Key takeaways

• Funding 
  • Q4 2023 dropped to a record low after the big spike in Q3: Circular materials companies raised USD 305.3 million across 23 rounds in Q4 2023, cooling down from the record-breaking USD 3.7 billion raised in Q3. The e-waste segment accounted for ~80% of the total funds raised, led by two battery recycling startups, Northvolt (~USD 150 million) and Mecaware (~USD 42 million). Companies that raised funds earlier in the year now appear to be prioritizing product development and partnerships for expansion.

• Product updates
  • New product launches continue: The quarter witnessed several product launches that utilized bio-based and recycled materials across diverse sectors, including construction, packaging, apparel, and footwear. Renowned brands like Gucci, Puma, and Holcim also actively contributed, reinforcing the growing adoption of these materials.
  • Advancements in battery recycling tech: Although battery recycling product activity was subdued, updates on promising new technologies emerged from players such as Redwood Materials and RecycLiCo. Additionally, battery recycling remains a hotspot in 2024, with extensive plans to build commercial-scale factories throughout 2023.

• Partnerships
  • Notable collaborations in recycling textiles and advancing new battery recycling processes: We observed 46 circular material partnerships across 36 disruptors in Q4 2023 (+55.0% YoY), with a total of 183 partnerships during full-year 2023 (+66.4% YoY). Nearly 30% of the partnerships focused on the recycled textile segment, as disruptors such as Renewcell, Ambercycle, Infinited Fiber Company (IFC), and Evrnu partnered to supply their recycled textile materials in fashion brands. In the recycled battery material space, relatively new startups, such as Cyclib and Tozero, formed partnerships with automotive manufacturers, focusing on the development of battery recycling processes.

• M&As
  • We observed three key acquisitions during the quarter (vs. five in Q3 2023). These acquisitions, primarily made by incumbents, target the recycled materials space with a focus on recycled plastic. Lyondellbasell stood out with a notable acquisition streak.

• Regulations
  • The recycling industry, having received ongoing government support in terms of funding, is also being bolstered by regulations aimed at advancing recycling efforts.

• Outlook
  • Battery recycling holds promising progress: Battery recycling startups have demonstrated notable success in their recycling trials in recent years, consistently attracting funding even during periods of low investor activity. We maintain our positive outlook for the industry—which is now at an inflection point—as players gear up for commercial operations and collaborate with major automotive firms to integrate materials into the supply chain. The emergence of new startups and advancements in promising battery technologies further underscores the potential. Growth expectations hinge on operational capacity expansion, allowing players to meet demand effectively. The progress of scheduled capacity expansions and the feasibility of new battery technologies among emerging players are areas to watch out for in 2024.
  • Bio-based materials gain traction among popular brands: The outlook for bio-based materials also remains positive. Popular brands across various industries, such as Ganni, Holcim, Gucci, Puma, and McDonald’s, are actively co-developing or collaborating to integrate bio-based materials into their products. This marks a pivotal moment for startups in the sector, as their extensive research and development efforts come to fruition. However, the potential for sustained momentum would depend on further strategic partnerships and supply agreements.

Funding: Lower new raises after a record Q3; sustained interest in battery recycling

Analyst QuickTake: Q4 2023 marked the lowest-funded quarter for the industry in the past three years. However, the sector attracted strong funding in the first nine months (especially in Q3) and full-year funding was up 31.3% YoY. This quarter’s funding dip is not indicative of an industry slowdown; rather, the companies that raised funds earlier in the year now seem to be prioritizing product development and partnerships for expansion. The e-waste segment, particularly battery recycling, continued to secure the majority of funding (~80% of circular materials funding), focusing on capacity expansion.

• Circular materials companies raised USD 305.3 million in (disclosed) funding across 23 rounds in Q4 2023. This was a 92.6% and 81.0% QoQ and YoY drop in dollar terms, respectively, and was the lowest-funded quarter for the past three years. The average funding round size was USD 13.1 million (76.8% less than the average of USD 57.2 million for the past 10 quarters).

• The slowdown could be a result of companies that secured strong funding earlier in the year (over USD 8 billion raised during the first nine months), now prioritizing product development, capacity building, and partnerships. Additionally, the results from Q4 were contrary to the record-breaking funding in Q3 (USD 3.7 billion, the highest quarter in three years).  

• Similar to recent quarters, the recycled e-waste segment raised the most funds (USD 245.4 million across four rounds or ~80% of total industry funding), led by Northvolt’s ~USD 150 million convertible debt funding round, which was expected to facilitate the Northvolt Six sustainable battery gigafactory project in Québec, with construction of the factory expected to start by the end of 2023. Other notable rounds in the sector include Mecaware’s ~USD 42 million Series A and Nth Cycle’s USD 37 million Series B funding rounds. Mecaware plans to start operations at its pilot plant, which recycles battery scrap, in 2025. The facility is intended to produce 50 tons of lithium, nickel, cobalt, and manganese recycled metal per year. Nth Cycle is also looking to commercialize by constructing a new partner testing facility and expanding its headquarters. 

• Bio-based materials space attracted less funding, though funding for bio-based packaging and industrial materials remained noteworthy, raising USD 25.6 million across eight funding rounds (8.8% of total funding), particularly for product development and commercialization. Notably,  Octarine Bio, a synthetic biology startup based in Copenhagen, raised EUR 4.35 million (~USD 4.6 million) to fast-track the development and market launch of the company's sustainable dyes product line. RAIKU, an Estonian startup specializing in eco-friendly packaging materials, secured EUR 8.8 million (~USD 9.6 million) in funding to improve its chemical-free, compostable packaging technology, establish its inaugural factory, and expand its operations worldwide. 

• The recycled e-waste materials segment has consistently attracted larger funding rounds compared to other forms of recycled materials and bio-based materials. Though the average e-waste funding round size in this quarter was one of the lowest in the last three years, it was still higher than other forms of circular materials.

• Seed funding was the most common (~39% of total rounds), also dominating in dollar terms (~59% of total funds raised). Other rounds, which included debt and equity financing, closely followed at ~35% of total rounds. There was a notable decline in growth-stage funding this quarter, accounting for ~4% of total rounds, compared to 11% in the previous quarter, and also being slightly below the 10-quarter average of ~5%.

Product updates: New circular material launches and advancements in battery recycling tech

Analyst QuickTake: The quarter witnessed various product launches utilizing bio-based and recycled materials in diverse sectors, including packaging, apparel, and footwear. The active participation of established players, such as Gucci and Holcim, suggests increased adoption of these materials. In battery recycling, although overall activity levels were subdued, updates on promising new technologies emerged, such as RecycLiCo's lithium-ion technology and Redwood’s energy storage system recycling project. With the revelation of extensive plans to build commercial-scale factories throughout 2023, battery recycling remains one of the hotspots for 2024.

• We observed 18 product updates across nine disruptors during Q4 (vs. 17 updates in Q3 2023). Most product launches focused on recycled plastic (six updates), recycled electronic waste (four updates), and bio-based industrial (three updates). 

• Notable innovations in bioplastics and recycled materials
  • Several startups and incumbents have announced the development of new recycled and bio-based materials, such as bioplastics and recycled textiles. Such product launches and initiatives from these entities and established players signal the increasing adoption of circular materials.
  • PolyCycle Innovation, a plastics recycling company, introduced a novel resin called “PolyCycle” made from recycled plastics to be used in food and beverage closures. The company's post-consumer resin (PCR) received verification from the GreenCircle-certified organization, confirming that it contains 100% post-consumer recycled plastics.
  • In the bio-based space, Spinnova, a Finnish sustainable textile fiber producer, launched its first blended denim fabric made with Spinnova fiber at the Kingpins denim trade show in Amsterdam on October 18–19, 2023.
  • Incumbents are also increasingly adopting bio-based and recycled materials in their products across various applications. Gucci launched a vegan version of its Horsebit 1955 bag made from plant-based leather material called “Demetra,” which was developed in-house by Gucci. The material is made using sustainable inputs, such as responsibly sourced viscose, wood pulp, and non-GMO corn-based plastic.
  • Puma announced that it intends to scale up its textile recycling technology, Re:Fibre, by gradually replacing polyester made from PET bottles with that made from old garments and factory waste. Puma intends to ultimately have 100% of its polyester originating from textile waste.
  • Holcim showcased Phoenix, a 3D-printed concrete bridge made with 10 tons of recycled materials, at its Invention Hub in Europe. Holcim claims the technology is the first of its kind and displays how low-carbon, circular technologies can be utilized in critical infrastructure applications.

• Development of new battery recycling technologies 
  • Updates on battery recycling were relatively subdued this quarter compared to previous periods. However, several companies announced the development of new technologies with potential applications in battery recycling. 
  • Redwood Materials, a battery recycler, announced its first energy storage system recycling project: Dismantling and recycling a 4 MWh stationary storage substation in Kauai, Hawaii, as part of a large-scale solar panel installation.
  • RecycLiCo Battery Materials, a Canadian battery recycler, was granted two patents in Australia and Japan for its lithium-ion battery recycling process. This increases RecycLiCo's patent portfolio to 10 granted patents, with six additional applications underway. The new patents are the second verification of RecycLiCo's technology in both regions. 
  • Incumbents are also marking their presence in the battery recycling space, with players like SK Ecoplant formulating four battery-recycling technologies. These processes increase the solvent extraction speed for used batteries to separate and recover nickel and cobalt, as well as fully discharge batteries rapidly ahead of disassembly. Additionally, SK Ecoplant partnered with Sungkyunkwan University in Seoul to develop technology that halves the amount of water used in the metal recovery process by improving the performance of solvent extraction.

• Launch of bio-based manufacturing facilities  
  • Mango Materials, a California-based bio-manufacturing company, opened its Launch Facility at the Easterly Wastewater Treatment Plant in Vacaville, California. The facility marks the first phase of a plan to establish a bio-manufacturing hub in partnership with the city. 
  • On the same front, DMC, a bio-based chemical manufacturer, announced a new 880 sq m (9,500 sq ft) metabolic engineering and fermentation facility in North Carolina. The facility will use fermentation technology and will develop new sustainable chemical solutions by introducing additional capabilities and streamlining existing workflows.

Partnerships: Collaborations for recycling textiles and advancing battery recycling processes

Analyst QuickTake: This quarter, a majority of disruptors and incumbents collaborated to develop products using recycled textile materials for diverse applications, from clothing to home decor. Established players secured supply agreements for recycled textile fiber, demonstrating the feasibility of recycling textile waste for branded products. In battery recycling, notable partnerships primarily focused on technology development, with automotive manufacturers joining to integrate these materials into the supply chain. Additionally, bio-based material startups partnered with industry players to innovate new products, particularly focusing on bio-based dyes and packaging materials.

Circular materials (Q4 2023): Disruptor and incumbent partnerships

Source: SPEEDA Edge

• We observed 46 circular materials partnerships across 36 disruptors in Q4 2023 (+55.0% YoY), with a total of 183 partnerships during full year 2023 (+66.4% YoY). 

• Almost 30% of the partnerships this quarter focused on textile recycling, while recycled e-waste—which typically dominates—had a lower activity rate at ~26% (compared to ~39% in Q3 2023 and ~33% in Q4 2022). This was followed by bio-based industrials (~13% of all partnerships), recycled other materials (~13%), and recycled plastic (~7%).

• Collaborations to develop and integrate recycled textile materials 
  • Several startups successfully secured supply agreements for their recycled textile materials. Additionally, some players collaborated in developing products utilizing these recycled textiles across various applications from clothing and fabrics to home decorations. 
  • Renewcell, a Swedish textile recycling startup, continued partnerships this quarter, too. It secured a partnership with Inditex, a textile conglomerate company, to supply 2,000 tons of Renewcell's Circulose fiber. Renewcell also partnered with Arvind, an Indian textile manufacturer, to manufacture denim from upcycled cotton textiles and viscose to improve circularity in the Indian garment industry. Arvind will also use Renewcell's Circulose Supplier Network. 
  • Ambercycle is another textile waste recycler, which partnered with Inditex, a textile conglomerate company, to supply its textile-to-textile recycled polyester material, “cycora.” During the quarter, Ambercycle also partnered with GANNI, a Danish affordable luxury brand, to launch a collection that is based on textile-to-textile recycling. The move is part of GANNI's “Fabrics of the Future” initiative, also securing a USD 5 million investment to construct a commercial-scale facility and the expansion of cycora.
  • Evrnu, a Seattle-based textile recycler, partnered with Bestseller, a Danish textile manufacturer, to release a recycled textile line in the latter's Object brand, made with Evrun’s Nucycl fiber from cotton-rich textile waste. 
  • SaXcell, a Netherlands-based company producing regenerated textile fiber from recycled cotton waste, partnered with Birla Cellulose, a provider of regenerated cellulosic artificial viscose fibers, to expand the production of recycled man-made cellulosic fibers. 
  • Infinited Fiber Company (IFC), a Finnish waste recycler that creates super fibers known as “Infinna,” partnered with Lindex, a fashion retailer, to supply its Infinna fiber made from post-consumer textile materials. IFC aims to fulfill this agreement once its commercial-scale factory becomes operational in 2026. 
  • Recover, a global recycled cotton fiber manufacturer, partnered with US decorative textiles producer Valdese Weavers to drive sustainable material use in the home textile sector. Valdese Weavers will utilize Recover's verified recycled fiber in its decorative fabrics.

• Joint development of battery recycling technology
  • Emerging battery recycling startups that have been operational for two years or less are increasingly forming partnerships with established automotive manufacturers to concentrate on the development of battery recycling processes. 
  • Cyclib, a battery recycling startup that was founded in 2022, partnered with e.GO, a German producer of urban BEVs, to refine battery recycling processes. The partnership aims to develop a comprehensive approach to the entire lifecycle of recycled Li-ion batteries.
  • Tozero, also a battery recycling startup formed in 2022, partnered with Huayou Recycling, the recycling division of Li-ion EV battery maker Huayou Cobalt, to manage battery waste in Europe. Tozero will receive end-of-life EV batteries and battery production scrap from Huayou, which it will process at its Munich recycling plant to recover essential raw materials for new batteries. Tozero plans to operate the largest battery recycling facility in Europe by 2027.
  • Li-Cycle, a Canadian lithium-ion battery manufacturer and recycler, collaborated with VinFast, a Vietnamese EV company, and VinES Energy Solutions, an EV battery producer, to discover sustainable recycling solutions for EV batteries. 
  • Altilium, a British e-waste recycler, teamed up with Chile's Universidad Católica del Norte (UCN) to advance the development of EV battery recycling technologies. The company also signed a Memorandum of Understanding (MOU) with ABB, a leader in electrification and automation, to reinforce battery-recycling plants in Europe with automation, electrification, and digital solutions. 

• Integrating recycled battery materials into supply chains
  • Battery recycling startups, established automotive manufacturers, and material suppliers also collaborated to advance the integration of recycled materials into battery supply chains.
  • Electra, a battery recycler, partnered with Canadian mineral exploration company Rock Tech Lithium to recycle lithium from used batteries. Electra will supply lithium recovered from its battery recycling operations in Ontario to Rock Tech for further refinement. Processing the recycled lithium is anticipated to start in 2026.
  • Redwood Materials, a Nevada-based e-waste recycler, partnered with Panasonic to recycle critical minerals from used EV batteries. Through the partnership, Panasonic aims to obtain battery materials from the resource extraction stage to the production stage.
  • Stellantis, a Netherland-based multinational automotive manufacturer, signed an MOU to form a joint venture (JV) with Orano, a French nuclear fuels firm. The JV expects to recycle used EV batteries and scrap materials from Stellantis' gigafactories in Europe and North America using Orano's technology. The partners will start recycling operations in 2026.
  • American Battery Technology Company (ABTC), a Nasdaq-listed integrated battery materials supplier, partnered with Pyxera Global and Terra's “Done with It” pilot program as the lithium-ion battery recycler to test the viability of recovering used electronics. The partnership intends to develop circular business models for the logistics industry and support a domestic battery metals supply chain for electric vehicles.
  • Meanwhile, incumbents are building recycling facilities to expand capacity. EcoPro, a South Korean battery parts and materials developer, South Korean construction company SK Ecoplant and its e-waste recycling subsidiary, TES, announced a collaboration to establish an EV battery-recycling facility in Hungary. The facility is slated for operation by 2025 and will extract raw materials such as lithium, cobalt, and nickel from battery waste.

• Joint development to recycle plastic and solar panels
  • Collaborations span across a range of industries, from fashion to energy, as companies team up to incorporate recycled materials into their products and advance recycling technologies. 
  • Protein Evolution, a plastic recycling company, partnered with Stella McCartney to unveil a parka jacket. The jacket utilizes polyester made from biologically recycled plastic waste, showcasing Protein Evolution’s “Biopure” technology. The company also partnered with the US Department of Energy's (US DOE) Agile BioFoundry, a consortium of laboratories, for two projects using enzymes to break down plastic and textile waste. The first project will utilize AI to design enzymes, while the second project will focus on scaling up the manufacturing process for these enzymes. 
  • Meanwhile, incumbents like OMV, an Austrian integrated oil and gas company, signed a collaboration agreement with Wood, a UK-based energy services company, to gain a commercial license for OMV's ReOil technology, which converts plastic waste into pyrolysis oil. In the future, OMV intends to collaborate with Wood to develop an industrial-scale plant with adequate capacity to recycle 200,000 tons of plastic waste per year.
  • Solarcycle, a solar recycling firm, teamed up with EDF Renewables North America, a leading renewable energy developer, to recycle damaged or unusable solar panels from various solar sites. 

• Jointly producing end products with bio-based materials
  • Disruptors are actively engaging in collaborations with industry leaders across diverse sectors to integrate their bio-based materials into a range of products, including consumer goods, accessories, and apparel. With ongoing collaboration, the availability of products made from bio-based materials is poised to increase in 2024.
  • UBQ Materials, an Israeli company that transforms household waste into a resin substitute, has expanded its partnership with Keter, a leading resin-based consumer goods company, to increase the use of UBQ's sustainable resin alternative across multiple Keter product lines. Keter will incorporate 5%–10% of UBQ's eponymous bio-based material in a new "Made with UBQ" product line.
  • Algaeing, another Israeli startup making bio-based fabrics and dyes, partnered with Indian cellulose fiber manufacturer Birla Cellulose to develop sustainable, algae-based fiber for the textile industry. This fiber is expected to eliminate the need for traditional dyeing by providing naturally occurring colors in the algae, marking Algaeing’s first international partnership, which could expand the global market for its products.
  • Huue, a California-based startup developing bio-based dyes for jeans, partnered with AGI Denim, a Pakistani denim manufacturer, to use Huue Indigo to dye denim and jeans more sustainably. Huue has been working on commercializing its bio-based dyes, which were in the product development stage until last year. Via this partnership, the company is moving toward the commercialization stage to launch commercial pilot projects and scale up production with partnered denim manufacturers. 
  • Incumbents like Veuve Clicquot, a French champagne house, and Stella McCartney have partnered to develop VEGEA, a grape-waste-based leather alternative that will be used in a line of luxury accessories. 

• Co-developing bio-based packaging materials 
  • Several players, including disruptors and incumbents, are actively focusing on clean and sustainable packaging.
  • Mi Terro, a California-based startup that produces bio-based plastic material from agricultural waste, signed a Joint Development Agreement with Lipton to develop dissolvable tea pods.
  • Xampla, a British sustainable plastic materials company, partnered with skincare brand Elemis to develop biodegradable sampling sachets using bio-film made from plant waste. This partnership follows Xampla’s launch of its consumer brand, Morro, last month. 
  • Incumbents are also collaborating to fulfill their commitment toward sustainable packaging. Novamont, an Italian biomaterials company, and Amazon partnered to pilot the usage of biodegradable and bio-based packaging bags in Italy and Spain. The bags will use raw materials derived from starch and vegetable oil and will be fully compostable and recyclable. 
  • Neste, a Finnish sustainable energy company, partnered with Japanese chemical manufacturer Mitsui Chemicals and Japanese polymer producer Prime Polymer to produce sustainable food packaging solutions for the Japanese Consumers Co-operative Union (JCCU). Neste’s renewable bio-based polymer, “Neste RE,” will be processed into renewable polypropylene by Mitsui Chemicals and Prime Polymer under the brand name, “Prasus.”

M&As: Lyodellbasell continues to expand plastic recycling business

Analyst QuickTake: We observed three key acquisitions during the quarter (vs. five in Q3 2023). These acquisitions, primarily made by incumbents, target the recycled materials space with a focus on recycled plastic. Lyondellbasell stands out with a notable acquisition streak in the plastic waste recycling space. This quarter, the company made two investments, building on its 50% stake in Stiphout Industries from the previous quarter. 

• LyondellBasell, a global chemical refining company, continued its investment in plastic recycling with a 25% stake in Cyclyx International, a collaboration between disruptor Agilyx and ExxonMobil. Additionally, LyondellBasell acquired a 50% stakein Rodepa Vastgoed, the holding company of De Paauw Sustainable Resources (DPSR), a Dutch plastic waste recycling company. This aligns with LyondellBasell's strategy to expand access to plastic waste feedstock and enhance its CirculenRecover product portfolio, complementing previous acquisitions such as the 50% stake in Stiphout Industries (in Q3 2023). 

• Reconomy, an outsourced waste management and recycling services provider, acquired UK Waste Electrical and Electronic Equipment (WEEE) and Batteries Compliance Schemes from Ecosurety, a producer responsibility compliance scheme for quality recycling practices. The acquisition would add producers and distributors to Reconomy's own compliance to track and categorize e-waste in the UK.

Regulations: New laws to boost recycling rates

Analyst QuickTake: US federal agencies are actively regulating recycling, proposing to sustain the current e-scrap recycling fee to prevent e-waste from entering landfills. This complements their earlier investments of over USD 200 million to advance battery recycling solutions, aligning with the national target of achieving a 50% recycling rate by 2030 from the current rate of ~32%. Meanwhile, the UK is also initiating efforts to enhance overall recycling rates.

• In October, California's Department of Resources Recycling and Recovery (CalRecycle) received approval from the Office of Administrative Law (OAL) for the emergency regulations proposed to maintain the current covered e-scrap recycling fee. The emergency regulations will go into effect from January 1, 2024, for two years or until revised by the department.

• During the same month, the UK government announced reforms to household and business bin collections to boost recycling rates. The new approach ensures that people can recycle the same materials at home, work, and school. Furthermore, the changes intend to reduce the complexity of recycling when local authorities collect the required recyclable waste streams. The new system uses digital waste tracking, which will record information from the point it is produced to the point it is disposed, to investigate unauthorized waste operators. 

New circular material startups added in Q4 2023

Summary of new startups added in Q4 2023

Appendix

Appendix 1: Summary of funding rounds in Q4 2023

Appendix 2: Summary of product updates in Q4 2023

Appendix 3: Summary of partnerships in Q4 2023