love to hear you speak about that.

Eric Hornung : 00:05:58

So I’m not afraid of the idea of getting my genes tested or getting output of what my genes say. It’s more of a privacy concern to me. Like your digital privacy. I get that. You put it out on the Internet, it’s your name, your information, whatever. You can always change that. You can mix it up. The data can be hard to find, your social security number is probably one that you don’t want stolen, but the idea that that information can go out there is less of a concern to me than the idea of your genes themselves and the thing that makes up you and you are being, being readily accessible by anyone in the event of a hack. So we’ve seen that there’s not many companies that haven’t been hacked. Even the ones with best in class security and if your genes get hacked and there’s a high enough number of things and someone finds out a way that they can do some sort of crazy serum or whatever. Whatever the terrorist attack that you want have the soup does your of terrorist attack or whatever. It’s just like that’s just too much for me to have a direct impact on me biologically. So I have stayed away from doing any of the 23 and me is or the ancestry.com or anything like that because I’ve seen on the fraud and investigation side of things. What has happened to digital information and I’m sure it will happen to biological.

Jay Clouse: 00:07:16

I like that the true crime novel playing out in your head involves a serum as opposed to like an airborne toxin or something like that. It’s a serum

Eric Hornung : 00:07:25

Yeah serum is just like a fun, like villainous word. I think

Jay Clouse: 00:07:29

I was. I was watching actually it was, it was a video game. Someone was playing as a Batman video game and the the enemy in this video game had prepared an antidote for the toxin that he had created and I always thought, why is this plan to poison people? Why? Why even have an antidote?

Eric Hornung : 00:07:44

Because it’s not fun if you’re all automatically gonna win the game. Right? I guess you don’t play. You don’t play. You don’t play football because you know you’re going to win.

Jay Clouse: 00:07:52

All right. Yeah, I guess. I guess that’s in all movies like James Bond

Eric Hornung : 00:07:57

That’s a privacy concerns. I just have a general privacy concern around this entire area and I don’t think that our global legislation is where it needs to be to address those kinds of privacy concerns. I don’t think our security is where it needs to be and I think that there needs to be more work done before I feel comfortable giving away what is effectively the code to write Eric to the Internet.

Jay Clouse: 00:08:19

The interesting thing here about Geno Palate is we’re not looking just directly at the DNA assessment market here. We’re also looking at things like nutrition markets, you know, because I think the premise of Geno Palate is we’re going to help you eat better based on your genetics, not so much as we’re going to give you a genetics and because of that you can eat better

Eric Hornung : 00:08:41

And according to ibizworld the size for the dietician market, which is I believe what they’re trying to be is $10,000,000,000 in 2018 revenues. So when we think about the market size of this opportunity, it’s somewhere probably between the $10 billion to $22 billion. Maybe it’s a combination of both, maybe there’s some synergies that both of them grow because of it, but it’s a big market. I think that’s what we can come down to. Everyone has genes, the dietician market’s big. The gene testing market is growing and big. What we take away from the market sizing exercise here is that the opportunity here is massive. Everyone needs food. Everyone has genes.

Jay Clouse: 00:09:19

All right, you ready to talk to Sherry? Let’s do it

Eric Hornung : 00:09:22

Well. Well, here we are. One more thing. Jay, is there something you want to tell the people

Jay Clouse: 00:09:28

I have good news and bad news. The good news is I’ve started to invest more into the podcast in the form of a new laptop. The bad news is because of this investment, I did not reset my audio settings. And so this interview may sound a little different because, uh, I screwed up, I messed up some of the audio settings and we had to do some extra editing to fix it and you’ll still hear some artifacts of key clicking in the background, which I apologize for it, but in a couple of weeks. Once we get rolling recording again, that will no longer be an issue. So thank you for bearing with us and we apologize for any inconvenience. Okay, on the interview.

Eric Hornung : 00:10:09

Sherry welcome to the show.

Sherry Zhang: 00:10:13

Thank you, thank you for having me.

Eric Hornung : 00:10:15

Great. Having you here. You, I believe our first founder of Chinese background, so that’s exciting. Can you tell us a little bit about the history of Sherry?

Sherry Zhang: 00:10:29

Good question. I grew up in a big metropolitan city called PNC. Last time I checked, they have 15 million people now, haven’t gone back for a year now. I really miss their, Boston and remind me of my hometown, so that gives you kind of a comparable if you haven’t visited my hometown. It’s one of the biggest city near central Beijing hop on the train thirty minutes boom you’re there. So very laid back, a lot of great seafood, which is a very livable. I grew up there up to the point where I got my Bachelor’s degree in Microbiology. Then I was looking for, well before I graduated I was looking for the best path to pursue my scientific career. I always wanted to be a professor and my mom said, oh, the USA is the best place to be. So go, off you go. I applied for several schools and at first, I got a quite a few full scholarships, so the first one was from Marquette University in Milwaukee and we weren’t very familiar with the Milwaukee area, but the school, the program has a very strong biology programs and we really liked the faculty so I accepted it. And then the following other offers I just have to turn down and it turned out to be a very exciting journey to me. It’s very cold in the first year, but you know, I call it my home now. I’m a citizen of the USA. Unfortunately my mother country doesn’t allow two citizenships you probably know, so I have to give it up unfortunately, but I love both countrie. In these two countries. I happen to be involved and they have the greatest people. They’re hardworking, very intelligent and innovative. So I spent, after I moved here to pursue my Phd in molecular biology and Marquette University. I graduated in 2007 and I got right away a opportunity to further my doctoral education training at the medical college of Wisconsin, which is still one of the strongest program in town in your market area in Wisconsin. And I jumped from my Phd thesis was studying a plant system, so very interesting. It’s a wheat, we called every tab sister Leanna. Before I, without boring you with all the research I did, I was very excited about what I did where we study because the plants cannot get away from their problems. They have to be successful, so they develop a big array of molecular mechanisms to deal with the problems they have. One is , so that’s kind of my background. My background in molecular biology and mark had given me a very strong foundation to study and molecules, whether it’s from the gene to the RNA or to the protein, the functional entity, how do we approach it so we can understand the mechanism of how things work. So that gives me a very, you know, we do single gene cloning. It’s a long than the lot of work at the end goal setting. One gene, one function at a time, but I think that’s very powerful for me to view my further career on that and once I jumped into human genomics at the medical college, Wisconsin, that’s the postdoctoral opportunity available to me. I was just fascinated by all of a sudden I can study the whole genome of humans, you know, problem a small we’d to for ourselves. That to me is really great. Long Story Short, I spent 11 years studying obesity and something called the metabolic syndrome, so that’s more complex model than just putting off fuel or 10 pounds some our body. It’s more the central obesity, hypertension, dyslipidemia, prediabetics that as all these metabolic conditions that put people at the two to three folds more risky for developing cardiovascular disease. So I was studying that using stayed up art genomics, the genetic approach, and we do have certain collaboration was , which is interrogating all the proteins in ourselves. So it’s a great place to develop my capacity as a scientist. And even though now I don’t, I’m not in a position as an academic faculty member, but I, my identity will always be a researcher and scientist. And I can do, I think even greater science inside of Geno Palate, which is exciting.

Eric Hornung : 00:15:29

I actually wanted to take us back to China for a, for a minute. You went to university right in Tianjin? Which is a really prestigious, very great university. So a lot of our listeners are from western cultures and might not be familiar with the Gao Kao and that process. I would just be curious to hear like your experience going through that and getting into university so we can contrast that with maybe what we experienced here in the west.

Sherry Zhang: 00:15:56

Well I think in my generation, China has been very modernized. Education and culture and economy and people know I. When I came here, there’s not much culture shock in terms of academic environment. It’s pretty my understanding. I think everything comes down to we came into science, our science in particular technology because we are, at least I was, I was a curious kid. I was just a curious person and I’m still curious. I know why and I want to know why not. Right so that’ll apply to people globally and I think what other people at Harvard, or you know the China, my Beijing and there is a local, not local in Beijing there’s another school. I think people are just intelligent kids will all be the same and a lot of farmers actually go to my school to pursue their higher education. I don’t know whether that.

Jay Clouse: 00:17:07

I was not aware of the inability to have dual citizenship as a Chinese citizen. Can you talk about that decision for you and why you made the decision to become an American citizen?

Sherry Zhang: 00:17:19

Well, me, early on I got established in Milwaukee, so that’s actually the most reason, one of the driving force that I need to be in the same citizenship with my son. I have a eleven years old. To me it will be unfortunate if we will have two different citizenships. So that’s kind of the main reason is not because I don’t want to be Chinese paper, I want to be more American. I think it’s just, I love again, both countries equally and it’s more a personal choice. I was disappointed I couldn’t have had dual because of my friend from Canada that it can’t be able to enjoy both the convenience and the support from both governments. But I do, if that helps. I mean I, I just felt after I did that I didn’t lose any connection with China. As a matter of fact, I was invited back as a hard time engagement for a while for two years, you know, supported by my employment at MCW. We’d build one of the most prestigious program in Shanghai where the government give tremendous amount of resources and support and talents and policy and there is a lot of programs to make sure people like foreigners I can be the, have the native connection, can live there without or travel back and forth without much problem that you should choose. So I think the country, my mother and is just very welcome. Even though I changed my, you know, I’ll say the ownership, I think that speaks to how open minded both of these two countries are. I think that will help our economy to build in the nights now many years to come.

Jay Clouse: 00:19:09

So you’re studying at Marquette and you’re transitioning into doing genomics and epigenetic research. At what point did you start looking at this and thinking or seeing an opportunity in the dietetic space?

Sherry Zhang: 00:19:24

Good question. I think I started to see possibility where great companies like ancestry.com, 23 and me started to use the technology happened to be. They had applied in my lab that to help general public to have a better understanding of the data sitting in their in their body all the time. And to me it’s a powerful thing to me is something I could also do, but I’m never as an innovator by heart. I’m never interested in doing something people already done. If I be honest with you, that’s a waste of resources and there’s so much more you can do. So I think I was doing some both from personal interests, like you know, I want my own nutrition plan, but I was, I was for this is back before. Obviously you can tell, I prepared for many years and then two years ago we founded it, you know, but it’s longer than that. So about four or five years ago I was thinking, oh, what if we have a provider will give me the information, help me better on my body, which I’m living in the environment, totally alien to my body. You know, as you both kind the are interested in asking about. And there weren’t any providers really out there that provide scientifically curated knowledge information delivered to a way that I can utilize. I was like, okay, um, how about I build it with my friends and colleagues and we included a team and see whether I, I, we can do something about it. So it’s a filling a gap to help people to go a little bit further in the application world, if that makes sense.

Jay Clouse: 00:21:20

I’m curious from your side Sherry where you got the interest in entrepreneurship, was that something that was in your family or how did you decide to say, okay, I want to start a company?

Sherry Zhang: 00:21:35

In the genes? In the spirit I think. So I really can’t relate 200 years ago. My mother’s family has a long heritage, which we can track. Her last name is YANG, you know at that time it was a very military family. They were the warriors for the country. It actually fought hard or the country’s safety and freedom. And to that spirit kind of have to alive until I see my mom is the strongest woman I have ever known. She’s an educator, so she put a year spread her knowledge to her students are still dense, are all over all over the world, doing great, great deal. And so I have the highest respect for teachers and for, I think that there it is over there and she’s so procreative, innovative. So when I was young I can always tell me, oh no, that’s my given name. And she would say, hey, you know, let’s make a customized shoes with the different patterns. And the reason I see shark tank is doing the same thing. I was like, this is old, you know, things like that. So I was having a very creative environment. Thanks to my mother, my father on the other hand is a CEO and president for probably three to four enterprises owned by the state Indian. My hometown is on the, on the. It’s a hopper come, so there are lots of import export transactions and business going on and he’s working for the big organizations. They have a lot of subsidiaries, so I kind of. I even though I was interested in building a career, I was just a good kid. Play Piano early on then transferred to more science and technology, but my family is filled with business talks and people and creation of ideas. I think the combination of that helped me. I think that there’s something in the genes, you know, we all have this stare at that I’m sure by type your genes for entrepreneurial geno type, probably in there and either way we will probably one day will be interested or in that behavioral stuff. The environmental. Also always inter interplay between your genes and. Right. Same thing. What are your food and your genes? That’s exactly what we’re doing. The interplay between the two can lead to different outcomes in your health. Sfor your question, Jay, I think the opportunity I had in the past three to four years to where I can apply some of my running project in an innovative way at the medical college, Wisconsin and apply that to build something from ground up or Shanghai or China and back here now with Geno Palate is all kind of tied together. I think that’s really what I am interested in doing for my whole life.

Eric Hornung : 00:24:38

I want to get to Gino Palate in a second, but first you’ve spent pretty much your entire life in academia and now you’re transitioning to the private space and actually creating and launching a company. What are some of the challenges or obstacles you’ve had to face in this first two years of pure transition?

Sherry Zhang: 00:24:59

I think shifting the identities or the application of the identities I should say was the hardest thing and I questioned the fact that I’m shifting to doing business completely in the phase. Is it kind of like abandoning something I really, truly devoted, truly love with the whole life. Science, life, human and animals and all this, and it bothers me for a while. Until one day I figured out doing the business, applying my knowledge to help people potentially more people in real life. It’s actually exactly what my academic preparation should be more. So because of that, I think I feel stronger. But the translation wasn’t easy.

Eric Hornung : 00:25:51

So what is Geno Palate today in your own words?

Sherry Zhang: 00:25:54

Geno Palate is a personal nutrition information company that helps people align their eating habits, or forwarding to our readout, which is a scientifically curated information based on their genetic makeup. In short, we say Geno Palate helps people eat with their genes.

Jay Clouse: 00:26:17

And is this something you you mentioned that it was kind of in the works for a couple years before it was available. Is this something that you were testing yourself with your own genes and your own diet for a while?

Sherry Zhang: 00:26:30

Yeah. I was easy for me to look up certain variants between you and me. Wish we did for about 5 million to 10 million of those like ladders, they eat ATGC. Some of them are probably to do with your obesity, cardiovascular or all the way to Alzheimer’s, that 23 and me and other companies are focused on, others are nutrition. How do they interplay with nutrients you take in from your food and how does that play a role in lowering your risk for the better health? So that’s kind of where I was most interested. So I was, you know, checking kind of testing some models, whether we have a robust enough algorithm where we could offer not just for me, for my curiosity as scientist who knows how to do this quickly in a raw way, but also apply to the general public. My son is a customer, my all my friends are, you know, people like you and that I care about how could I confidently call them and then provide it and at the end of this casting and trials. And not just me, me and was my Phd at colleagues and scientists runs and believe that we can. This is a ongoing, Geno Palate will always be innovating. Just like any other generic companies or related to biological type companies, so we will not say this is the final product and I shouldn’t be. It should be a basic foundation for us to understand your genome based on 30 years of studies and treat ends of dollars invested in this from the . Now we had viewed on that around with our understanding of your true habits, your personal preferences, more behaviorals and sounds, so over time we should be able to provide a more precise, more accurate personal nutrition

Eric Hornung : 00:28:38

So over time as the sample size gets larger, the error terms are going to get smaller things are gonna become more precise. Where are we at in this technology now? Whether that’s at Geno Palate or at 23 and me or wherever the technology is. Is it 60 percent accurate? Is it 80 percent accurate? Is it 95 percent accurate? Like how would I understand the kind of prediction methodology?

Sherry Zhang: 00:29:03

I will say more than 95 percent accurate for the part I read, everything, all the way to 100 percent. I mean when I read, so if Jay share his data or we were very happy to take yours as well. You know, that’s ATGC whatever we read for you move other genetic markers that we know works in certain mechanism in the brain, our gut health and so on, so forth. That’s hard coded. That’s, you know, thanks to your ancestors in bringing about into you after million to 2.5 million of evolution ready. So that’s, that’s done. The part I said we need to keep innovating is to add in more layers to that, more complexity. You know, maybe two years from now we’ll have 30 more markers around eating behavioral which is just emerging. We do have some very robust ready. I think it’s a, the habits of visual part that will make it more accurate to you because you are just like, wow, hundreds, thousands will be interested using our service. We don’t have the access to their life and even though we want that, but what we know is to read their genetic and wrote that set in stone.

Jay Clouse: 00:30:27
What are some of the common trends or themes you see with people as it relates to diet, that they are messing up, right? Like what do, what do people just commonly do that disagrees with their genetic makeup

Sherry Zhang: 00:30:42

Into eating based on? So we have a group love eating behavioral variants we call snips that can categorize people or some people into different risk groups. If you are exposed to fatty foods, if you’re over eat, they’ll push you to more extreme situation over developing obesity and all the associated metabolic syndrome. But that’s all intertwined with how you approach your eating behavior. That’s why example or someone has, oh, this is another very interesting model where we have a genotype it’s relatively rare, but 100. There are such individuals that will show the symptoms somehow the tribes, they these people was originated from, have four times higher efficiency of swapping iron. Now in a modern time where everything is in surplus and that could be a problem where, for example, some people train for triathlons are pushed to the performance point where you know every day is and very high content of iron. And this person can literally have pigmented skin because they just have so much iron saturated in their body. They cannot pump it out eventually and that became very can be a devastating situation. So that’s the kind of an extreme case where the nutrients which can be very healthy or helpful or supplementing our diet and can be detrimental to people if they

Eric Hornung : 00:32:30

So you mentioned ancient tribes and I’m guessing that the people who have this gene we’re in an area that was pretty iron deficient. Is that something that you kind of see as a large trend where what’s grown organically near where someone’s genes originated? So if you have someone who’s Asian for example, maybe dairy just isn’t a very good thing. It doesn’t sit well with them or someone who is from Italy can deal with a lot excess amount of fiber or something like that. Is that like are those correlations prevalent or is that more just like have a narrative fallacy?

Sherry Zhang: 00:33:05

Some of the evidence evidence is pretty substantial. That’s a good example. We just gave, so my genotype for lactose intolerance is actually shown. I am an Asian genes tolerance for digesting lactose sugar versus lots of our Caucasian members are not intolerant. They have the mutation, they develop about three, 3000 years into cattle farming. So the original call wild type are the fact that we don’t have that because it’s not efficient way of keep a gene all the time. Well, you don’t use it as it is very smart mechanisms and we developed in our genome, so after winning many five years and above, you don’t need to like it anymore and the gene will turn off automatically as applied to everybody in human. And because the cattle farming, Northern Europeans actually there’s four spot on the global map evolved almost the same time, about 200, 300 years next to each other. So they independently develop this mutation so they could digest milk sugar because that gives these people 60 to 70 percent of the bondage of surviving environment. Yeah, that’s actually one of the basic mechanism that we develop in our ancestral human nutrition for our users

Eric Hornung : 00:34:31

And I kind of want to adjust real quick to go back to Geno Palate and talk about it operationally. How does this work? You sent Jay a box, he has a box. Somehow something goes in that box and all of a sudden he gets a response. What happens in the interim? Does it go to a lab? Do you guys have a lab? Can you just walk us through that process?

Sherry Zhang: 00:34:50

Yeah, so Jay got a box in a box, there is FDA cleared saliva sample collector and they I’m 30 minutes on that, the saliva, so he needs to spit in a tube and then ship it and days later our lab will receive it. You’ll have a contact at lab, which is a clear clear. They will group the samples that belong to our project in this particular batch and then put it on a machine and a process, extract the DNA and put it on a big automated machine to process his DNA, along with many other samples. And then it takes about a or two before we’ll be able to get a data, if you know from the data we extract successfully have is DNA and um, was a good yield and put on the machine. And now we will receive notification that his data is available for analysis and we have like in-house algorithm imbued into our system which is a Hipaa compliant environment cloud based. Now we will generate a personal nutrition report in about four to six weeks. That’s kind of the industry norm from the day that you provide your DNA.

Eric Hornung : 00:36:16

Is that algorithm protected in any way or is it protectable

Sherry Zhang: 00:36:21

It is protectable? We have a strategic plan for protecting our. Keep innovating IP. It’s a proprietary to Geno Palate and now we keep updating as we go. Our algorithm not only interrogates curates scientific knowledge base we established in the genomics science, will also be dealing with a algorithm will be taking the nutrition science and food science and together, so at the end of the analysis pipeline, Jay will be able to get his own shopping food list that he can take it to any grocery stores or farmer’s market where she can he can shop while his own boots.

Eric Hornung : 00:37:10

Jay, I really hope for your benefit that Wasabi piece are on that list because Jay eats a lot of Wasabi piece.

Jay Clouse: 00:37:18

This is maybe a little overblown. I’ve. I’ve had a wasabi piece a couple times on the podcast. Sherry, what’s the feedback been so far from some of your customers this point and actually before, before you answer that, when was this first available for the public?

Sherry Zhang: 00:37:34

We have a preview sales since January of 2017, but that’s very limited to my local circle because we want to have the robust way of doing trials and getting feedback and rent, innovating, polish our product and keep going like that. So is that ongoing strategies? I will say the official initial launch was last fall this time. And the one you will be hearing saying is actually our much enhanced release that we are very proud to to take into the world and that many people use it and be benefited from it and I don’t know whether you read the article about us from Journal and USA Today also pick it up and so far we’ve seen very good response from public so people are interested. That’s a very good feedback we got initially II want to share with you.

Jay Clouse: 00:38:42

Has anybody been able, just trying to think of the timeline here, has there been enough time has passed that somebody has taken the Geno Palate test, gotten their recommendations for diet and has really implemented that? Have you seen a full cycle of that and gotten feedback from those customers?

Sherry Zhang: 00:38:59

We, we do, we are collecting more innovating our hotline and the feedback are very positive in general, but it’s very individualized as you can tell. There’s a commonality in how people use it, how people respond to that, how that has impacted their nutrition life so far. Well, we are very encouraged and uh, we utilize that feedback to refine our current release.

Eric Hornung : 00:39:29

How many people have gone through and spit in the box so far

Sherry Zhang: 00:39:35

The data I can release right now if you can understand is 45 000 and these people including whole family, four or five couples. So we are very interested in providing families with a household nutrition meal plans and solutions as well. My background was family based population study, so that helps a lot.

Jay Clouse: 00:40:03

Hmm. And are people saying that it’s helping them to lose weight or sleep better or how do people say this makes a difference to them once they follow these guidelines?

Sherry Zhang: 00:40:15

I don’t want to give partial data can data to you, but I, I do want to share with you the feedback from again individual data points include, I feel much energized after I adopted this is the current offering weeks as much better enhanced experience from this point. People have experienced what convenience of losing weight, if that’s their health, go there. Some people, they don’t want to lose weight, they want to gain muscle mass, so we can also help with that with eating for your genes. That’s what our hypothesis and there are people have energy associated with better sleeping patterns. Overall, what we’ve confidently provide to our users is a way of thinking and making choices for your foods, so it’s a we call it inform decision making process. We’re facilitating whether you, you know, you want to fit into the genes 20 years ago at your purchase or you know going to a wedding three weeks from now or you want to be more athletic and whatever it is or deal with your work stress better in a better, stronger way. I think it’s all up to you. The individual, you know, fundamentally will provide a universal tool that it’s personalized you at a very, very deep level that you could utilize when you making so many choices in your life that you feel empowered with it. So that’s the fundamental thing. We the value proposition we provide..

Eric Hornung : 00:41:56

So in the intro I mentioned that everyone has genes and everyone eats, which means that your tools, you just call it universal, is just that it applies to everyone. So how do you identify who your first target audience is as you kind of develop who is going to be like that core group of users that allows that to eventually be universal

Sherry Zhang: 00:42:20

From me? I’m a person who is curious about my body regardless of education now mobile or socio economic, gender, age. Really. I think as you said, it’s a great way of saying about Geno Palate is everybody has a genome. Everybody has to eat frequently and everybody deserves a healthy outcome, healthy life and hopefully this will help them live happily and long. So I think it just all comes down. I, I wanna, you know, I think a lot of ecommerce, they whoa. The first question is we all go through that right practice or exercise. What is your segmentation? All right, what’s your target audience, and I don’t want to say we off target, we don’t want to say were random but. But I do think, oh, I see this differently. I see this. If it can be applied to me and you and you and I believe that can be applied to many people who will have the heart to adopt it

Jay Clouse: 00:43:34

And once this new version goes out, you’ve redone the website, you have this new version of the product. What is Geno Palate strategy for going to market and getting in the hands of people and making sure people are aware that this is an option for them

Sherry Zhang: 00:43:47

Through the people like you are. Through users, I think we, you know the word of mouth for Geno Palate so far it’s very limited to experience is very powerful. I think I’ve seen people go to their Thanksgiving dinner just say, hey, you know, you should try this thing. This is unsolicited. I knew this after her after I actually reconnect with individually and if that helps that individual, that individual will be our advocate and I would really want to foster that. I think the best way of fostering that is to provide a better service everyday with that person we engage with, so it’s about relationship. It’s beyond one transaction.

Jay Clouse: 00:44:36

Let’s switch over to finance for a second. How does know Palette make money?

Sherry Zhang: 00:44:42

We have about 30 percent to 40 percent, so we have several projects right now if you can see online. But the main products we were promoting to two ways of getting your genome profile for a nutrition. One is going through the kids get away is also he can go through submitting your existing data. That was originally a proposal for something else. Then we can repurpose that at a lower cost compared to the kit. The kit is also affordable, cheap as you can see. So we established a personal nutrition profile. People already be back that they want for their nutrition planning services, meals and so on, so forth. And then we will, we’ll go around and provide that. So the marginal our services is about 30, that just enough to how house running and keep investing in getting more awareness out and keep building innovation team.

Eric Hornung : 00:45:52

So that 30, 40 percent is gross margin than it’s before all the fixed costs or is that your net margin? That’s okay. Cool. So what are the KPI’s that you guys look at at Geno Palate? What are the numbers that you really care about and focus on if you had a dashboard

Sherry Zhang: 00:46:10

Right now I’m caring about quality first and quantity. What I mean is we already have a, you know, we established locally mostly at Wisconsin then nationally. We want to make sure 70-90 percent or more of these people are happy with us. If not, we want to know why, why not? I want to know how can we do to make it better so that quality part quantity wise, you know, the good part, we want to spread it out. Through you, through me, through family and friends and through media, you know, Facebook, no Instagram and so on. So for that I’m going to use, to me is about spreading out quality messaging, reflecting quality work. So I think that’s kind of my to the top merriment on my matrix.

Eric Hornung : 00:47:08

So you mentioned 70 percent or more are happy. Do you guys do follow up surveys? Is that how you get that data?

Sherry Zhang: 00:47:14

Uh, we do. We do to certain degree without burdening our people with many, many surveys.

Eric Hornung : 00:47:22

And something that you kind of mentioned a little bit earlier is this idea of maybe having dietary plans or other additional add on services. It seems that right now you’re kind of a, there’s no repeat customer because you only have one set of genomes or one genomes I guess. So once everything is checked in and run through the proprietary system, you kind of get your one report. What are the options for future add on services or recurring services?

Sherry Zhang: 00:47:53

Right now we’re focusing on acquiring that first engagement, right? Establish that profiles. So it’s a little bit early to answer your question in a comprehensive way as you can imagine. But right now we know people are interested at getting something personalized. What are convenience, right. So we could utilize the established profile and give them products that they can use for daily applications, whether it is something tailored to the differences in their household or you know, the parents and the children can provide something in common so that they can use it, put it on the refrigerator and okay this is my shopping list. We will all share. We eat raspberries, right, and we all benefit from I think like that. And we could do that and then people want to pay for it and will provide that and other way too if people want to have diversified meal plan for extended period of time and we can also innovate our services into full by that as well. So to me that application of what we establish is opportunity where we could upsell or re-engage our customers.

Jay Clouse: 00:49:20

Talk to me about your team. Sherry, how big is your team right now?

Sherry Zhang: 00:49:24

We have about 16 to seven team members it, there’s a lot of growth recently. So I, I, I think it’s about 16 to 17 upgrade on that. Some are part time, some are full time. Each member of this team brings to the team a complimentary skill and skill set and I’m very happy about how well our team has been evolving and we are constantly seeking patterns. If you guys know anybody who are passionate about how nutrition genomics and let me know

Eric Hornung : 00:50:02

listeners, that’s. That’s a shout out to you as well,

Jay Clouse: 00:50:07

And so those team members can you break down what their different roles and skill sets are?

Sherry Zhang: 00:50:18

Sure. Without getting too much into nuances, we have three Phd’s, me included, and these are experts, reputation in our industry in the innovation sector or either genetics, genomics or data analysis. We have three registered dieticians will have clinical experience and also our greatest scientists working with me in refining our algorithm and building our innovation, core nutrition, science and food science. And the other 10 people, 10 to 11 people are supporting now saying downplay any of their roles are fantastic, but they’re supporting our core scientists team, our innovation team to make sure we are supported and we do the right thing. We helped with running and also messaging this knowledge in the product to the laymen audience, which is, I think it’s very important for our business.

Jay Clouse: 00:51:18

Sounds like a lot of people to keep on staff. I think you guys just finished a small raise. Is, is that where the funding for the team comes from?

Sherry Zhang: 00:51:28

We’re very efficient on capital to date. We’re proud of it and I will keep using our continue our culture of the capital utilization. We managed to have this team growing and maintain and keep growing and right now we are um, a, a bigger size for the team because we have a few new interns joined for the summer and I think after the summer we’ll have some restructuring and we are recruiting more full time people as well. Aand so far I would have managed, managed well and we, there’s no one member that is not efficient on our, our team. So we’re really proud of it.

Eric Hornung : 00:52:18

So just trying to get an understanding here. To follow up on Jay’s question. You guys raised $300,000 in this last seed round and you have what we’ll call 10 full time equivalence. You said that some people are part time, some people who are full time and you’re 16 to 17, so that’s like $30,000 a year per person. Are people forgoing salaries here or is this. How does, how does the overhead costs work of people I think is the question. Well how does that translate the runway

Sherry Zhang: 00:52:46

we have raised a little bit more than 300. Okay. So then we’re up there. The details. I wouldn’t be able to describe those as we’re in the process of evaluating our financing, needs and everything. But what I can say is yeah, that’s our team. I’ll week have been successful in maintaining it and doing a great job and now I don’t think it’s. No, I can’t speak for other other companies. It works.

Jay Clouse: 00:53:15

I’m curious about being based in Milwaukee. Obviously you went to Marquette and that has a large reason why you started the company in Milwaukee. How has living there either benefited the company or basically what I’m trying to get to is is there a geographical advantage to being in Milwaukee or is that sort of happen in stance?

Sherry Zhang: 00:53:36

Just want to clarify. Marquette is not the reason why I founded her here. The reason was my core team happened to be here to begin with and it happened to be in Boston or the other one is in California maybe the structure will be different. I’ve heard so far we’re delivering a information in terms of business that we don’t rely on physical lay to be limited by any geographic location. So that’s just a the traits of the characteristics of company ever, so I think it doesn’t have to be anywhere and then that’s also an advantage that some of my people are not located in Milwaukee but still contributing tremendously to the work. So we are really can be a very virtual capacity. It just happened to be me in Milwaukee and some other people near here. For your question about advantages or disadvantages, so far I think I see more advantages versus not else is because you are key in Wisconsin in terms of the startups and the entrepreneurial environment is underrated. We got a lot of support from local ecosystem. You’re probably familiar with this generator accelerator program And we graduated from G Beta, which is a precursor program, would build a little bit more after that. And now we got admitted into the regular program last fall and we’d be tremendously more during that and after and since then the state of Wisconsin and the city of Milwaukee and people here are just very supportive of a startup like ours and trying to help people eat better and better and I feel it feels another resource here for us. It can speak to any other entity is pretty good.

Eric Hornung : 00:55:49

Have you ever had an output that said that you should eat more cheese curds because I feel like that would go over really well in Milwaukee.

Sherry Zhang: 00:55:56

Uh, not for me. The Irish Irish ancestry. Yeah. That they, most of them, 90 percent of North European ancestry will have that mutation that will help them to digest lactose.

Eric Hornung : 00:56:11

How big is this opportunity? How big can Geno Palate get?

Sherry Zhang: 00:56:17

Well, I don’t know how to answer that question because as the founder of a company, we all want ours to be huge one day, so I think it is everybody’s dream. All can say is I think by focusing on one relationship at a time, really treat people nicely with respect and with care and that we are delivering. I think we can be quick and I just hope one day lots of people will know about us and have used that our services and we’ll talk about ours.

Eric Hornung : 00:56:56

I have one more topic I want to hit before we wrap this up, so if you’ll indulge me. The idea of privacy and the fact that the only thing that remains private is our DNA currently. Everything else is pretty much out there for people to take and see. Your name, your email address, your social security number, but the biological privacy is probably like the final frontier of privacy. So I’m curious how Geno Palate thinks about privacy.

Sherry Zhang: 00:57:23

This is a fast evolving industry because it’s important, it’s helpful and it’s a great opportunity as well for businesses like ours. So what I meant was we will probably see in the next two to five years a lot of new policies, regulations, laws, will come out and in place and as a, both a users, scientists and the founder of this genetic company who wants to help people with knowledge. I welcome all this evolution because eventually I am competent that we all will come into a situation or a state where we can have a mature protection strategy plan, regulation so that we’ll all feel protected in the same time while using services like Geno Palate hopefully ancestry and . And so, um, so that’s, that’s kinda my little bit forever vision or a feeling for this on behalf of Geno Palate. Another thing is we always stay state of the art and also trying to be ahead of the curve when it comes to the privacy of our users DNA or any other personal information we have exposed to. And Geno Palate will never sell or trade your or my users’ data to third parties. And I mean, I don’t know whether you are aware of there are companies doing section and section that’s their business, I can’t speak to that, but that’s not general interest, general pallor interest is to utilize that data back to servicing, bettering the service of each individual and I think there is a stronger value proposition there than make some side money out of it. We uh, you know, apply the highest standards in at a time, you know, industry football’s the lab or how we handle the data management analysis and again, as a user, each of us can always opt in, opt out at any time to access that, give it to us as individuals. So, so yeah. So that’s kind of where we are standing at and will be always investing resources team and time into the privacy issues of genetic.

Jay Clouse: 01:00:14

Great. Well thanks for being on the show after the show. If listeners are interested in learning more about you or trying Geno Palate, where should they go?

Sherry Zhang: 01:00:22

If they want to try Geno Palate go to our website. Uh, it’s a brand new website. If you haven’t experienced it please do, you probably seen the previous version, so please give us your feedback on the new one. Well, if someone with talent or potential partners or investors who want to get ahold of me, feel free to share my email work email with them and sherry@genopalate..com. I’ll be more than happy to be connecting with them.

Jay Clouse: 01:00:53

Great. Thanks again. All right, Eric. We just spoke with Sherry Zhang of Geno Palate time to get into our deal memo. Let’s talk about Geno Palate as an opportunity here.

Eric Hornung : 01:01:08

Yeah, let’s do that. Let’s talk about the founder. Let’s talk about the company and let’s talk about the opportunity to see what are some areas where we see some upside, some areas where we have some shadows are some areas of caution. Let’s dive in. What was your just initial kind of high level take on the company and the opportunity.

Jay Clouse: 01:01:25

So to me this is a space that is growing, the sort of DNA understanding or DNA information space, if you want to call it that. We have a lot of players in that space as of recently. People seem to be into it so I could totally see a world where Geno Palate is successful because you marry this idea of people being interested in their genes with people’s interest in health and wellness that’s growing and growing and growing. I think that’s really interesting. I’m still a little hazy on how big this market specifically is. I’m a little hazy on who that target customer is and I think Sherry did answer this pretty well. You know, we asked who is your customer basically because we led with the question of this can be applied to anybody who. Who would you go with? First response was people like me, which she expanded on as people who are curious about their body and the best ways to to live. I think it’s a difficult market to put your finger on and both in size and understanding who that person is, where to go and find them. So I, I have a lot of questions here, but conceptually I like this as an opportunity.

Eric Hornung : 01:02:29

Are you curious about your body? I am. That wouldn’t be like how I categorize you. I think I know you pretty well, but that’s something that’s new to me.

Jay Clouse: 01:02:36

I’m curious about all things. I signed up for Geno Palate, I spit in the tube. That’s true. So you know, I’m curious. I have, I want to know. I want to see what this experience is like. You voiced concerns over privacy, which I think are super valid. I kind of just expect that I have no privacy, so I feel like I’ve kind of a surrendered that.

Eric Hornung : 01:02:57

Fair, fair. Let’s just touch on the privacy aspect real quick because I don’t think it. It’s definitely a valid concern. That’s an area for caution, but the idea that it’s HIPPA compliant, they don’t sell your data. That’s all great. I think that they’re definitely making strides. It’s just a, your data’s in the cloud. Anything that exists in the cloud is hackable regardless of how much great security you have. So I don’t want to Belabor the point of privacy. I think we talked about it enough on the upfront and in the actual interview. I just wanted to mention it as something that I would definitely be paying attention to as a potential downside risk for this company.

Jay Clouse: 01:03:34

Totally. I think anything that is digital is in the cloud. Anything that exists really seems hackable at this point. We just survived a Facebook hack where 50 million accounts were compromised and that goes all the way to anything. You’ve authenticated with Facebook, which I have just no idea how to trace that back. I know that I was one of the accounts affected, but I’ve been hacked so many times the last few years. I really kind of glossed over this and I should probably be way more concerned. It’s just crazy what new realities we accept when things just continually go bad, but I won’t get on that soapbox.

Eric Hornung : 01:04:06

Well, hold up. Now I have one more point. I was going to quit. Cut it off, but you have been hacked digitally. Your genes have never been hacked, right?

Jay Clouse: 01:04:14

Right, true. True.

Eric Hornung : 01:04:15

That’s a whole different thing. I think that when your genes get hacked, it’s a whole different ball game than your digital identity.

Jay Clouse: 01:04:20

So what do you. What do you see as the end game of that? What are the implications of genes getting hacked?

Eric Hornung : 01:04:25

Oh, I don’t want to go down to the conspiracy theory route for like another half hour, but I, I just think that the science is definitely outpacing regulation and best practices in terms of being able to protect this stuff and I, I dunno, I could hypothesize for hours about both sides of the coin, the security side, how that’s going to get better, whether that’s something new type of technology like blockchain and the hacking side, which is what happens when that actually goes down. Are they able to literally like somehow change your genes without you knowing because they have access to it or is it just something that they can look up and figure out, okay, how can we monetize this? I’m not sure if criminals are really creative.

Jay Clouse: 01:05:16

That’s true people go to great lengths. I was just talking to somebody recently to hide health concerns or health realities for our president for example. Went to Alaska a couple weeks ago with speaking with our chef at that camp who had been a chef for President Obama when he visited Alaska. I was like, do they? Does he have a taster? They taste things? Because the night before we have been trying to find out, does the president have a taster? Apparently when the president is in foreign countries, sometimes they literally have to like if he uses the restroom, take that back to America to dispose of it so that they don’t dig into it find some health realities. Crazy crazy stuff. Anyway, this is not related some simply to Geno Palate. This is all things DNA that you’re voicing concern over, so.

Eric Hornung : 01:05:56

Right. Absolutely. Absolutely. I also think that moving back into Geno Palate, there’s this really interesting future casting that Sherry alluded to, which is like behavioral analyses and add on services and we’ll dive more into the opportunity into the founder in a second, but this idea that this data set is very useful for teaching you what kind of foods you should eat. Like Eric, you shouldn’t eat plums. Okay, fine. Great. But it’s also if you run different algorithms on it, potentially extremely valuable for a slew of other things, which is what I think is fascinating.

Jay Clouse: 01:06:30

You think that’s some of the real upside here. Because I know in the interview we would discuss things like this is a one time purchase as far as getting your gene set. You won’t necessarily need to do that again. So you had the great question of what are the other add ons or services you’re saying this is where you might be seeing some of the real upside and the opportunity.

Eric Hornung : 01:06:48

I just think that once you have a dataset of something, the algorithm you run on it right now Geno Palate’s algorithm is what it is. It’s centered around food and centered around your body and what it’s supposed to be eating or what it would like to eat the most. And there is add on services around that product. There’s add on services that are probably like a personal nutrition plan or something more customized specifically to you, like weekly shopping lists that don’t get boring come with recipes, things like that. But then there also based on that same data set, and I’m not saying Geno Palate has this side in or not, but she did allude to this idea of having some sort of behavioral component along with it. If you get enough data scientists who have the right and she has three Phds, so I’m assuming that there’s the right brain power there. It just depends on the right subject matter expertise. You could write a different algorithm which is a different, which is completely different product based on the same data set. So right now the 23 and me’s, the ancestry.com, Geno palate, anyone who’s collecting this data, if they’re collecting it in a clean fashion that someone can write an algorithm about. I think that the product range is massive.

Jay Clouse: 01:07:56

Interesting. So you’re almost looking at it from a platform play. They can provide the raw information and have other things built on top of it to leverage that information.

Eric Hornung : 01:08:05

Right. Which right now they won’t do because they say they won’t sell any of their data, but it gives you a little insight into probably what the 23 and me’s and the ancestry.com or whoever is selling the data. She didn’t allude to a specific name, but there’s not that many people in the space right now are doing. So it’s just like a in a, in the hedge fund space, if you have the best data set, you can find multiple algorithms to find a great winning trade or some alpha out of it, but you need the best data set. So I feel like that’s kind of the underlying premise here is there’s a race to the best data set.

Jay Clouse: 01:08:35

Found it interesting that she spoke to the, the pure understanding, your, uh, help me use the right words here, understanding your genome, the ATGC, the Gatica letters that science is 95 up to 100 percent accurate right now. She says, where are the innovation is happening, is that you can add on new behavioral layers, understanding habits based on genomics. And that’s relatively new. She said, especially related to eating and food. So something that’s true, gene, of how it seems to be in a good position at a good time. Something that seemed to be. Well, I want to I want to dig into Sherry as a founder because three of our. Three of our questions we’re trying to answer here relate to the founder of the company. Eric, you’ve spent a lot more time in China, so I would love to hear your take first about Sherry’s background coming to America starting this. Is Entrepreneurship something that you experienced a lot when you’re in China? Is that something that seems to be a core family value? Pontificate a little bit. Will you?

Eric Hornung : 01:09:34

So one of the things I love about Chinese culture is it’s just so long. I think they can trace a lot of things back to like 5,000, 7,000 years ago. The Chinese were a civilization when the Egyptians were a civilization and Egypt is still a country, but China is still attached to that same country. Obviously there are rough patches, but the idea is that the culture is pretty fluid over the centuries, which is crazy and I love the idea that when we asked why entrepreneurship for you, she said it’s in my genes. They can trace it back thousands of years in the warrior class and that’s like the hard working side of things. Her Dad, it sounded like he was in the party, but he is a CEO of multiple companies, so you have the hardworking, you have the business. It just made sense. I loved all of that. I love that history and that it made sense over multiple, multiple generations. One thing that I thought was interesting was that she as a founder came from academia. This is only our second founder who really was steeped in academia. I mean, you know, outside of your undergraduate curriculum, the other one being mobius and that is always an interesting challenge to me because I, I’ve, the people who I know in academia don’t generally have the same like tenacity about starting a business and that might be an overgeneralization, but just from what I’ve seen, what I’ve, what I’ve experienced with professors who I knew were launching businesses on the side. We did some projects in school with professors who had their own kind of thing and would talk about it, but it just doesn’t feel as like all in. Maybe that’s my perception of it. That was something that I was curious about. Having been in academia for so long and she opened up saying my identity as an academic. That was interesting to me.

Jay Clouse: 01:11:22

She mentioned explicitly that was a struggle for her to to change that identity, to to move into something and like go something that had been so core to her and she said she realized that the opportunity to take what she learned in academia and apply it in such a way that can affect so many more people was her real purpose, but I had that same sense, which was this little bit of a struggle which I think we can relate to. I think we can empathize with. What, what struck me as different from what we hear from a lot of our guests here in the west. When we asked her where the idea for Geno Palate come from, why are you doing this? It seemed so much more calculated and opportunistic as opposed to necessarily a passion or something she like just had to do. It almost seemed like entrepreneurship is in my genes. I found myself studying this area and academia and I could see that this was an industry that was growing and there was nobody here and she used the phrase, so we were filling a gap.

Eric Hornung : 01:12:21

See, I felt differently. She said one thing that kind of stuck with me and it was the idea that if something isn’t new, if something isn’t being done that’s new or innovative, it’s quite frankly a waste of resources. To me it didn’t seem like she was filling a gap. It seemed like this was the, this was the extension of what she was doing in the lab and what she was doing in the lab. Like the natural evolution and natural innovation was to turn this out of the lab and actually do something new with the technology. So to me it felt like okay, she couldn’t have done something as new and as big in the lab.

Jay Clouse: 01:12:58

Interesting. Different rates. I like it when you more conflict with this podcast.

Eric Hornung : 01:13:02

Yeah, we had some good conflict last week and I liked that

Jay Clouse: 01:13:05

Healthy. Okay. So anything else that stood out to you from Sherry’s background or any shadows or upsides that you want to talk to for this opportunity?

Eric Hornung : 01:13:16

I have a question for you. Venture capital has historically been like a boys club, right? We have well documented the idea of a female founder being way less likely to raise venture capital in almost any venture capital book you read, it’s going to be. There will be some sentence in there that says you have to make sure you liked the founder because you’re getting into a relationship with them effectively that lasts longer than the average US marriage. The entire idea of bias permeates venture capital and I think Ireland does a really good job of calling this out, especially for African Americans, but I’m curious as to if you’ve even thought about this, what if any, impact did Sherry’s ethnicity and accent have on your read of her? As a founder and I, I understand that like that is a deep question, but I’m curious if like you’ve thought about it at all.

Jay Clouse: 01:14:12

You’re asking if I noticed any unconscious bias through the interview?

Eric Hornung : 01:14:15

Yeah.

Jay Clouse: 01:14:15

I will say that probably a little bit in more so in trying to. I did find myself just as I just said in that previous comment, right? I found myself comparing her answers to other founders on our show and almost comparing the way they answer things and the cues that I’m looking for, which is why I wanted you to start by talking about your experience with Chinese culture because I really did have that, that feeling of I don’t know if this is something that Sherry is doing because it’s distinctly Sherry and she has to do it or because she saw an opportunity and wants to go after it, that was the read that I got. Either one could be successful, but early stage going to be really hard. That seems like a particularly hard prospect because you’re digging into life sciences and DNA with privacy concerns and in a market that’s hard to kind of identify and you have to figure out how to market this thing. I don’t think I’ve felt unconscious bias from a gender standpoint at this point of the podcast, but I did feel a little bit of a cultural bias, I’ll be honest.

Eric Hornung : 01:15:21

Yeah, of course. I mean, and that’s the important thing. We need to call that out, right? We’re two in our twenties. White guys, we are like the prototypical venture capital associate and I don’t think that that gets called out enough, so I wanted to make sure that we made a point of it here on the podcast to say, look, we’re trying our best. We’re still flawed humans, but that’s what we’re doing. Also, I want to address one point on the idea of generalizing Chinese history because she is an American citizen. She’s lived what I can calculate about half of her life in America. So the idea of saying, okay, this is her as a Chinese person and we should put her in this context or this is her as a Westerner and put her in this context I think is a little difficult and I think that there’s probably so much that has rubbed off from American culture that having the underlying foundation of Chinese like understanding of tradition and things like that is helpful, but it probably would be hurtful to over rely on that.

Jay Clouse: 01:16:23

I’m glad you brought this up because there was one point about Sherry the founder that I wanted to bring up the fact that. Well, one, I didn’t realize that dual citizenship was not an option in China. And two that she chose American citizenship for to have the same citizenship as their son and to build this business here. I thought that was really compelling and also just strikes me as a difficult decision one with which I can’t actually relate. I can try to empathize but can’t actually relate and I just imagine that had to have been big.

Eric Hornung : 01:16:52

Yeah. Would you. I don’t know how tied you are to America. I can’t imagine like turning down my American citizenship. I would only do it for. I would only go to a country where I can have dual like that is. It just seems kind of crazy to me, but yeah, that’s a big life decision. So let’s pivot this conversation a bit. Let’s get back to the opportunity. It’s something that you mentioned right at the beginning. You couldn’t put your finger on how big this market is. So let’s try to do a little bottoms up analysis here. I have a couple of numbers in front of me. Let’s make some assumptions. Let’s figure out what the market size is.

Jay Clouse: 01:17:26

Love it, walk me through the numbers.

Eric Hornung : 01:17:28

Okay, so let’s just walk through what they’ve done so far and then we can extrapolate from there. She said they’ve had more than 500 paid users will just assume that $500, they have a gross margin of 30 percent, so it’s an operating margin of 30 percent. Price of a kit $199, price of DNA already $99. Let’s just call it $200. Let’s say everyone signs up for a kit. That means that there is a $100,000 of revenue in the business right now today. $30,000 of operating profit and we’re not really sure what’s below that bottom line to get us to net profit so let’s just stick with operating profit for now. How do we expand that? Like how? What? What would you say is an adoption rate of something like this? That’s. That’s my biggest question right now is what percentage of people in United States are going to say, oh, I want to learn how to eat better?

Jay Clouse: 01:18:15

If you look at an adoption curve and you have the innovators, early adopters, early majority, late majority, laggards, just as an industry, I think we’re still in an early adoption phase for anything related to DNA testing, just out of curiosity and not strictly medical procedures or reasons. Right. So you’re already looking, I think at, I don’t know, less than 20 percent of the population, maybe 10 percent and that’s for all the hard work that you know, things like 23 and me have done. And to relate it specifically to Dietitian, probably smaller. What were you thinking?

Eric Hornung : 01:18:52

Yeah, no, I think we’re right in line. So let’s see. Let’s say 10 percent of the US is like the total addressable market here in the United States, right? Let’s not go across the world for now. So 10 percent of the United States is roughly 30 million people, 30 million people, and the average gross margin per person is $60. You’re looking at $1.8,000,000,000 opportunity. All that to say that’s a lot of assumptions, but it’s a big market when you make conservative assumptions. Yeah.

Jay Clouse: 01:19:20

And that’s today before it becomes more commonplace or even just more aware,

Eric Hornung : 01:19:27

Right? Absolutely. I think that the market is substantial enough for me to say, okay, this is something that I think people would be interested in. There’s a huge trend right now towards organic, towards all these. I mean there’s always a diet trend going on, right? But there is maybe more of a clean eating trend than we’ve seen in the last 20 years. Kind of really happening now, you see it with Amazon’s purchase of whole foods. Do you see it with every single historic. I mean Heinz Ketchup’s coming out with something that’s organic. Hellman’s is coming out with something that’s organic or like egg free or Vegan and all of these like classic products are now launching things that clean green and I don’t have anything that rhymes with the other two of those, but it would have been cool if I did. So I think this is a large opportunity.I’m excited about that part of it. Let’s dive into the company itself, the Vision for the company and how it’s going to address that market and what did you see from that aspect that you liked?

Jay Clouse: 01:20:28

I liked that Sherry wasn’t bullshitting us in any way in that, you know, we ask them questions that were tough questions about who is the customer, how are you going to do marketing and she didn’t say things like social media or you know, it seems clear to me that they’re still identifying that we. We’ve talked a couple times now about the interview with Alli Trotman and how much focus is she’s putting into her marketing channels and our marketing spend because she understands that just because she’s the more mature company, again here, there needed to be pilots that are run and understand how they acquire customers, who those customers are, what the segmentation is. So I did like that Sherry was one just looking from a psychographic level as opposed to a demographic level saying is for people who are curious about this type of thing people like me, the question is, okay, tell me more about that person and where do you find them? And how do you market to them?

Eric Hornung : 01:22:08

Yeah, I liked that. It was refreshing that we actually got a good amount of, I don’t knows, or I don’t want to make representations without valid data and that might just be that she’s a data person. So like everything that she publishes has to be valid peer reviewed and maybe that’s the academic inner coming out. I would have liked to have a little bit more insight. Let me step back, I think the reason we ask those questions isn’t for the answer. I don’t think the reason we say, okay, what’s your total adjustable market is so that someone can tell us 2 billion or 4 billion or 100 million or whatever it is. I think the reason we ask those questions, especially when it pertains to numbers or strategy or vision, is to see what the thought processes behind the answer. So when you get, I don’t know’s or I don’t want to make representations, but here’s one small anecdote. It doesn’t give me as much insight as I would like in that question to be able to say, okay, I understand how you’re thinking about this. I understand that things are going to change, right? Your strategy is going to change, your marketing strategy is going to change, but if you would’ve told me we’re going to go and make a database of 100,000 Instagram models who like really care about their health and wellness and we’re going to start there with an influencer campaign like even if that’s just something you were thinking about or maybe you say you were thinking about doing it this way, that gives me a little bit more of a sense of like, okay, we’re testing some things, we’re trying some things and here are some of the things we’re thinking about versus I don’t know. We’re looking at innovators like Jay who’s curious about his body, who’s going to find us organically or maybe we have some marketing message, but you what what is your take on my take there?

Jay Clouse: 01:22:57

I agree with that. I wouldn’t say it’s an either or in terms of why we ask the question. I think it is both. I think it’s we both want to know what information you, but yes. Also the thought process behind it. Sherry strikes me as a product visionary type of leader and not necessarily the operator or the marketer and I hope that she has that type of skill set on her team. Very large team by the way.

Eric Hornung : 01:23:22

I would agree in my question about forgoing salaries was because the math just doesn’t make sense to me. Yeah. If they. Yeah, if they made 300,000 or if they’ve raised 300,000. She said they raised more than that, so maybe they did like call it, call it 500,000. Right. And they made $30,000 in operating profits last year. That’s $53,000 in employee. Roughly not a lot of money. Say she’s four going salary. Fine. The Phd’s might be able to forego salary because they have teaching assignments. Fine. Now you’re down to six. Thatmakes a little bit more sense to me. $90,000 per person, but it’s still just like it seems like a large team and maybe there’s a lot of science going on in the background that we didn’t really dig into enough on the podcast to understand what everyone is doing on that team. But to the extent that some of them are on the marketing side of things

Jay Clouse: 01:24:11

And she was counting interns that were part time and may even be potentially paid for from other sources. Our intern is being paid for through the state of Ohio and that just may be a little bit inflated and generous, but that did stick out to me to all that, to say back to my original point, it seems like Sherry has a great eye for product and what she wants the product to be able to achieve. I don’t think that she’s spent a lot of her focus yet talking or thinking through go to market.

Eric Hornung : 01:24:38

I would agree. So let’s run into our last question, Jay. When you’re looking at Gino Pallet in six to 18 months from now, what are you looking for?

Jay Clouse: 01:24:49

I’m looking for more insight into that. Go to market more insight into who their initial customer segments going to be. I would love to hear some case studies whether they’re statistically significant or nearing statistically significant to talk about here’s what our users are saying after they’ve spent six, 12 months using Geno Palate in changing their diet because of it, because that’s still a little bit unclear to me. Yeah, I think I’ll stop there. I think I want to see some more traction. I want to hear what the market is saying and I want to have just some more clarity around all these things that we’ve mentioned. We’ve had some questions around.

Eric Hornung : 01:26:36

I would agree, so I’m going to kind of splice my answer into two segments. The question is six to 18 months from now, I’m going to say at six months I would want a lot of those questions you just asked answered. I would want a strategic marketing plan, whether it’s written out or not, just who is the target we’re going after? How are we going to go after them? Why is this the right target? Give me those kind of like feels. What’s the size of that, of that target audience? How are we going to interact with them? Things like that, to answer the question, what is the KPI we’re going to look at, because she said there’s two KPI’s, there’s quality, which is that 70 percent of the people are happy with their Geno Palate experience. Great. That’s once they get on the platform, the other one is the quantity and she said that’s spreading the message of quality, so that isn’t to me a measurable KPI at this point and I think that that marketing strategy, that marketing plan is going to buff out some of their initial KPI’s. So that’s at. That’s at six months. At 18 months. I’m interested in two things. One, the number of paid users because if you have your marketing strategy, 12 months later you should have some sort of increase, some sort of trend. So I want to hear a little bit more about that. And two, are they hitting that 70 percent plus number of people being happy with their Geno Palate experience? It’s the one KPI that has been, that came across super early is that a great customer user experience is important for Geno Palate because you only have one chance at getting them on. There’s no repeat services once they do it, it’s one time and then you have a chance for follow on services, but there’s no repeat experience. You get one great experience.

Jay Clouse: 01:27:05

I also like this metric which I would refer to as a net promoter score because since this time is the innovator side of the adoption curve, there aren’t many people who are actively searching for the solution would be my assumption, which I think is a very strong assumption. A lot of their growth as Sherry stated is going to be word of mouth and people telling other people about it because there needs to be an awareness and an education and understand this. They think that this exists because it’s not necessarily something people are actively searching for right now.

Eric Hornung : 01:27:36

That’s true. You know what else people might not be searching for?

Jay Clouse: 01:27:40

A 33 minute deal memo.

Eric Hornung : 01:27:41

That’s possible. They also might not be searching for the upside podcast, but if they want to the upside podcast, how would they do that, Jay?

Jay Clouse: 01:27:49

Oh, this is actually one of my favorite deal memo, I think this is good. I think we really dug into things, so I hope they were searching for a 33 minute deal memo. So if they’re not searching for the upside podcasts or they are searching for the episode podcast, they can find it on twitter at upsidefm or on Breaker under upside, and you can comment on this episode. You can like this episode, which would be great. We’d love for you to leave a rating or review on iTunes where you can also find upside. Let us know what you guys think. Let us know what we missed and otherwise we’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email at hello@upside.fm, or find us on Twitter at upsidefm will be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on Twitter and let us know and if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple things we wanted to share with you at the end of the podcast, and so here we go, Eric Hornung and Jay Clouse or the founding parties of the episode podcast. At the time of this recording, we not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinions of Duff and Phelps LLC and its affiliates on your collective LLC and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening and we’ll talk to you next week.

Sherry Zhang is the founder and CEO of GenoPalate. She has a PhD in molecular biology from Marquette University and has used DNA technologies to understand obesity and metabolic disorders.

GenoPalate analyzes individual’s genetic data, demographic and lifestyle information to deliver personalized insights for optimal healthy eating via DNA-based profiling. Their DNA analysis provide customers with genetic-based recommendations for foods that are scientifically best for their diet.

GenoPalate was founded in 2016 and is based in Milwaukee, WI.

learn more about GenoPalate: https://www.genopalate.com
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