By: Frank Klemens – GFRP Fund I*, Big Idea Ventures (New York City, New York), Max Martin – Supercharger* (Nashville, Tennessee), Kevin Wang – Supercharger* (New York City, New York)
*Generation Food Rural Partners Fund, a Big Idea Ventures Fund, partners with 23 US-based universities pioneering research into breakthrough agricultural technologies, food technologies, and protein innovations to create new companies and create living-wage jobs in rural communities across the US.
*Supercharger is a New York Based Financial Technology company that automates investment research and machine learning capabilities for the private capital market.
Polystyrene, commonly known as Styrofoam, is a petroleum-based plastic and the most littered waste product in the world. When exposed to sunlight, Styrofoam creates harmful air pollutants that deplete the ozone layer. It takes polystyrene over 500 years to decompose naturally. Polystyrene production is anticipated to grow to 15.68 million metric tons by 2024. Of that amount, only 12% is recycled, taking up 30% of global landfill space. When it ends up on the bottom of the landfill, its benzene and styrene chemical components seep into local water reservoirs and cause liver and kidney cancer. With a long decomposition life, polystyrene threatens human health and our society. We should seek an alternative packaging solutions.
Startups are building alternative sustainable solutions to this issue. Three focus areas are Chitin-based foams, Polylactic Acid (PLA) materials, and Nanocellulose material (NC). Chitin-based (derived from shrimp shells) foam alternative, made famous by startups such as Cruz Foam. Chitin-based foam is compostable and produces bio-benign organic waste, with Cruz’s specific formula approving the USDA’s BioPreferred program. However, the foam’s rapid compostability makes it unsuitable for specific long-term applications such as insulation. Another alternative is polylactic acid-lined paper (PLA), a compostable, plant-based resin made from corn starch that can be used to create compostable containers, cup lining, and water-phobic applications. PLA’s shortcomings, however, are inadequate heat transfer and a six-month lifespan. A third alternative is plant-based packaging or nanocellulose material (NC). NC-based packaging is fully compostable, often incorporating seeds in its design so that end users can bury the packaging after use. One main drawback of plantable packaging is water degradation, making it unsuitable for food packaging. Let’s focus on Nanocellulose Material a bit more.
Nanocellulose foam is produced using nanocrystals of cellulose, the most abundant organic material on Earth. This abundance of material gives it scalable potential, a crucial aspect when considering pricing. Still, in its early development phase, nanocellulose foam research thus far lacks structural integrity. In 2019, researchers at Washington State University (a GFRP Fund Partner University) successfully developed a foam made from 75% cellulose, surpassing the insulation capabilities of Styrofoam. Their foam was reported to be “lightweight and can support up to 200 times its weight without changing shape. It degrades well and doesn’t produce polluting ash when burnt.” Its potential is also being tested in the private sector.
Another area under development is Cellulose Nanocrystals (CNC). Various cellulose nanocrystal (CNC) extraction methods include acid hydrolysis, enzymatic hydrolysis, subcritical water hydrolysis, and mechanical processing. The optimum yield of CNC extracted from cellulose can reach 70%–80%, corresponding to a total yield of 20%–30% from the original bioresource. These methods will yield by-products such as lignocellulosic agricultural waste, including cotton stalks, fruit leaves, corn husks, and oil. Post-treated CNC can be disposed of as green waste turned into composting, incinerated as biofuel, or may go to a biogas plant used as an energy source; CNC-derived packaging has an efficient waste stream.
Startups working in the NC or CNC area include:
Cellugy, a Danish startup, which has created a product called EcoFLEXY, created using a biotechnology process where a specific strain of bacteria produces nanocellulose through the bioconversion of sugar. Their crucial product feature makes it strong enough for use in industrial and commercial packaging. Other use cases include food and cosmetic packaging currently undergoing scrutiny through GRAS by the FDA. EcoFLEXY may also be used as a mechanical strengthener in the construction and automotive industries.
Stora Enso’s Papira is a competitor product manufactured from pulp fibers. Papira is lightweight and shock absorbent, ideal for protective packaging applications. Papira is biodegradable and can be fully recyclable in regular paper and board flows. This allows it to be recycled in existing packaging waste management systems, unlike its predecessor, PLA, which requires a unique recycling process.
Ecovative Design uses vertical farming to grow mycelium products via their AirMycelium process. Through carefully guided geometrical mycelia, they produce a wide selection of materials, including high-performance Forager foam. Its Forager product enables product turnability and thermal control suitable for various industries, from packaging and food to beauty and fashion.
SpadXTech uses a fast-growing microbe approach to create cellulose-based materials. This unique approach, which combines green fermentation techniques and proprietary biotechnology, allows the company to produce flexible, durable, and customizable materials suitable for insulation, filtration, and apparel. They aim to expand into more industries in the future with the overarching goal of ameliorating climate change.
Blue Lake Packaging develops and produces several cellulose-based, sustainable packaging solutions. Their fine molded fibers are renewable, biodegradable, and recyclable, all while meeting industry performance standards. Their fiber foam offers the equivalent protection as petroleum-based foam alternatives.
Adsorbi is a research-based startup out of Chalmers University that has created a cellulose-based foam that has the ability to capture air pollution. Their foam is ideal for packaging food, batteries, books, and personal care products. Their material pulls pollutants by more than 400% compared to their competitors while being completely customizable in shape, size, and pore structure.
The development of the nanocellulose foam industry has not gone unnoticed by venture capital funds that have increased their exposure to new packaging technologies. December 2020 saw the European Union’s EIC Accelerator commit to a $2.3 million seed investment in Cellugy. Viking Global Investors led a $60 million Series D investment in Ecovative Design last May 2021. As of July 2022, At One Ventures led a $3.5 million seed investment in Simplifyber, the creator of the world’s first fully-molded garment and shoe uppers made directly from a cellulose-based liquid.
|VC||Notable Investments||Lead Investor?||Funding Round||Date|
|European Investment Council||Cellugy||Yes||Seed||12/30/20|
|Viking Global Investors||Ecovative Design||Yes||Series D||3/30/21|
|Senator Investment Group||Ecovative Design||No||Series D||3/30/21|
|Bolt||Blue Lake Packaging||Yes||Pre Seed||11/7/19|
|New Climate Ventures||Bucha Bio||Yes||Seed||9/27/22|
|Lifely VC||Bucha Bio||Yes||Seed||9/27/22|
|At One Ventures||Simplifyber||Yes||Seed||7/6/22|
Initial venture capital funding to nanocellulose foam alternatives is positive but whether additional venture capital inflows will occur remains to be seen. Nanocellulose foam is a likely candidate to save the packaging industry. The global packaging industry is expected to reach $1.01 trillion by 2023, fueled largely by population growth in emerging markets and increased consumer habits fueled by Uber Eats and DoorDash. At the same time, governments worldwide are actively cracking down on Styrofoam usage. Bans on polystyrene food items are already in place in major cities such as Oakland, San Francisco, and Chicago; in the neighboring states of Maine, New York, and Vermont; and in countries such as China, India, and Taiwan. Combining the growth in packaging needs with Styrofoam bans, the packaging industry is desperate for a durable and sustainable polystyrene alternative. Nanocellulose foam appears to be the best material to fit the bill. The recent breakthroughs in nanocellulose foam’s durability and insulation and the failure of competing alternatives to adapt as quickly leave nanocellulose foam as the most promising sustainable packaging option of the future.
At an estimated minimum selling price (MSP) of $10,031/dry tonne of CNCs, the production of CNCs via acid hydrolysis can be technically and economically competitive. Cellulose insulation costs between $1.63 and $2.52 per square foot for the materials and installation. An effort is underway to develop processes enabling NC to be sold at a lower cost; for instance, with increased scale, production costs could be significantly reduced. Furthermore, capital costs could be reduced through government investment or infrastructure repurposing. Increased process efficiency or internal energy generation could also help to reduce energy costs. Cellulose-based material is expensive, but there is a cost-effective isolation method, resulting in greater availability for developing inexpensive polymer-based products. Additionally, chemical costs and investment in manufacturing equipment and paper machines are other factors that influence the cost of NC manufacture.
Even with nanocellulose foam being economically competitive, the biggest hurdle for mainstream adoption is expanding polystyrene (EPS) affordability. Recent price averages of EPS put its cost at $3,315/ tonne, one-third the cost of CNC, even factoring in recent inflationary pressures. For example, polystyrene-based spray foam is more expensive in the insulation industry than its cellulose-based counterpart, with a median price of $1.00 to $15.00 per square foot. Of course, the massive scale of polystyrene currently produced plays a role in its price advantage. While cellulose-based foams may not achieve that same production scale in the near future, as capital continues to flow into the space, the price gap between expanded polystyrene and nanocellulose foam alternatives should continue to shrink.
One hurdle that nanocellulose foam will have to clear in the coming years is finding enough incoming capital to make its production scalable. Even the most successful startups in the space are struggling with the problem of scale. As Bob Beckler, CEO of TemperPack, points out, “There are very few alternatives out there for sustainable materials available at scale.” However, for the time being, consumers and distributors appear to be willing to pay a slight premium for environmentally friendly packaging. As governments worldwide crackdown on the proliferation of petroleum-based plastics such as polystyrene, companies will be drawn to alternatives that meet regulatory requirements. The good news for nanocellulose foam is that these workarounds are likely temporary. The past year has seen hundreds of millions of dollars in funding be invested in early and mid-stage startups in the space, a sign that the industry is set for continuing growth in capital.
Another hurdle for consumer uptake and sustainability recognition. However, based on the 2022 McKinsey Consumer Survey, more than half of US consumers are highly concerned about the environmental impact of packaging in general. McKinsey found that consumers are willing to pay more for green. Still, they would also buy more sustainably packaged products if more were available and they were better labeled. Shorr’s 2022 Sustainable Packaging Consumer Report revealed that 86% of the consumers surveyed are more likely to purchase a product from a brand or retailer if the packaging is sustainable. 77% of the consumers surveyed expect more brands/retailers to offer 100% sustainable packaging for their products shortly. And 68% of respondents would be open to switching from their typical brand to a more sustainable brand. Even though consumers may have before ESG-related packaging, it may ultimately be up to governmental agencies’ restriction of styrofoam packaging production.
Nanocellulose foam production is a prominent environmental improvement over polystyrene. The production of polystyrene is dangerous not only to the workers involved in the production process but also to the community near the plant. Two polystyrene’s main byproducts, toluene and benzene are included on the Environmental Protection Agency’s list of “five priority air toxics.” The CDC classified styrene, the main building block of EPS foam, as Immediately Dangerous to Life or Health Concentrations (IDLH). Cellulose foam production offers a healthy alternative to these harsh chemicals and pollutants. Cellulose foam can be produced using no gas other than air or steam using a water-vapor expansion method, which is why no global warming gas is emitted during production. At the current market rate, polystyrene is one-third the cost of nanocellulose material, however new NC development methods by companies like Cellugy and Blue Lake Packaging provide much hope that the future of sustainable packaged goods involves nanocellulose material.
BIV’s Generation Food Rural Partners Fund (GFRP) is currently evaluating several university-led IPs in the field of packaging innovation with the goal to commercialize the most relevant technologies. If you are interested in joining one of our NewCo, apply here or in partnering with us, reach out here. Find out more about the GFRP Fund here.