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Our recently released report, “10 Trends Shaping the Future of Food in 2022,” explores ten trends that are driving the transition to a climate smart, healthy food system. Throughout the year we will be diving deeper into these trends through our blog and podcast. In this article, we look at the potential for fermentation to transform our food systems and what it will take to advance the sector and scale these technologies.

“We are witnessing the reinvention of fermentation - to a future that will push the boundaries of biology by creating new foods and medicines that will be more precise, healthy and more sustainable.”

- Sanjeev Krishnan, S2G Ventures Chief Investment Officer

Fermentation, one of the world’s oldest food processing methods, is now being used in new ways to fuel the next generation of proteins and fats that are optimized for a variety of applications. A growing cohort of companies are harnessing the potential of fermentation to create novel ingredients and products with enhanced sensory and functional attributes in addition to being potentially more sustainable, scalable and cost efficient.

While fermentation has been around for thousands of years, the movement to create new ingredients through fermentation is very young and growing rapidly. There are more than 50 companies focused on fermentation-enabled alternative proteins and 80 percent of those have formed in just the past 5 years. Innovation in fermentation is fueling excitement in the industry and increased investment.

In this post, we break down the types of fermentation, talk about sub-sectors S2G is investing in, innovations that can accelerate the growth of the industry and the challenge of scaling facilities to meet demand.

Breaking Down Fermentation

Fermentation in the alternative protein industry refers to cultivating microbial organisms for the purpose of processing a food ingredient, obtaining more of the organism itself as a primary source of protein, or deriving specialized ingredients for incorporation into plant-based products or cultivated meat. The alternative protein industry uses fermentation in three primary ways:

  • Traditional fermentation is the process of changing a food through microbial anaerobic digestion and is used to produce food products such as beer, tempeh, yogurt and cheese. It can also be used to improve flavor or functionality of plant ingredients.

  • Biomass fermentation leverages the fast growth and high protein content of many microorganisms to efficiently produce large quantities of protein, fat, or other biomasses. This biomass serves as either the predominant ingredient of a food product or one of several primary ingredients in a blend.

  • Precision fermentation uses microorganisms to produce specific ingredients by essentially programming them to be little production factories. Precision fermentation is what enables alternative protein producers to efficiently make specific proteins, enzymes, flavor molecules, vitamins, pigments, fats, and other ingredients.

Growing interest by scientists, investors, media and governments has generated a heightened focus around fermentation over the past few years. In November 2020, the World Economic Forum stated that “fermentation presents an opportunity to fundamentally change the way the world eats and improve global human and environmental health and the economy.”

There are a number of reasons fermentation has this kind of potential. Fermentation processes can take advantage of a variety of host organisms, feedstock sources and cultivation processes, offering an unprecedented opportunity to decouple protein production from increasingly scarce resources such as land, freshwater and other inputs. It is also incredibly efficient. The food to feed conversion ratio, which for cows is 10 to 1 and for chickens is 3 to 1, is 1 to 1 for fermentation. And while it takes weeks, months or years to raise animals or plants using traditional methods of protein production, you could produce the same quantity of protein using fermentation in a matter of hours. Additionally, animal protein analogs can be created through fermentation without the risk of antibiotics or steroids or the use of other adulterants that are common in intensive conventional animal farming. The end result is a product that has the sensory experience of its analog but with a much smaller environment footprint and potentially better nutritional value.

Fermentation Use Cases

At S2G, we are excited about this rapidly growing space and hope to support the development of the fermentation ecosystem. To that end we have made a number of recent investments in early stage fermentation companies, adding to our roster of portfolio companies that are utilizing fermentation technologies.

While all these companies are using the same underlying technology, fermentation companies are differentiating themselves by utilizing different production methods, feedstocks and organisms and creating go to market strategies with varying business strategies, services or product types. The below chart represents the landscape of fermentation in alternative proteins.

Landscape map of fermentation  in alternative proteins
SOURCE: Good Food Institute, State of the Industry Report: Fermentation

Animal Free Foods

Within the animal free sector, companies are taking different approaches to product composition. Some companies are creating biomimetic ingredients in a more sustainable manner, using microbes instead of cows, chickens or fish to produce animal or plant proteins, fats and other ingredients, while others are creating novel, better performing or more nutritious ingredients.

One approach is to use fermentation to create biomimetic ingredients as an identical substitute for plant or animal derived ingredients that may be expensive, unsustainable, or resource intensive. For example, New Culture is using fermentation to produce Casein protein, a key cheesemaking ingredient, without the cow. The company is initially focusing on creating a mozzarella that has the same taste, texture and stretch as cow based mozzarella but contains no cholesterol, lactose, trace hormones or antibiotics and is planet friendly. Imagindairy is similarly pursuing creating animal-free biomimetic proteins but through a B2B model. The company is using precision fermentation techniques to create milk proteins, starting with whey, and offers its proprietary fermentation technology to manufacturers in the food industry to enable these customers to develop their own alt-dairy products.

On the other hand, some companies are utilizing fermentation to produce novel fats, proteins and other ingredients that may be more sustainable, nutritious or better performing than what is currently available. Shiru is using bioinformatics, artificial intelligence, and machine learning to identify animal-free proteins that can create the same taste, texture or nutrition to replace animal derived or synthetic ingredients. They then use precision fermentation to mass produce the ingredients they have identified. The company’s product line currently consists of 6 ingredients with different functions that are colorless and flavorless and can be added to a variety of foods such as sauces, yogurt, burgers or packaged baked goods.

Fungi based ingredient company MycoTechnology is developing substitutes for crucial proteins in meat products. Myco produces PureTaste protein by using naturally occurring mycelia from a heirloom variety of shiitake mushroom that converts feedstock containing pea and rice protein into a complete vegan protein. The extruded version of PureTaste tastes better and has greater oil and water holding capacity than what is currently used in plant-based meat products, enabling companies to create more nutritious, juicier burgers while also reducing input costs.

While there is certainly a major focus in the sector on finding substitutes for animal products, some companies are also looking to fermentation to create healthier and more sustainable versions of plant based products. Tropical oils, such as palm and coconut oil, are the most commonly used fats in plant based products but they are notorious for causing deforestation and habitat destruction in Asia. Additionally, meat analogs that utilize these alternative fats also tend to be dry because the plant oils, which have a lower melting point, leech out during cooking. Yali Bio is combining synthetic biology, deep learning, and genomics tools to produce high quality, premium fats that have exceptional flavor and performance but are far more sustainable than the oils previously mentioned and the animal based analogs.

Image courtesy of Zero Acre Farms

Fermentation is also being used to address the negative health consequences of widely used cooking oils. 20 percent of our daily calories come from vegetable oils that are linked to obesity, heart disease, cancer and diabetes. Zero Acre is using fermentation to create a new category of healthy oils and fats to replace vegetable oils and animal fats. The company, which plans on bringing a product to market this year, is aiming for its products to be used in all aspects of food production – consumers at home, restaurants / food service and manufacturers.

Cultivated Protein

Cultivated protein is made by producing animal cellular tissue in bioreactors. The sector has generated a huge amount of investment and interest in the last few years for its potential to create products that are identical to ones derived from animals with a much smaller environmental footprint. Precision fermentation is an important enabler in the cultured protein sector as it can be used to efficiently produce nutrients and growth factors for cell base media. Additionally, proteins such as collagen or fibronectin can be produced via fermentation and serve as key animal-free components of scaffolding for more complex cultivated products. At S2G we have invested in a number of companies in the very exciting and complex cellular agriculture space and we will dive into the technology and opportunities in a future article.

Gearing Up For Growth

There are a number of innovation areas that will enable the fermentation sector to accelerate growth and have a real impact on the food industry and consumer diets.

Target Selection and Design

If fermentation-derived products are to serve as indistinguishable replacements for animal and other plant products, then companies must identify the molecular compounds and their associated DNA that give these products their signature characteristics. For example, milk contains six key proteins that must each be fermented separately.

Strain Development

Choosing the optimal host organisms, such as a bacteria or yeast strain, that grow quickly and require less energy can maximize production efficiency. New artificial intelligence and machine learning algorithms are creating opportunities to dramatically accelerate the engineering of new microbial production strains through computer models that can simulate the effect of specific genetic changes on cell behavior and metabolism.

Feedstock Optimization

A major element that many companies are focusing on is feedstock optimization since the feedstock that is used for fermentation has enormous implications for both cost and sustainability, as well the growth, composition and flavor of the microbes themselves. Glucose is widely used as a cheap and reliable feedstock but its production is relatively energy intensive. Using alternative feedstock sources such as sugarcane molasses or other agricultural waste streams could reduce the carbon footprint of fermentation inputs. Alternatively, companies and researchers are developing bacteria and other microorganisms that use gas feedstocks, such as CO2, instead of sugar but more research is needed to determine whether these processes will be viable at a commercial scale.

Equipment and Environment

Making sure the equipment and environment is optimized for the fermentation process is crucial for maximizing output and ensuring consistency. A lot of the infrastructure that is currently being used was not originally built for alternative protein applications and is not optimized for food grade fermentation. Additionally, finding ways to power these systems with renewable energy resources will be essential if they are to deliver on their full impact potential. There are also opportunities to explore using alternative substrates that are less expensive, more sustainable and more widely available, and to utilize solid state fermentation which would offer cost savings and lower the barriers to entry since it doesn’t require the same capital-intensive bioreactors, requires less energy, and can have greater throughput compared to submerged fermentation.

End Product Formulation and Manufacturing

Lastly, fermentation companies that make B2C products have the same opportunities for innovations in formulation and manufacturing as plant-based meat companies, and individual companies will be able to iteratively improve upon and fine-tune their product offerings. There is also an important opportunity to find markets for byproduct utilization. Upcycling spent media and other byproducts from fermentation processes will improve the overall economics and sustainability of precision fermentation.

The Scaling Question

While there are a number of areas for innovation and growth in the sector, the greatest obstacle that fermentation currently faces is achieving scale. Many of the companies active in the fermentation space today are small start-ups still experimenting with the technology and fine-tuning their products. They will need both intermediate and commercial scale facilities to bring their products to market. Available manufacturing sites capable of scaling fermented protein production beyond a “proof of concept” scale are limited in the United States and globally. According to recent projections, the existing manufacturing sites with suitable fermentation systems will be completely utilized by the end of 2022 and it takes many years to conceive, finance and construct new facilities.

Although VCs are jumping in to provide critical support for innovation and R&D efforts, there is a tendency to adopt “asset-light” investment models which prioritize intellectual property over physical assets like infrastructure. However, investment is most crucially needed to fund infrastructure for fermentation companies. There is strong precedent for this level of investment in infrastructure expansion. For example, global renewable energy capacity investments grew from $40B in 2004 to $484B in 2019. And just like alternative proteins, clean energy is a cost effective and more sustainable alternative to the incumbent industry, has high upfront R&D and CapEx costs, and requires long-term, low-cost capital to build infrastructure.

Forging partnerships among early stage companies and incumbent manufacturers will also support more rapid scaling in the industry. Incumbents in the fermentation industry include manufacturers of food processing enzymes, vitamins, flavoring ingredients and live microorganisms for fermenting foods such as yogurt, cheese and preserved meat. These companies have deep expertise in crucial areas such as enzyme and strain development as well as large scale manufacturing. Fermentation companies stand to benefit from partnering with these large co-manufacturers with decades of experience and capabilities to bring products to market at scale.

Lastly, public-private partnerships that involve public sector investment in manufacturing expansion will facilitate the scaling of a diverse set of fermentation systems. The federal government has a track record of advancing novel manufacturing in other sectors such as electric vehicles, biofuels and nanotechnology and can use these past models of funding to provide financing to construct or expand fermentation manufacturing capacity. In October 2021, the USDA became the first ever government body to fund research into scaling cellular food production with a $10 million award to Tufts University. Further funding dedicated to expanding fermentation manufacturing could support both cellular and plant based product innovation.

Perhaps the most exciting aspect of the young fermentation sector is that there is so much room for participation from a variety of different industries from manufacturing to AI, biology, chemistry and food science. The industry is ripe for financial investment, an influx of talent and novel partnerships. At S2G, we are incredibly excited about the seemingly limitless opportunities in the space and hope to help facilitate further engagement and investment to realize the potential of fermentation technologies to transform our food systems.

Fermentation Will Power the Next Generation of Alternative Protein Products

Fermentation Will Power the Next Generation of Alternative Protein Products


Michael Robinson

Senior Associate

Michael Robinson is a former investment banker gone venture capitalist, working at S2G Ventures as an Associate to help make a better food system. Outside of work, Michael is a lifetime hockey fanatic and has officiated for USA Hockey for over a decade. Michael received his BS and MBA from Indiana University's Kelley School of Business.


Josie Lane

Art Director

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