Clara Foods, the San Francisco-based innovative food startup, has closed a Series B round of funding led by global ingredients business Ingredion. Other investors in the round were B37, a strategic partner of the world’s largest baking company Grupo Bimbo, Hemisphere Ventures, and accelerator VC SOSV.

While the final size of the Series B has yet to be disclosed — there are still some more potential investors coming into the round, according to CEO Arturo Elizondo — sources close to the deal say it was raising $40 million.

Clara Foods develops animal-free, animal proteins for use as food ingredients with its flagship product a foamy egg-white alternative for use in baking. It also has a soluble protein product — also derived from egg proteins — for vegan protein fortification in products such as high protein drinks and shakes. Current ingredients in these products such as whey come with “a lot of baggage” requiring the addition of sugar, masking agents or other additives to deal with bad taste or the wrong texture such as chalkiness in whey, Elizondo told AgFunderNews.

Vegan foods, in general, can get a bad rep for their nutritional profile for this reason; that they require so many more ingredients to get the same effect or result as an animal product-based food — in baking this often means more sugar, for example. But Elizondo says it doesn’t need to be like this anymore.

“Animal protein is still the dominant source of protein for functionality and taste, so we wanted to enable the next generation of food products and make something that performs better and tastes better,” Elizondo told AgFunderNews. “But it’s also about unlocking new products that were not possible with existing protein options, animal-based or otherwise.”

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“What I love about what we’re doing is that we’re not just replacing animal protein, but we’re making ingredients that fundamentally perform better using really advanced technology that’s beneficial to both consumers and CPGs,” he added.

What is the technology?

Put simply its fermentation of yeast, but the secret sauce is in the design of that yeast; Clara Foods genetically modifies yeast to be able to produce the proteins it wants without using any animal inputs.

Elizondo likens the process to how cheesemakers make rennet, an enzyme that helps milk separate into curds and whey. Rennet contains the enzyme chymosin and can be sourced from the abomasum (fourth stomach) of newly-born calves where the chymosin aids digestion and absorption of milk. However, cheese makers now use either plant-based rennet or “microbial rennet” that’s produced with modified yeast.

How also references how insulin used to be sourced from pigs but is now manufactured through fermentation. “So the technology has been around for 40 years,” he adds.

Will Clara Products need to be labeled GMO? Elizondo says it depends on the regulatory market but it would fall into the same bucket as cheeses made with microbial rennet, which are rarely regulated.

When asked about consumer opinion of products designed with GMO technology he counters that the chickens are “some of most engineered creatures on Earth; originally they produced one to two dozen eggs in a year but now that’s over 300 dozen in a year. Is that our conception of natural? We want people to know that’s the reality, and so we’re going to build a brewery in the US with glass walls so everyone can see our process.”

While manufacturing will start overseas, Clara Foods has plans to build a facility in the MidWest of the US in due course.

Egg whites are just the start.

“When we looked at the egg white, we saw a multibillion-dollar ingredient that was 90% water and 10% protein so it was a great place to build a protein-focused platform; we don’t need to mess with carbs or fats, so it was a great place to start,” said Elizondo.

Clara + Ingredion

As part of the round, Clara Foods and Ingredion have entered into a commercial partnership to “jointly develop, market and globally distribute novel, highly functional protein ingredient products that enable food and beverage companies to produce products with higher levels of protein, unique characteristics, and lower costs without the inclusion of animal-derived inputs,” according to a press release.

The relationship started three years ago, according to Elizondo, who says that Ingredion is a massive player that’s being “very thoughtful about the future of food and acknowledging that protein alternatives are a part of it.”

“Initially we started discussing potential distribution work for one of our proteins in the pipeline, but when we got down to it, it became obvious that there were lots of ways our ingredients could complement their portfolio, answers the needs of their customers, and solve real problems for them,” said Elizondo.

“We’re excited to be working with Clara Foods as they have pioneered groundbreaking technology that allows a more sustainable and cost-effective production of proteins traditionally found in animal-derived products,” said Tony DeLio, senior vice president, corporate strategy and chief innovation officer. “We see tremendous need and increasing demand for highly functional animal-free proteins in multiple applications including foods, beverages and supplements.”

The Series B round follows a $15 million Series A round in 2016 that was led by The Production Board, Climate Corp founder David Friedberg’s investment company. Friedberg did not re-invest in Clara Foods’ Series B as his investment model has shifted to company creation and will no longer invest in startup rounds.