Out of the $1.5 billion in funding raised by plant-based companies in the first half of 2020, a record $435 million of that went to companies developing products that use fermentation, according to a new report from the Good Food Institute.

Proportionally, fermentation companies raised 60% as much funding as plant-based meat, egg and dairy companies, and 350% more than cell-based meat companies. This finding prompted the trade organization that promotes plant-based alternatives to declare that fermentation is the next crucial pillar in the growing alternative protein space.

Companies operating in the fermentation space can fall into three categories: precision fermentation, biomass fermentation and traditional fermentation. Clearly, the days of fermentation techniques being relegated exclusively to beer and yogurt are a thing of the past. The report shows that precision fermentation is now the largest category in the space and is responsible for creating functional ingredients rather than entire products. This means flavorings, pigments, amino acids and enzymes.

Perfect Day, which produces animal-free dairy proteins, falls into this category. Since December, the Silicon Valley startup has raised $300 million. Last year, the company also released its own-brand dairy-free ice cream for $20 per pint and it sold out in a matter of hours. Other companies in this space include Impossible Foods whose heme protein that “bleeds” to mimic meat has made the brand into the standard against which other plant-based burgers are compared.

Biomass fermentation is also playing a bigger role in the fermentation arena. Microbial biomass serves as the predominant ingredient of a food product or as one of several primary ingredients in a blend. The process that creates these ingredients is based on the quick growth rate of microorganisms that become protein rich foods – a process which the report says can efficiently produce enough protein for the entire world.

Quorn, which arrived on the market in 1985, is the oldest player in the fermentation space. It uses biomass fermentation of filamentous fungi to produce its meat-free burgers, fishless sticks, sausages, deli slices, roasts and cheese cutlets. While its technology was cutting edge nearly four decades ago, biomass fermentation has come a long way toward the mainstream. Today JBS’s new brand, Planterra Foods ferments pea and rice protein using shiitake mycelium from MycoTechnology to create its products, and Meati ferments cultures in broth to mimic whole-cut meats. Air Protein takes things a step further and is working to produce proteins found in carbon dioxide into edible items.

While this space is growing, it still remains behind plant-based companies that are producing products that are available directly to consumers through retail and foodservice. Still, fermentation-focused companies may be catching up. Almost half of the 44 fermentation companies that exist today were launched between 2019 and the first seven months of 2020.

The interest in the space is continuing to increase, and if the prediction from The Good Food Institute that these fermentation processes can improve and lower production costs for both plant-based and cell-based meat holds true, then there is likely to be continued growth in this space as manufacturers and researchers uncover the yet-untapped potential of fermentation.