October 19, 2017

Colorado-based mushroom-focused food tech startup MycoTechnology announced that it has officially closed its Series B round of funding oversubscribed at $42 million.

In mid-September the company announced it had successfully raised  a $35 million round co-led by S2G, Bunge Ventures, and Emerson Collective. Other investors included in the round are Health for Life Capital; Seventure Partners; Middleland Capital; Tao Capital Partners; Kellogg’s venture fund, Eighteen94 Capital; Continental Grain; GreatPoint Ventures; Closed Loop Capital; and Windy City LLC.

This announcement was noticed by Ajinomoto Co. In. and Continental Grain Company, both of which have subsequently joined the round, along with additional commitments from Series A and B investors S2G Ventures, Middleland Capital, and Health for Life Capital.

Founded in 2013 Dr. Brooks Kelly, Jim Langan, Peter Lubar, and Alan Hahn, MycoTechnology has pioneered the development of a variety of new food processing systems using mushroom roots (mycelium). Although the full range of possibilities for their technology is not yet known, the company has used their platform to solve some of the toughest challenges faced by the food and beverage industries, including  removing unwanted compounds from foods, adding beta glucans and highly digestible proteins to raw agricultural materials, naturally reducing the bitterness in coffee, improving the taste of chocolate without added sugar, removing gluten content from wheat, and achieving the critical application of removing the bitter aftertaste of stevia.

The flexibility and potential of this technology, particularly in connection with its success in improving the taste profile of stevia, drew the attention of investors. In 2015 MycoTechnology announced a raising of $6.7 million in July, quickly followed by the closing of a $9.2 million Series A in October, which was led by led by S2G Ventures, and including Seventures Partners, and Middleland Capital.

“MycoTechnology has a unique technology platform that addresses the growing consumer demand for health and sustainability,” said Takeshi Kumura, board member and corporate vice president of Ajinomoto. “We are excited to combine Ajinomoto’s expertise with MycoTechnology’s innovative organic technology to provide solutions for the future of society.”

Protein

Last month MycoTechnology also announced that it planned to use the capital from this round to fund the construction of a new production site in Aurora, Colorado, for the production of their latest product, PureTaste – a complete, non-GMO, vegan mushroom protein that is low in fat, calories, and carbohydrates, but high in vitamins and minerals that is expected to be an ideal sustainable plant-based protein ingredient.

The company has followed this announcement with a second stating that it has signed a lease on an 86,000-square-foot commercial facility in Aurora with a production capacity of 4,000 tons of PureTaste per year.

“We are rapidly approaching a time where we will be unable to support the population with enough protein to sustain life,” said Alan Hahn, CEO and co-founder of MycoTechnology, in a recent press release. “Our discovery and commercialization of PureTaste protein solves the challenges of feeding an exponentially growing population with a highly sustainable protein source but does not compromise on taste, which is the number one challenge with consumer acceptance. Proteins with high concentrations of amino acids tend to have a bitter taste which has seriously limited the adoption of alternative proteins; however, with PureTaste Protein we have solved this challenge and the taste is great!”

A Sweet Plan

MycoTechnology’s pipeline is not only vastly applicable in the protein space, but is also making pioneering moves in the sugar substitute space.

Driven by the trend toward a more healthy lifestyle and diet, consumers have recently targeted sugar as the next ingredient to reduce or eliminate from their food choices. A poll conducted on January 15, 2016 by Reuters/Ipsos found that 58 percent of adults surveyed responded that they attempted to reduce the sugar content in their diet within the past 30 days – reflecting a higher percentage compared to the percent of consumers trying to reduce calories, or fat, salt, cholesterol, or carbohydrates.

The drive to cut sugar has also extended beyond the consumer into the regulatory sphere – demonstrating that the reduction of sugar is being addressed as more than a consumer fad, but rather as a health issue that needs to be addressed for the long-term.

In January 2016, the U.S. government advised that Americans should limit the amount of added sugar in their diet to less than 10 percent of their total caloric intake – marking the first recommendation of a direct limitation by the government. And by July 2018, all food companies will be required to note amounts of added sugars on their labels.

Enter stevia. A small shrub native to South America, stevia is an alternative natural sweetener that is up to 400 times sweeter than sugar and has zero calories. However, a constant drawback according to consumers, has been stevia’s delayed aftertaste, which some describe as bitter or metallic in nature. It is this challenge that MycoTechnology can address.

In conjunction with the startup’s Series A, the company released Clear Taste – a newly released natural, GMO-free, chemical-free ingredient solution that uses extracts found in mushrooms to even out the taste profile of stevia. And in January 2016 MycoTechnology partnered with GLG Life Tech Corporation (GLG), a leading commercial developer of zero-calorie natural sweeteners, to incorporate Clear Taste technology to improve the taste of stevia and monk fruit as alternative sweeteners.

As these different uses reflect, it is the vastly varied channels of potential for growth for MycoTechnology’s technology that is attracting investors.

“Health For Life Capital is reputed for its vision in investments,” said Isabelle de Cremoux, CEO of Seventure Partners. “MycoTechnology, which we supported in the Series A, and now again in Series B, fits perfectly with our strategy. MycoTechnology has taken a different approach to the food industry, by utilizing filamentous fungi allowing them to create an unlimited source of innovation.”

-Lynda Kiernan