WASHINGTON — Fermentation may be the next pillar of alternative proteins alongside plant-based and cultivated meat, according to a new report from The Good Food Institute.

The organization’s inaugural state of the fermentation industry report found a record $435 million was invested in fermentation companies in the first seven months of 2020, a nearly 60% increase from the $274 million invested in the space in 2019.

Fermentation, or the use of fungi, bacteria, mycelium, microalgae and other microbes as a bioproduction platform, has been used to create beer, leavened bread, kimchi and other staples for centuries. More recently modern technology has empowered microbes to create functional food processing agents and ingredients, such as chymosin, the primary coagulant in cheese production.

New applications of fermentation are rapidly transforming the alternative protein industry. Along with industry pioneer Quorn’s mycoprotein-based meats, new products like Perfect Day’s ice cream and the heme iron used in the Impossible Burger are opening a new class of ingredients and products.

“Fermentation is powering a wave of alternative protein products with huge potential for improving flavor, sustainability and production efficiency,” said Liz Specht, associate director of science and technology at The Good Food Institute. “Investors and innovators are recognizing this market potential, leading to a surge of activity in fermentation as an enabling platform for the alternative protein industry as a whole.”

Globally, fermentation companies raised more than three times more capital than cultivated meat companies in 2019 and nearly 60% as much as US plant-based meat, egg and dairy companies.

Investments in 2019 included Boston-based synthetic biology company Ginkgo Bioworks’ spin out of Motif FoodWorks, seeded with $90 million. Motif Foodworks was created to identify target molecules and manufacture them as flavoring and functionality solutions for the plant-based sector.

Clara Foods, San Francisco, raised $40 million to help fuel its fermentation-based ingredients, including baking products and animal-free eggs. Berkeley, Calif.-based Wild Earth, a maker of clean protein dog food, raised $11 million, and San Francisco-based New Culture, a maker of animal-free dairy cheese, raised $3.5 million in seed funding.

 A record investment period

Investments in 2020 included Perfect Day’s $300 million Series C funding round, the largest-ever for a fermentation-derived alternative protein company. Formed in 2014, Perfect Day uses milk proteins for food applications using microbes rather than mammary glands. The technology enables flora-based cheese, ice cream, yogurt and butter.

“We use fermentation to make the foods people love while delivering the same taste, texture, and nutrition as conventional dairy without the environmental, food safety, or welfare concerns,” said Ryan Pandya, co-founder and chief executive officer of Perfect Day. “But that’s just the start. By working with food and dairy companies to bring a new category of animal-free products to market, we’re building a next generation supply chain to provide more nutritious, scalable options globally.”

Perfect Day in 2018 commercialized its ingredients through a joint development agreement with ADM, and earlier this year partnered with San Francisco-based ice cream maker Smitten to sell animal-free dairy ice cream. It also spun off The Urgent Co., which recently launched animal-free dairy ice cream brand Brave Robot.

Nature’s Fynd, Chicago, raised $80 million in Series B funding. The company creates meatless and dairy-free products using Fy, a new-to-the-world nutritional fungi protein.   

“Fermentation is rapidly becoming the No. 1 technology in terms of investments toward new proteins,” said Thomas Jonas, CEO of Nature’s Fynd. “Fundamentally, the rationale is simple: Fermentation is just more efficient, and markets hate inefficiencies.”

MycoTechnology, Aurora, Colo., raised $39 million to accelerate development of its mushroom-based ingredients. The company currently offers PureTaste, a blend of pea and rice protein fermented with Shiitake mycelium roots, and ClearTaste, an organic bitter blocker used for sugar reduction.

Atlast Foods raised $7 million in seed funding. The Green Island, NY-based company is focused on developing whole-cut mycelium-based meats, starting with bacon. Boulder-based Meati, which also is developing whole-cut meats from mycelium, raised $3.2 million to expand production of its steak alternative.  

Geltor, a San Leandro, Calif.-based maker of fermentation-derived collagens, including HumaColl21 and Collume, raised $91.3 million to accelerate development of additional animal-free gelatin products.

Several of the world’s largest food science companies, including DuPont, Novozymes and DSM, also are developing fermentation-derived product lines tailored to the alternative protein industry.

Global meat company JBS, São Paulo, Brazil, is leveraging fermentation through its new Planterra Foods brand. It uses MycoTechnology’s PureTaste to produce its Ozo line of plant-based burgers and ground meat alternatives.