For decades, building materials companies have been shredding old newspapers to make cellulose insulation. But as newspapers declined, the cellulose insulation industry found itself in a bind, chasing dwindling supplies of raw materials.
As old newsprint becomes harder to find, another paper-based product is on the rise: corrugated cardboard. People have increasingly turned to e-commerce and the volume of boxes has steadily increased. Every year, up to 50 million tons of the material ends up in garbage and recycling bins.
Cardboard seems like a perfect paper-based solution to the insulation industry’s scarce supply, but there’s a problem: corrugated boxes are riddled with contaminants like plastic tape, shipping labels and even metal staples. Converting it into insulation is a far greater challenge than newspaper ever was. But one startup, CleanFiber, anticipated the change and has been working on the problem for years.
To date, CleanFiber has been able to produce enough insulation for around 20,000 single-family homes. But CEO Jonathan Strimling knew that if the company was going to become more than just an afterthought, it would have to expand beyond its original factory in Buffalo, New York. According to Grand View Research, the U.S. insulation market is dominated by a handful of large players and is worth $12.5 billion.
Strimling also knew that he and his team would need more capital to expand. Most recently, they raised $10 million in Series A financing in 2022 with a creative mix of equity and debt to keep the Buffalo facility running at full speed. However, a nationwide expansion would require a much larger war chest.
Luckily, the company had been courting Spring Lane Capital, a sustainability-focused private equity firm, for over a decade. The company had been watching CleanFiber’s progress and, happy with the numbers the startup was posting, decided to lead a $28 million Series B, which also included a $31.5 million project financing facility included, TechCrunch has learned 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 for nationwide rollout,” Stripling told TechCrunch.
One of the challenges the company faced in developing its product was using an entirely new process to convert a different source material into a replacement for existing cellulose insulation. It couldn’t cost more and it had to perform as well or better for the installers who deal with it every day.
CleanFiber sells its bales at market prices while refining its production process. Strimling didn’t disclose whether the company is already making the product profitably, but said CleanFiber “has been able to reduce the marginal cost of production by a very, very significant curve,” Strimling said.
By building and operating a unique facility, CleanFiber has managed to navigate one of the most treacherous parts of the Valley of Death, where startups often attempt to commercialize a new technology. Building new additional factories will not be child’s play, but should become easier with each additional factory. Strimling also points out that stricter building regulations mean new homes need more insulation than ever before. In other words, CleanFiber doesn’t need established players to lose in order to win.