For decades, building material companies have shredded old newspapers to create cellulose insulation. But as newspapers have declined, the cellulose insulation industry has found itself in a tailspin, chasing supplies decrease raw material.
As old newsprint has become harder to find, there’s another paper-based product on the rise: corrugated board. People are increasingly turning to e-commerce and the amount of cartons is steadily increasing. Every year, as 50 million tons of earth materials in waste and recycling bins.
Cardboard would seem like a perfect paper-based solution to the insulation industry’s shortage, except for one problem: Corrugated boxes are filled with contaminants like plastic tape, shipping labels and even metal fasteners. Converting it to insulation is much more difficult than it has ever been. Another startup, CleanFiberpredicted the shift and has been working on the problem for years.
To date, CleanFiber has managed to produce enough insulation for approximately 20,000 single-family homes. But CEO Jonathan Strimling knew the company would have to expand beyond its original factory in Buffalo, New York, if it was going to become more than an afterthought. The US insulation market is dominated by a handful of large players and is worth $12.5 billion, according to Grand View Research.
Strimling also knew that he and his team would need more capital to expand. They last raised a $10 million Series A in 2022 using a creative mix of equity and debt to get the Buffalo plant up and running. But a national expansion would require a much larger war chest.
Fortunately, the company had been courting Spring Lane Capital, a sustainability-focused private equity firm, for over a decade. The company had been following CleanFiber’s progress and, pleased with the numbers the startup was putting out, decided to lead a $28 million Series B that also included a $31.5 million financing facility, according to TechCrunch exclusively. Spring Lane was joined by Ahlström Invest, AXA Investment Managers, Climate Innovation Capital and Tokyu Construction/Global Brain.
“It puts us in a very, very strong position to roll out nationally,” Strimling told TechCrunch.
Using an entirely new process to convert a different raw material into a replacement for existing cellulose insulation was a challenge the company faced when developing its product. It couldn’t cost more and it had to perform as well or better for the installers who deal with it on a daily basis.
CleanFiber sells its bales at market prices while improving its production process. Strimling would not yet disclose whether the company is making the product profitable, but said CleanFiber has been able to “lower the marginal cost of production by a very, very significant curve.”
With a first-of-its-kind factory built and operating, CleanFiber was able to cross one of the most treacherous parts of the death valley that often claims startups trying to commercialize a new technology. Building new additional factories won’t be a walk in the park, but it will get easier with each successive one. Additionally, Strimling points out that stricter building codes mean new homes require more insulation than ever before. In other words, CleanFiber doesn’t need established players to lose to win.
