Canada’s largest pension fund makes alt-dairy bet in Perfect Day’s $300m Series C

Hawk eyed readers of AFN may have spotted Perfect Day’s previous and already vast Series C close at $140 million last December in a round led by the Singaporean backing agency Temasek and joined by past investors including Hong Kong billionaire Li Ka-shing’s Horizons Ventures . With this expansion, it is now Canada’s largest pension fund taking the lead.

The Canada Pension Plan Investment Board (CPP Investments) has disclosed it is buying a $50 million stake alongside top-up funding from the two aforementioned Asian backers and others. On the production side, the business is showboating a doubling of its production capacity over the last several months, an achievement that likely owes a fair bit to partnerships with manufacturers like Archer Daniels Midland. The tech behind the production involves Perfect Day developing and deploying ways to genetically engineer microflora – the name for a group of protein-producing organisms that includes yeast, bacteria, and fungi — to convert plant sugars into the milk proteins casein and whey that are essential in most dairy products.

The whey and casein are identical to what you’d get from cow’s milk, per to Perfect Day, which then combines them with other elements to make its products, such as fat and water to make milk. US regulators are warming to microflora milk On the regulatory side, Perfect Day has completed the FDA’s review of its Generally Recognized As Safe (GRAS) status.

Incidentally, I tried its strawberry ice cream at a Temasek event quite a while before it was declared GRAS — in Singapore, last November — and hats off to the Perfect Day food scientists; its ice cream had a smooth texture and sweet taste that was uncannily similar to a conventional dairy ice cream. A pension fund of this standing taking a direct stake in an early-stage foodtech business is an eye catching intervention — whatever the progress on production or regulations.

For CPP Investments, which manages more than $400 billion worth of assets, the new backing was not actually through its relatively new in-house VC arm. A taste of due diligence “We were force-fed some ice cream,” recalled CPP Investments head of thematic investing Leon Pedersen , describing how he had as well been impressed by the texture and taste of Perfect Day’s dairy products like milk, ice cream, or cheese that “actually taste real” compared to plant-based rivals.

Per to Describing the rest of the due diligence process in a video call, he, one of the key points was around Perfect Day’s projected ability to drive down the cost of production. Per to Here, he, it was increasingly key to keep an eye on the early stage, even for a pension fund that is known to be more risk averse. “Some of tomorrow’s strong winners will actually be found in the private space,” he explained, expressing an appetite for further investments in this area, as the CPP Investment thematic portfolio is split one third private equity, two thirds public firms.

There is of course no such thing as a perfect risk-free funding, and Perfect Day will be no exception. This segment of the foodtech trade is churning with competitors like Eclipse Foods , Dream Pops, Clara Foods, Ripple and New Culture — and that is just to name a few using both cellular agriculture and fermentation techniques like Perfect Day as well as plant-based formulations.

Those are markets that earlier stage startups like TurtleTree Labs and Biomilq are targeting, with Biomilq in recent weeks securing a $3.5 million backing from Bill Gates’ Breakthrough Energy Ventures. But that niche does not appear to be one Perfect Day are heading for as yet.

With more mainstream milk products, one tactical advantage the founders are claiming over the dairy industry already besides their sustainability credentials is production flexibility. The dairy industry has experienced a supply glut in the face of Covid-19, driven by long production cycles, centralized manufacturing, and limited processing facilities.

The founders of Perfect Day now say that it has a production advantage of greater buying interest responsiveness, allocating a stable protein supply to where it is needed most. With some of the extra funds, Perfect Day in addition plans to build a turnkey network of localized animal-free dairy protein growers and processors to avoid supply chain bottlenecks.