To say that “next-gen” material innovators had a rocky 2024 would be a gross understatement.
Renewcell’s travails were hardly unique. Finland’s Spinnova, which makes fibers from wood pulp and textile waste, went through a wringer of its own, with cashflow problems and disappointing revenues that culminated in millions of euros in operating losses and, despite a subsequent $13 million R&D loan, a postponement of the plant it was building with Brazilian pulp manufacturer Suzano. Over in Illinois, Natural Fiber Welding, a producer of plant-based, plastic-free materials, furloughed a “significant” portion of its staff, only to lay them off shortly after. It also switched CEOs, though it ended the year with what it said was a “successful closing of a funding round.” In France, biotech firm Carbios recently pumped the brakes on what it hailed as the world’s first industrial-scale enzymatic PET recycling plant to process all manner of plastic waste, including polyester.
That such companies are having such a harrowing time might come as a surprise to anyone not paying closer attention. Despite signs that companies are gradually retreating from once-ambitious sustainability goals, more fashion purveyors are touting their green bonafides than ever, spurred in part by burgeoning legislation from Europe requiring a transition to so-called “preferred” fibers that contribute less to climate change.
This could be an issue if lower-impact materials find it nearly impossible to gain ground. While by no means a universal experience, the struggle for startups navigating the so-called “valley of death” from lab-scale to industrial viability “exists on several fronts,” said Tricia Carey, who fought for Renewcell’s survival as its chief commercial officer and is seeing a chillingly familiar pattern happen to others in the space.
“Is there the right strategy? Is there the right leadership?” she said of what it takes to “get to the next level,” particularly for former incubatees that are seeing the once-bountiful support they received dissipate as they grow. “Developing the technology is a small part. The go-to-market seems to be the area that is causing the most trouble. There is a lack of shared risk within our very fragmented supply chain.”
The new year may not supply much more leverage. Europe and the United States’ sharp right-wing turns, and their expected drag on sustainability action notwithstanding, ongoing geopolitical strife continues to mire the global economy in a bog of uncertainty that isn’t conducive to taking chances on something different. Conversely, the surge in due-diligence regulation, including those relating to supply chain reporting, is expected to take a toll on already-stretched corporate resources. All that, Carey said, makes it “very hard for planning in these timelines that currently exist for the industry,” stymying the systemic change that needs to happen.
Challenges in mustering up financing aren’t something material firms like to talk about, which is why for every Renewcell or Spinnova, there are probably 10 more whose hardships are expressed behind closed doors or whispered through the grapevine. Renewcell’s difficulties with shifting its inventory were only so widely publicized because it was a public company that had to make public declarations of its business health. Spinnova is listed on the Nasdaq Helsinki First North Growth Market and Carbios on the Paris Bourse, France’s stock exchange. Natural Fiber Welding’s personnel predicament came to light because of Illinois’s Worker Adjustment and Retraining Notification, or WARN, Act.
A prevailing notion holds that bad publicity can have the unfortunate effect of making the company appear less desirable as a partner or borrower, creating a vicious cycle that may hasten its downfall. A company that downsizes or restructures, for example, might spin the moves as creating a more focused, efficient version of itself.
It’s likely why Chui-Lian Lee, founder and co-CEO of Werewool, a Brooklyn-based biomaterials startup, picked her words carefully when speaking to a reporter about the company. And even then, she asked that certain things stay off the record. What Lee can say out loud, however, is that Werewool, like so many others of its ilk, is seeking new funding in an environment that she can only describe as “rough.” The firm is finally gaining traction with commercial partners with protein-based fibers that meet brands’ often stringent specifications. But it still needs greater engagement—and more cash—to expand its ambitions. Lee doesn’t think she’s alone in this sentiment, either.
“I feel like all of us innovators are saying the same thing or similar things, you know, where there is a disconnect between VC funding cycles, the time it takes for innovation and the stage at which we’re able to gain meaningful commercial traction with brands,” she said, using an acronym for venture capital. “All three of those things are key to any of us succeeding [but they] don’t necessarily line up in a way that is cohesive to supporting innovation.”
Brands require scale and a comfortable price point, putting expectations and pressures on innovators that can prove “really, really difficult,” said Lee, who wishes there was a way for startups to pool expensive tools and equipment. The expectation for seed-stage companies to have significant commercial momentum with only a few million dollars of investment and a couple of years of development can be overwhelming, she said. Price parity with conventional materials, when overhauling a supply is involved, also takes a lot of time.
“The speed at which innovation needs to happen doesn’t [always] match the funding necessary to support that speed,” Lee said. “And I think that the market is nervous and a little bit less excited about new materials and investing in them.”
Indeed, time, patience and money are luxuries that the risk-averse industry is frequently loathe to part with, agreed Thomasine Dolan Dow, who was director of materials and innovation at the Material Innovation Initiative until the California-New York think tank’s closure in September, though she said it had nothing to do with next-gen. It’s why capsule collections that serve as “proving grounds” for something untested are so popular with brands. But there’s also a tendency to get stuck there, especially if the consumer doesn’t jibe with an unfamiliar product.
“I think there is the natural tendency for brands to look at fiber and material innovations and immediately want to make an apple-to-apple comparison with existing products in the market from appearance and hand feel to price and color options,” Dow said. “Some fibers will live up to the incumbent comparisons but others should be viewed as novel materials and judged on their own merit.”
But while brands are “rightfully” customer-focused and hesitant to mess with time-honored business formulas lest it impinge on profit margins, all the “big, game-changing innovations” that came before, from nylon to polyester to “ever-evolving” Tencel products, took a while to catch on, she said.
Carey thinks that the innovators that will emerge from the current morass relatively unscathed are the ones that have benefited from a parent company’s fiscal and resource scaffolding from the get-go. There is, for instance, Re&Up, a nascent textile-to-textile recycling firm that is propped up by Turkey’s deep-pocketed Sanko Group, owner of denim giant Isko. Reju, a circular polyester maker based in Paris, is backed by Technip Energies, a French engineering and technology company that is a global leader in the construction of liquefied natural gas factories. Syre, headquartered in Stockholm, was co-launched by Swedish retail juggernaut H&M Group, which, in contrast, only invested in Renewcell—that is, until it decided it could no longer keep bailing the latter out.
Katrin Ley, managing director of Fashion for Good, a sustainable innovation platform in Amsterdam, pointed to Ambercycle and Circ, both American manufacturers of textile-to-textile polyester, as examples that demonstrate the “power of strong brand partnerships and clear ROI,” meaning return on investment. Both have been inking deals with textile manufacturers to steadily ramp up capacity that provides drop-in solutions for brands. Even so, there are two parts to the equation.
“Change is possible, but it requires brands to commit to offtake agreements and invest in scaling technologies, while innovators focus on building market-ready solutions and securing diverse funding streams,” Ley said. “Without systemic support, innovation risks stalling in the face of economic pressures.”
If Carey were a betting woman, however, she would put her money on Reju, not only because of the company’s significant support but also because it kept its focus on what it needed to do with its technology and funding internally before “turning on all of the marketing and market engagement.” Other startups have to, as the old chestnut puts it, build their airplanes while flying them.
All of which brings us back to an existential question about the category: Do brands actually want new materials?
“I think there is less true, authentic customer demand for innovation in this sector than everyone believes,” said Dan Widmaier, CEO of San Francisco-headquartered Bolt Threads. “In my opinion, what we’re seeing now is the manifestation of stuff that started happening in 2022. It just takes a while because companies move at different rhythms.”
The “stuff” is one of the reasons why the former unicorn announced in 2023 that it would be pausing production of the mycelium-based leather alternative known as Mylo in favor of B-silk, a bioengineered yeast-derived peptide meant to replace silicone elastomers in beauty and personal care products. Like Renewcell’s bankruptcy, the move came as a shock. Bolt Threads appeared to have successfully courted the likes of Adidas, Lululemon, Stella McCartney and the luxury conglomerate Kering.
He said that the “short version” of what went wrong is that Bolt Threads needed a “ton” of capital to scale the process and make the unit economics work, so that “everybody could make money in the process.” But while the customer pull was strong, it was not strong enough.
For Widmaier, the problems innovators are wrestling with today come down to a fundamental disconnect. If the mantra for brands remains that the product has to be “better, more environmentally friendly, higher performance and cheaper, then you guys might as well wind them all up,” he said of companies like his.
“More pain on the way,” he said of 2025. “The only way out of this is for customers to adopt innovation en masse and buy product from innovators or support them in some way. And I haven’t seen that happening.”
