Startups Raise Record Sums To Take On Packaging Waste

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Startups Raise Record Sums To Take On Packaging Waste
Joanna Glasner, January 17, 2020

Plastic packaging is awfully convenient for consumers. But as most of us are guiltily aware, that convenience is taking a toll on the planet.

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You’ve probably heard some of these stats, but let’s dwell on a few. About 8 percent of the world’s oil production is used to make plastic. Of that, about 40 percent turns into disposable packaging. Of that, some 18 billion pounds of plastic waste flows into the oceans every year.

It’s enough to make the author of a piece on sustainable packaging feel downright consumed with self-loathing for just downing a plastic bottle of water and a plastic-wrapped cookie. But we’re here to talk about startups.

Fortunately, while some writers aren’t doing their part, startups have been quite busy developing alternatives to plastic packaging and other environmentally damaging materials. Investors have been writing them some big checks as well.

A Crunchbase survey of funded companies in the sustainable packaging and materials space unearthed more than 20 (see list) that have raised significant funding in the past three years.  Collectively, they’ve raised more than $850 million, with most of the money coming in the past couple of years.

This is no paltry sum, so we thought it’d be instructive to take a look at where the money’s going, and what it might signify for the future of disposables.

Funding Recipients

There are at least seven recently-funded startups in the eco-packing space that have individually raised $20 million or more, per Crunchbase data. We chart out the top funding recipients below.

One unusual takeaway is that the most heavily funded company – Zume – started out with a business model that had little to do with sustainable packaging. The Silicon Valley company was primarily focused on robot-enabled pizza prep and delivery when it raised a $375 million round from SoftBank in late 2018. The company has since announced a sharp pivot into sustainable packaging a few months after acquiring fortuitously named startup Pivot Packaging.

Another observation from the list of top venture-backed startups is there’s no clear geographic hub for sustainable packaging. Well-funded companies in the space hail from multiple continents and are based in major tech hubs as well as cities not known as startup havens.

Why Now?

Sustainable packaging seems like one those startup spaces that should have really taken off a long time ago. After all, everyone knows plastic is wasteful and bad for the environment, and there are plenty of other materials we could use to package the endless things we buy.

But change hasn’t come easy. Disrupting entrenched supply and manufacturing chains, producing new materials and containers at scale, and asking people to pay a bit more for eco-friendlier packing are all challenging things to orchestrate.

Adding to the complexity is consumers’ high expectations of their packaging, notes Sofia Martinez, an adjunct partner at AgFunder , who is focused on food supply chains. Consumers are looking for containers that are resealable, microwaveable and keep food fresh.

“The consumer at this point will not sacrifice product convenience,” she said. “So the packaging needs not just to be sustainable, but also fulfill the convenience and conservation capabilities it has been fulfilling for years.”

But the space is getting a boost as more major retailers, eateries, and food and consumer products producers are increasing investment in and commitment to sustainable packaging. And it goes beyond small steps like the eco-friendly paper straw you get at Starbucks.

Big corporations stepping up their eco game include cereal giant Kellogg, which announced in October that it aims to transition to 100 percent reusable, recyclable or compostable packaging by the end of 2025. Consumer products conglomerate Unilever, meanwhile, disclosed plans to halve its use of virgin plastic by that date. Even Walmart, known for its low-cost emphasis, has committed to providing fully recyclable, reusable or compostable packaging for its private brand items. And the list goes on …

Exit Potential

Sustainable packaging isn’t a brand-new area, and entrepreneurial companies have been innovating in the space for a couple decades at this point. That means some of them have found their way into the arms of an acquirer, including most recently Pivot.

But for now the bulk of the exit activity remains ahead, particularly as incumbent packaging companies come under pressure from customers and governments to meet targets for lower-waste packaging.

As one sustainable packaging startup, TemperPack, notes in its marketing materials: Packaging waste represents one-third of all municipal trash, costing local governments billions each year in disposal costs. Finding ways to cut back is a laudable environmental goal — but increasingly it’s looking like a wise financial decision as well.