In 2021, the Material Innovation Initiative reported that $980 million dollars of funding were poured into next-generation (next-gen) material innovation – more than doubling 2020's input to the industry.
The MII's report was not surprising to those working in the materials space. With issues like climate change and exploitation of natural resources top of mind for consumers and corporations alike, the potential for new, sustainable materials is promising. Following the alternative protein trend, next-gen materials have been named the next industry to invest in due to an expected 80% compound annual growth over the next four years, making the industry worth $2.2 billion in 2026.
Unfortunately, that $2.2 billion valuation would amount to only 3% of the market share of the materials industry, with animal-based and petrochemical-derived materials continuing to dominate. This data shows that while current funding for next-generation materials is promising, much more is needed to ensure biomaterials replace conventional options in order to achieve the maximum environmental impact.
Material innovators primarily rely on two sources of funding to refine and scale up their developments: brands and investors. In Part 1 of the Funding Next-Gen Materials series, we explore how brand partnerships can support the industry's growth.
“New relationships must be built between innovators, raw material suppliers, and manufacturers as brands begin to integrate these new technologies into their products.“
Brand Partnerships: The Chicken-and-the-Egg Conundrum
While there is certainly pressure from consumers to start using next-gen materials – specifically biomaterials – brands are up against an undeveloped industry. Brands are ready to buy materials that are market-ready, but instead, they find a technology that is still in lab-scale production. Material innovations are expensive because they require years of extensive research and development. The higher price point of the material is often reflective of this long development period. The only way for innovators to achieve more accessible price points is to scale up material production. Yet, the only way to scale up production is for brands and investors to buy into the development of the material.
Innovators rely on brand partnerships to co-develop and scale materials that meet performance and manufacturing needs. However, most brands only want to invest in fully-scaled innovative materials that already meet their needs. Brands and innovators find themselves at an impasse. Material innovators cannot give brands what they want without upfront brand support, but brands will not risk providing upfront support unless the innovators already offer what they want.
Material innovators, therefore, often prioritize partnerships with high-profile brands that drive innovation. Despite the growing demand for next-gen materials, only a small handful of brands can provide the capital and in-house R&D capacity to support innovators as they become market-ready. Some innovators even choose to collaborate with a consortium of brands to diversify the resources they receive and lower the investment risk for brands. Material innovators end up competing for the partnerships of a small pool of brands while most other brands wait for materials to scale up for commercial use.
Innovators must be mindful of balancing exclusivity with availability around their materials. Brand-name partnerships provide access to resources to accelerate development, but that can sometimes come with an exchange of IP or exclusivity. With no shortage of interest around next-gen materials, committing exclusivity too much can prevent innovators from growing their business and making their technology—and a more sustainable future—more accessible.
Compromise and Growth
This chicken-and-the-egg conundrum may not seem to have any obvious solutions. However, a report by fashion innovation platforms Biofabricate and Fashion for Good reminds us that transparent communication and compromise between brands and innovators go a long way.
Material innovators face the challenge of delivering materials that compare to or exceed that of their conventional counterparts while also being more sustainable. This colossal task calls for new technologies to be built from the ground up and rigorously tested. The development process may take years before being ready for commercialization. This timeline can be a difficult adjustment for an industry that usually sources materials within months.
From the brand's perspective, they may be risking much more than traditional investors when buying into a new material innovation. The brand puts its image, product quality, and supply chain schedule on the line. Larger brands, in particular, may face challenges integrating a new technology from outside their well-developed supply chain. New relationships must be built between innovators, raw material suppliers, and manufacturers as brands begin to integrate these new technologies into their products. This adjustment can involve many different parties and create bureaucratic challenges.
Brands can come to the table with patience and an understanding that innovation will take time and will require an adjustment to integrate into existing supply chains. Innovators, on the other hand, can be transparent about what can be realistically achieved within a certain time frame and work to cooperate within these existing supply chains. Both brands and innovators can be transparent about what key metrics are most important for both to be achieved.
Regarding competitive pricing, brands can be tolerant of accepting sustainable materials at a more premium price point when possible. However, it is important for innovators to understand that this flexibility may be limited. Brands and innovators can align on how this price tolerance may change over the course of scaling the technology.
Despite these challenges presented to both innovators and brands, what is most important is that both parties are aligned in their mission for creating a more sustainable future. In this regard, Bucha Bio is grateful for the positive response and support they have received from both brands and investors who share their same vision.
Note: Bucha Bio rebranded to Rheom Materials in January 2024 to better reflect their process and offerings. The new name combines the Greek word "rhéō" (meaning "flow") and "form," describing how a melt-extruder works, where the biopolymers flow into place and then solidify, or form, the final product.
