September 15, 2017

• Updated to include revealed investors, final closing amount, and company plans

Colorado-based food tech startup MycoTechnology has raised a $35 million  Series B, 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.

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.

Sugar and the Stevia Story

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.

“MycoTech is excited to be partnering with GLG to solve the challenge of the bitter aftertaste of stevia. Consumers are demanding natural alternatives to sugar that have zero calories without compromising on taste. Now they don’t have to,” said Alan Hahn CEO of MycoTech at the time.

Not only is this good news for the food and beverage industries which are seeking to meet consumer demand by replacing the sugar in popular foods while still retaining taste, but it is also good news for agricultural producers such as PureCircle – the world’s leading provider of stevia ingredients, which last year announced it was investing up to $200 million over the next five years to establish a stevia supply chain in India, and investing $100 million into its PureCycle Agronomy Program.

Through the program, the investment will fund the expansion across 15 key global growing regions as the company aims to expand its farmed acreage outside of China. The expected result of this expansion will be a global 10,000 hectare natural stevia supply pipeline that can support year-round stevia production.

Protein Plans

MycoTechnology states that it plans to use the capital from this round to fund the construction of a new production site in Aurora, Colorado to produce 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 will be ideal as a sustainable plant-based protein ingredient.

“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!”

Once completed, the resource-efficient facility will have the capacity to produce 4,000 tons of PureTaste per year.

“MycoTechnology is doing important work to ensure that a sustainable, edible protein source is more widely available to consumers,” said Simon Burton, managing director of eighteen94 capital. “They are committed to addressing consumer demand for a great-tasting, protein-rich product and we’re very excited to partner with them.”

-Lynda Kiernan