In an office block a 15-minute drive outside Gothenburg, you’ll find the dozen-strong team — and mascot dog — of Millow, a startup working on mycelium-based foods. I’m at the startup’s offices to try a mix of different products it makes, such as a vegan alternative to Swedish meatballs, doner kebab and taco mince. The meatballs they serve me are okay, but the taco mince is tasty, and has a nice crunch to it.
Millow is operating in a wider foodtech sector which has yet to fully recover from the dip in venture capital investment caused by the 2022 financial downturn. According to recent PitchBook data, the global foodtech sector saw record-low deal counts in the last quarter of 2024. While total investments increased from $9.6bn in 2023 to $10.3bn in 2024, this was mainly driven by a few large ($100m+) late-stage deals.
Europe has also had its fair share of failed startups in this space — such as Sweden’s Mycorena, which failed to raise a Series B and filed for bankruptcy in July last year. But according to Carlotte Lucas, head of industry at the Good Food Institute (GFI) Europe, investment in alternative proteins, particularly mycelium startups, is on the rise.
“At least in the alternative protein sector, investment in Europe has continued to grow. There seems to be a lot of momentum,” she says.
Waste, waste, baby
Investments in alternative protein startups rose from €127m in 2023 to €158m in 2024 — a 24% increase. While generalist VCs remain hesitant, players like EIT Foods and the European Innovation Council (EIC) are doing most of the deals. German VC FoodLabs is the third most active investor in the space, according to Sifted data.
The largest funding round in this sector last year was Hamburg-based mycelium startup Infinite Roots’s $58m Series B in January, which the EIC backed.
“What’s resonating with investors right now is that many of these startups are leveraging waste or side streams from other industries,” Lucas says. “Using waste streams as feedstocks for fermentation makes the process circular — and hopefully leads to lower-cost proteins.”
Using waste or side streams from other industries is something that Millow is involved in and regularly gets enquiries about, according to Staffan Hillberg, Millow’s CEO.
“We are now launching a project with a major international company that produces rapeseed oil and has large amounts of by-products they want to convert into protein-rich food for both animals and humans,” he says.
Large food producers are also interested in this approach to reducing their carbon footprint, which has led to new partnerships and investments. One example is Finnish startup Enifer, which counts Valio — a major Nordic dairy producer — among its largest investors.
“With Valio, they first invested in Enifer, and now they’re actually building some supply chains together,” Lucas says.
Cutting out the water
Mycelium is the root-like structure from which mushrooms grow, and its cells can be turned into food products that serve as alternatives to both animal-based and plant-based proteins. This is what mycelium startups are doing in various ways.
Companies such as Infinite Roots grow cells in tanks through liquid fermentation. Before they develop into the fruiting body of a mushroom, their environment is controlled to encourage tissue growth into food products instead.
Millow, however, takes a different approach. Cofounder Mohammad Taherzadeh, a professor of bioprocess technology at the University of Borås in Sweden, has developed a dry fermentation method called “solid-state” fermentation. This process produces plant-based protein using mycelium without excessive water use.
“We only use two ingredients — a plant-based ingredient and mycelium,” says Hillberg. “In the past, we’ve worked a lot with oats, which we combine with mycelium cells in our own bioreactor. By controlling the environment in the bioreactor, we can get the mycelium to grow.”
During liquid fermentation, Hillberg explains, large amounts of water is required — a challenge in water-scarce regions. But with Millow’s solid-state fermentation process, mycelium penetrates the oats and ferments them using only a small amount of water vapour.
“Other producers using liquid fermentation struggle with protein structure, iron content and require too many processing steps and additives — we don’t,” Hillberg says.
Instead of liquid fermentation, which creates thin threads of protein that need to be mixed and bound with another ingredient, Millow’s product is already complete when it comes out of the dry fermentation process — a protein and oats mix that can either be made into things looking like meatballs, taco mince, doner kebab meat or something else.
From hospitals to stores
Although major food retailers are under pressure to cut CO2 emissions, startups often struggle to produce the large quantities needed to supply them directly.
Millow, which is in the process of opening its first factory outside Gothenburg, aims to produce more than 300 tonnes of protein by the end of 2025. The company has so far relied on grants to run the business, and last summer was granted €2.6m from the EIC.
But to limit the risks involved with supplying large retailers directly, Millow is taking a similar strategy to US alternative protein company Impossible Foods, starting with food service providers — such as office cafeterias, schools, and hospitals — where large volumes aren’t immediately expected.
“When we’re ready for retail, we’ll have two chances a year to apply. If accepted, we’ll need to deliver the right amount, at the right time, in the right place, and at the right quality — or face fines.”
Compared to meat, Millow’s protein is cheap to produce. Hillberg says it can buy a kilo of oats for about €0.25 and turn it into 2.2kg of protein. In comparison, cattle consume an average of 25kg of feed per kg of meat.
“This means we can sell through major chains at competitive prices,” he says. “We can match cheap mince meat, unlike Beyond Burger, which can’t scale at that price point.”
The patent explosion
Many foodtech startups face long approval processes for patents with the European Food Agency, which can take up to 18 months. Millow has avoided this by choosing a mycelium strain that is already approved.
“We have several hundred fungal spores that contribute to flavour, texture or colour, but many require novel food approval,” says Hillberg. “We’ve chosen to proceed with one that’s already approved.”
The growing momentum in the mycelium sector is also reflected in patent filings, according to GFI Europe. Close to 1,200 patents related to plant-based foods, cultivated meat and fermentation were filed in 2023 and 2024 — compared to fewer than 600 in 2021.
Millow has four patents pending but has decided against patenting some aspects of its product, such as its processes and how it handles fungi.
“Patents are great, but if a giant decides to copy you, you can’t defend yourself,” says Esmaeil Taherzadeh, Millow’s other cofounder.
Read the orginal article: https://sifted.eu/articles/can-mycelium-finally-become-a-cheap-vegan-alternative/
