Cruz Foam’s shell-based foam replacement brings in $3.4 million with DiCaprio and Kutcher – TechCrunch

Plastic foam like Styrofoam is a ubiquitous, harmful and near-immortal single-use material that’s long past its shelf life for a good and green alternative – and Cruz Foam is here to stay. This startup creates a durable yet compostable backyard packaging foam from shrimp shells produced (and discarded) by the seafood industry. It recently expanded its seed round to accommodate the likes of Leonardo DiCaprio and Ashton Kutcher, and is scaling up to meet the needs of its first major customer, Whirlpool.

I met Cruz Foam co-founder John Felts during the memorable event Accelerator at sea hosted by the Alliance for Sustainable Oceans. His pitch makes perfect sense: creating a biodegradable alternative to expanded polystyrene foam (EPS) using a material abundantly supplied by nature.

This material, chitin, makes up the shells of shrimp, crabs and other crustaceans in and out of the sea. It’s hard and flexible, like any part of a living organism, breaking down quickly and safely. Most of all, it’s produced in huge quantities by the seafood industry – it’s practically useless, so thousands of tons of shells pile up outside shrimp processing plants, most of which sent to the landfill. People are actually paying someone else to get this.

Named for the city where it started, Santa Cruz, Cruz Foam’s innovation is a patented process for this excess chitin, where the shell enters one end and the other creates a foam sheet. Lightweight, durable with many of the most desirable aspects of EPS. It can be essentially a one-to-one swap with conventional petroleum-based packaging material, molded and cut to practically any shape. (And in case you’re wondering, no, it doesn’t smell like old shrimp.)

“You combine chitin with some low starch and fiber, all of which are bioavailable,” says Felts. The company made it clear in an email that mushrooms, hemp, recycled paper and other sources also play a role. “If you throw this in your garden, it’ll be gone in less than a month.” (Or more; speeds vary depending on humidity and temperature, just like regular compost.)

A Cruz Foam block (left) after two days in moist soil; EPS is on the right (and it probably will be in a few hundred years).

Initially, the startup experimented with all kinds of formulations, finding that the foam could be tailored to meet diverse requirements in terms of shape, firmness, etc. Felts says: “We haven’t yet. find the limit to what we can do with this foam. “But it’s not just about how we can make this cheaply – it’s about a product that can fit into the ecosystem, all these existing processes and the lifetime. We don’t want to introduce material that would be another matter”.

The company continued to operate in the period after I met them with the SBIR award from NSF, with the Phase I and II awards bringing in over $2 million in undiluted money to work with.

I feared when Felts put his company back on the boat that technical innovation simply wouldn’t be enough to get them through the door in an industry as huge and as traditional as packaging. Fortunately, the team understood that they needed to find niches that could capture the company’s significant interest while keeping R&D costs down. They soon discovered that people were silently searching for something better, and that the existing green alternatives had yet to emerge.

While EPS, like many plastic products, is nearly unbeatable in terms of performance and industry inertia, the tide is turning against this category because of the widespread pollution it causes in continues to be shunned by researchers. The recent revelation that practically every animal on the planet has microplastics in its blood and organs should probably come as no surprise to anyone in ecology, but it’s one of those realities. Today’s inevitable publicity is that companies are running to invest in green alternatives to waste most of their habits and supply chain linkages. EPS is toxic both in terms of ecology and reputation, but the next best thing is triple the price; The Cruz Foam could join in with an option that’s not unduly expensive, but still as blue as it gets.

Cruz Foam R&D manager Juan Bravo looks at a strip of extruded foam.

From prototype to multi-million shipment

Whirlpool is one of those companies that has historically relied on Styrofoam and other plastic packaging products, but in recent years it’s been trying to reinvent itself with a commitment to go completely new.

Whirlpool’s fully renewable packaging with Cruz Foam legs.

“We as manufacturers of tens of millions of products each year are looking to go above and beyond to eliminate the impossible use of plastic,” said Ron Voglewede, Whirlpool Global Director of Sustainability. recycle and use once because that’s the right thing to do. Manager. “Removing Styrofoam for large, heavy equipment is difficult, and any defect in the final product results in a large loss of embedded carbon if damaged in transit. We look for innovation from everywhere, and we know sometimes the latest ideas don’t necessarily come from industry incumbents.”

Whirlpool worked with Cruz Foam to create an alternative to one of the last remaining pieces of EPS used in its equipment packaging, a set of small molded feet that help immobilize and cushion things like stoves in the boxes they are shipped to. It’s a form that Cruz Foam can easily create (unlike molded food containers – certainly possible but requires special machinery) and Whirlpool needs a million things. Suddenly, this seashell foam went from a promising experiment to a major shipping product.

Felts said it is in talks with many other companies to offer similar products – the agreements are not made public, but the major manufacturers of TVs, food and beverages, even cars and Parts are on sale. “It hasn’t stopped. We had to beat everyone,” Felts said.

Climate-focused stars log in

Despite a few false starts when writing about Cruz Foam, I’ve kept in touch with them because it feels like they’re always in the “we’re about to” phase, with huge potential to be realized soon – but COVID and other realities of no-software startups intervening (e.g. they need production space and logistics partners across the country – aren’t exactly the best times to set up that upward). But now with the maturity of this process, an industry willing to pay high prices for green alternatives, and physical orders for millions of products, the company seems poised to explode to the top. become prominent.

I’m not the only one who thinks so, as Cruz Foam has received about $5 million in capital along with $2 million in SBIR grants. The latest revision of the seed round puts it at $3.375 million, while that round at the end of 2021 is valued at $2.5 million. Round expanded to include investments by movie stars Leonardo DiCaprio and Ashton Kutcher (via SOUNDWaves); elementary math put the difference at $875K, but no further details were revealed about their stakes. Both will join as advisors.

Kutcher has been an active and engaged investor for a few years and has talk about his approach on stage at TechCrunch Disrupt. DiCaprio is newer to the VC scene but has long been involved in social and climate activism. I wasn’t able to phone one of the new celebrity investors (something about being busy), but they made statements in the press release.

DiCaprio: “Cruz Foam is taking an important step in reducing the environmental impact of the supply chain industry. The mission to eliminate single-use plastics in the ongoing fight for a cleaner and more sustainable environment makes me excited to join as an investor and advisor and I look forward to what we will see next. achieved together. ”

Kutcher: “We see great potential in Cruz Foam’s consumer packaging adoption as the industry moves away from petroleum-based products and towards new biomaterial technologies.”

Previous seed investors include Tom Chi’s At One Ventures (he also met Felts in Alaska), Sustainable Oceans Coalition, Sony Innovation Fund, and Regeneration.VC. It should be noted that DiCaprio is also an investor and advisor to Regeneration.VC but both invest independently here and his position as an advisor to Cruz Foam is also separate.

Chitin King

Cruz foam box for a piece of consumer electronics.

Cruz Foam’s ambition is to move beyond the EPS replacement and leverage the material’s versatility to become a major material innovation company, Felts told me.

In one of our conversations, I suggested that the future of the company is not simply a foam maker, as transformative as it is for most industries, but a sort of “Chitin King.” , turn the shrimp to gold.

“That got me thinking – we started with foam but in our view there’s a lot of opportunity for this material to go beyond that,” he said. “We looked at injection molding, adhesives, etc… We wanted to be a company that innovated technology around chitin applications. We want to create new technologies around new types of materials that we can deploy into industries, be it automotive, construction, consumer goods.”

There won’t be a shortage of raw materials any time soon. Even as shrimp stocks begin to deplete, companies that provide new insect-based feeds and proteins are facing the same problem.

“I have been contacted by 3, 4, 5 insect companies, we have nothing to do with these garbage bags full of dead insects,” says Felts. Not the call most people would return, but this was a special case.

Although the potential is there, one hurdle is regulation. It’s not that the government doesn’t want this type of green innovation to happen, but the regulatory structures around decomposition and collection at scale are not really prepared for it. Has yard waste, food waste, “industrial compostable” items that are safe to landfill, and dozens of other labels and management processes for all other types of waste. this each other.

As Felts said, you can throw it in your garden and it will decompose in a month or two – but not everyone has a garden, and even if they do, they may not want to decompose the chitin sheets. in there. And if the company and materials want to scale, it needs to fit into one of the waste streams that are already out there — and that’s a long negotiation process with city, state and private governments. core.

“End-of-life infrastructure, recycling, etc. are complex; It was a completely different conversation. What is needed is a lot of industry standardization in how these things are shuffled. If people see five different labels and they don’t read them, they just throw it away,” he explains. It’s not a tragedy with such amazing compostable materials, but the new green, circular economy that needs to be built from these from the start. “We just want people to understand that there are materials like Cruz Foam – some kind of label that says, compost at home in a green bin, throw it in the yard waste. It has to be simple. ”

However, that is all in the medium term for a company that is currently standing still and trying to fulfill its first large order so that it can begin to fill the needs of other companies. But Cruz Foam has a long-term plan and hopes to raise money soon, perhaps as soon as summer, to start the next phase of shrimp-to-gold alchemy.