Auckland-based startup Mushroom Material, on a mission to replace styrofoam with sustainable fungi-based packaging, has successfully raised $8.5 million in seed funding. This round was spearheaded by Singaporean investors Wavemaker Partners and SEEDS Capital, alongside contributions from Black Kite Capital, Icehouse Ventures, and Sir Stephen Tindall’s K1W1.
Mushroom Material, registered in Singapore, is pioneering a sustainable alternative to single-use synthetic styrofoam and cardboard packaging. The company has already attracted interest from approximately 200 potential customers, including major brands like Estée Lauder, Panasonic, Ikea, and Toshiba.
"For businesses shipping millions of products globally, single-use styrofoam remains the go-to protective packaging," explains founder and CEO Shaun Seaman. "Our goal at Mushroom Material is to bridge the packaging industry's need for scalable, cost-effective solutions with society’s demand for environmental sustainability."
Founded in 2020 amidst the global pandemic, Mushroom Material previously raised $470,000 in a pre-seed round led by Icehouse Ventures. Seaman emphasized that involving offshore investors in the recent funding round resulted in a more favourable valuation, underscoring the challenges of raising capital in New Zealand.
"While New Zealand excels in research and development, raising capital here is tough. Investors love the country but often don't know how to invest here. In contrast, Singaporean investors quickly understand and support our vision," said Seaman. Registering the company in Singapore aligns with Mushroom Material's global ambitions and proximity to major Southeast Asian customers.
Wavemaker's general partner, Andy Hwang, highlighted the startup's unique technology that integrates seamlessly with existing styrofoam production lines, enhancing cost efficiency and scalability. "The market demand for sustainable alternatives positions Mushroom Material for significant growth," Hwang noted.
Advancing Sustainable Packaging
The company’s innovative material is created by combining agricultural waste like wood chips, sawdust, hemp straw, and cardboard with mycelium, the root structure of fungi. These materials grow into pellets that are coated with a biopolymer, making them versatile for various packaging needs. Compression molding shapes these pellets into desired forms, providing a biodegradable, sustainable alternative with the protective qualities of polystyrene and the strength of concrete.
A critical challenge has been ensuring the packaging's durability on shelves for up to two years while also enabling it to degrade within six weeks. Seaman emphasizes that Mushroom Material aims to fit into the existing supply chain rather than creating an entirely new industry.
Future Plans and Industry Impact
With the latest funding, Mushroom Material will establish a 1,300 square meter pilot plant in Auckland, costing about $5 million. Seaman aims to provide samples to customers by the end of the year and commence deliveries by 2025.
The startup's long-term vision includes building a commercial-scale plant in Southeast Asia, estimated at $50 million, followed by licensing the technology globally. This strategy will necessitate continuous fundraising, with plans for a Series A round in 18 months.
Addressing Plastic Pollution
Mushroom Material's mission aligns with global efforts to eliminate non-recyclable plastics. Over 100 US cities, the EU, and 25 other countries have initiatives to ban single-use plastics, with major brands like McDonald’s and Starbucks committing to replace all single-use plastics with recyclable or compostable materials by 2025.
An Ipsos poll revealed that 85% of respondents worldwide support an international treaty banning single-use plastics, which contribute over 70% of ocean plastic pollution. New Zealand has already banned the sale and manufacture of many single-use plastic products, and similar legislation is proposed in Australia.
While Mushroom Material's immediate focus is on replacing styrofoam, the technology has the potential to target other plastics like polystyrenes, polyurethanes, and polyethylene in the future. "We aim to replace these materials in every application, from food containers to thermal acoustic insulation, although some applications, like food containers, are likely a decade away," Seaman concluded.
Mushroom Material joins the 50+ companies at the forefront of a sustainable packaging revolution with innovative mycelium-based technology poised to disrupt the packaging industry and significantly reduce environmental impact. As global demand for eco-friendly solutions grows, mycelium based composites are well-positioned for substantial growth and industry-wide influence.