From science to CPG: New ventures create opportunities for startups

Two people pose for a portrait in front of a variety of milk products in a kitchen lab.
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This is the last installment in a five-part series about the challenges food tech companies face in scaling up. Previous stories can be found here.

When Ravi Jhala joined Perfect Day, there were six employees. 

A dairy industry veteran who worked with big CPGs including Chobani and Wells Enterprises, Jhala purposefully joined a small startup. 

As Perfect Day’s global head of commercial, Jhala said he now sometimes pinches himself to prove that Perfect Day is getting to be as much of a provider as some of the companies he’d been with previously.

“What we are strongly aware of is what got us here may not get us there, to the next step,” Jhala said. “…But at the same time, the DNA and the playbook that Perfect Day has created of collaborating with people, partnering with teams to make one plus one equal to three, that still continues to be part of our approach on how we are building our business.”

Perfect Day announced in September it was getting into a new line of the precision fermentation business altogether by launching a subsidiary, nth Bio, to help other startups use its process to create biomaterials ranging from animal-derived proteins to rare sugars. 

“Perfect Day is out here to help companies in the precision fermentation space to truly close the gap from strain to scale,” Jhala said. “…And we want companies to know that there is a path forward, that you do not have to piecemeal your needs. Basically, you can go from soup to nuts essentially with this kind of a service that we are going to offer.”

Perfect Day isn’t the only company using its technological knowhow and facilities to help smaller startups. Mark Warner, who had been a consultant for companies in the cultivated meat and fermentation spaces as they started scaling up, noticed a real lack in existing facilities they could use. According to a presentation Warner gave in 2020, a pilot facility — which can provide proof of concept, but only a small amount of product — could cost $1 million to $5 million to build.

His new venture, Liberation Labs, would establish fermentation facilities for food companies to scale up. The lack of this kind of facility is one of the biggest problems Warner has seen among companies he worked with. Facilities like those planned for Liberation Labs, Warner said, could help startups do more to improve and expand their technology without having to raise millions of dollars and use months of time to build their own.

And last week, Capacitor, a new online directory of pilot-scale facilities that companies can use to scale up, went live. Capacitor is a product of Synonym Biotechnologies, a business venture formed in January to build commercial-scale facilities for biomanufacturing companies to use. 

Two people pose for a portrait in front of a variety of milk products in a kitchen lab.

Perfect Day co-founders Ryan Pandya and Perumal Gandhi with a host of prototypes in 2019.

Permission granted by Perfect Day

Assistance to the nth degree

When Perfect Day got started in 2014, it was a brand new entity doing something altogether new. The company harnesses the power of precision fermentation to create dairy proteins without the animal. At the time, co-founder Ryan Pandya was working at a company making medical antibodies through precision fermentation. A bad plant-based cream cheese experience encouraged him to apply that technology to dairy.

Fast forward eight years, and Perfect Day is the biggest player in the precision fermentation food space. Its branded protein ingredients are used in products ranging from ice cream to cream cheese to protein powder to milk. Perfect Day also has partnerships with three of the world’s largest CPG companies. It’s working with General Mills on the animal-free Bold Cultr cream cheese, providing the dairy in Mars’ milk chocolate CO2Coa bar, and partnered with Nestle to make a milk drink.

Part of this success was being the first to the space with good science and a plan, but another big part is beneficial business decisions, including a scaling and commercialization agreement with Archer Daniels Midland in 2018. 

Perfect Day is still building its scale, but it is increasing its capacity quickly. According to a statement from the company in September, Perfect Day made more dairy proteins in the first six months of 2022 than all of 2021.

“What we have realized in this journey when we started out as a startup in the precision fermentation space is that the ecosystem that is required in order to successfully bring a commercial product to the market, we had to create it on our own, right? Because it did not exist,” Jhala said. ”And so that has now become the core base of what the company does.” 

In September, the company’s new business arm nth Bio named its first partner, Onego Bio, which makes egg white protein through precision fermentation. Jhala said they will work closely with Onego to help them to develop bioprocesses, scale up their production and help the proteins produced at the end receive approval from regulators.

Nth Bio will operate from Perfect Day’s 58,000 square-foot state-of-the-art Salt Lake City facility, which Jhala said should be completely operational by next August. The space will address a gap in precision fermentation scale-up. The facility has space and equipment for pilot-scale production for both Perfect Day and nth Bio partner companies.

In the early days of Perfect Day, Jhala said Pandya and co-founder Perumal Gandhi were just trying to figure out how to make a kinder and animal-free version of real dairy. What nobody realized for a while, Jhala said, was the company they founded would be figuring out how to make biotech-enabled food a reality for the mass market.

Perfect Day is expanding into nth Bio largely to share that knowledge. Jhala said Perfect Day doesn’t want to be the only ingredient maker using precision fermentation for long. 

“Our vision is that if we are going to enable our other partners …there could be an aisle in the store full of products that people can buy today, and they would have a choice, because we are enabling each other to become successful in the market,” he said.

Aerial view of part of Salt Lake City, including the Gateway BioHive complex in the front, skyscrapers behind that, and mountains in the background.

Perfect Day’s hub in Salt Lake City is in the Gateway BioHive complex. Its nth Bio division operates from this location.

Courtesy of The Gateway/Perfect Day

Liberation Labs fills in the gaps

Money is a big part of scaling up because there really aren’t facilities available for companies to use as they work to get bigger. Warner, the former consultant, is trying to change that.

Liberation Labs, which Warner and cellular agriculture business veteran Etan Bendheim started earlier this year, is currently raising its $20 million seed round. Publicly traded Agronomics — which holds a 47% stake in the companyadded $7 million to its investment in the company late last month. According to a release from Agronomics, it will co-lead the investment round with Siddhi Capital. Other investors include New Agrarian and CPT Capital.

“Liberation Labs’ solution will set the standard for the precision fermentation industry with cost effective, reliable and strategically situated facilities to meet growing consumer demand across the globe,” Jim Mellon, co-founder and executive director of Agronomics said in a written statement in the U.K. publication The Grocer. “It is a crucial step in the advancement of cellular agriculture.”

Liberation Labs plans to build six production facilities worldwide for food companies using precision fermentation. Warner said they are finalizing a site in the U.S. for their first facility, and they plan to announce where it will be by the end of the year. The company expects this first facility to be operational in 2024.

In the absence of facilities like the ones he is creating with Liberation Labs, Warner said many food tech companies using fermentation have had to travel far and wide to find places to scale up. And that’s literal — many U.S. companies are using research facilities in Europe, he said. Not only are these facilities farther away, but they’re also sometimes using older equipment.

While there are some scale-up facilities being built by others, Warner said those are not competitors to Liberation Labs. The smaller facilities, he said, are like the middle school. Liberation Labs is like the high school. And, Warner said, he’s very hopeful that all of the scale-up facilities being built are successful. That way, he’ll have more companies to work with, and they won’t have to wait.

“I’ve seen people spend tens of millions [of dollars] and fail,” he said. “I’ve seen people spend a few million and succeed. It’s generally around going forward with speed, but knowing when your process is ready.”

Because, he said, facilities or not, a product that is not ready for primetime will not succeed when it’s put before consumers.

A map of the North America with green diamonds on several locations and circled numbers on other locations. Numbers on the bottom indicate numbers of facilities, capacity and countries.

A screenshot of the Capacitor database of pilot-scale precision fermentation facilities. The database was created by Synonym Biotechnologies.

Permission granted by Synonym Biotechnologies

Searching for capacity

When tech company veteran Joshua Lachter joined with entrepreneur and founder of Essential Capital and Kite Ventures Edward Shenderovich to start Synonym Biotechnologies at the beginning of the year, they had a big problem they were hoping to solve.

Synonym’s goal is building commercial scale facilities for companies in the precision fermentation and synthetic biology space to make a large amount of products. Synonym’s facilities will be used for food production, Lachter said, but they also could be used by companies in a variety of industries, including materials for energy production and packaging.

Synonym has mostly been doing behind-the-scenes work so far. The company closed a $6.3 million pre-seed funding round last month, with participation from Andreessen Horowitz, Giant Ventures, Blue Horizon and Thia Ventures. It’s developing its first U.S.-based “fermentation farm,” which will have a standards-based design to allow companies to produce large amounts of product. More will be planned in the future, Lachter said.

They’ve also been working with companies in the precision fermentation space, as well as with the Good Food Institute, to find out what they need. Lachter said they heard the same thing many times: While the ultimate goal is producing at a massive scale, it’s very difficult to find facilities to use to get beyond the lab.

“We began asking around where that pilot scale capacity existed, and they’re [people we asked] like, ‘Well, there used to be a database. This one guy used to run a database out of his garage, … and it hasn’t been published in years.’ And, yeah, that was basically it,” Lachter said.

Synonym started another project: Making a database like this exist. The database, called Capacitor, was developed by Synonym, the Good Food Institute, Blue Horizon and Material Innovation Initiative. Lachter said it took about six months to create, and involved a lot of researching and telephone calls to piece together who has available facilities and where. The database is free for those seeking fermentation facility access to use, as well as for companies to list their facilities. And it’s open for additions and corrections; Lachter said Synonym could be missing some available facilities.

While Lachter knew there was demand for this kind of database, he was amazed at how many people registered in the first couple of days. The popularity, he said, underscores the underlying reason for Synonym’s development: There are many companies with products that would be made through advanced fermentation, if only there were facilities to make them.

Lachter said the directory provides an opportunity for facilities — which usually have no means of advertising themselves — to attract companies to work with them. But, he said, it also helps show where there are geographic gaps for scale up facilities. He likened it to doing a search using your phone for a sushi restaurant nearby. If you’re in a well-populated area and there isn’t one for 15 miles, you may think that someone ought to open one nearby.

However, opening a pilot facility is much more involved than a sushi restaurant, Lachter said.

“These things are really expensive, and it’s hard to gauge demand until you have the thing open and you’ve sunk a bunch of capital into a facility,” he said.

Synonym is moving forward on its primary goal of building commercial scale facilities for fermentation production, too. Lachter said they are developing their first “fermentation farm,” and working toward selecting a site in the United States. Synonym is planning on a groundbreaking in the second quarter of 2023, and want to have it up and running in 2024.

Lachter said commercial-scale precision fermentation facilities will be like data centers or cell towers, which eventually became ubiquitous. And, like data centers and cell towers, commercial-scale precision fermentation manufacturing facilities could one day be relied upon to make a vast array of vital products, he said.

“The means of production needs to be separated from users of that production — and that’s again been the case in so many different industries,” Lachter said. “It’s not yet the case here. There’s this woeful shortfall.”

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About the Author

Jervie David Montejar
A food lover who wants to try every delicious dishes around him and spread the news to everyone to try it as well. Finding the latest trends about food and restaurants around Cebu and the rest of the world :) "Life is uncertain. Eat dessert first." -Ernestine Ulmer
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