The cellulose insulation industry has been facing a shortage of raw materials as the supply of old newspapers, which are typically shredded to create cellulose insulation, has declined. However, there has been a rise in corrugated cardboard due to the increasing popularity of e-commerce. Each year, around 50 million tons of cardboard boxes end up in waste and recycling bins.
While cardboard seems like a viable alternative for cellulose insulation, it poses a challenge because it contains contaminants such as plastic tape, shipping labels, and metal staples. Despite this, CleanFiber, a startup that has been working on the problem for years, has found a solution.
CleanFiber has managed to produce enough insulation for approximately 20,000 single-family homes. However, CEO Jonathan Strimling knew that the company needed to expand beyond its initial factory in Buffalo, New York, to compete in the $12.5 billion U.S. insulation market dominated by a few major players.
To fund its expansion plans, CleanFiber sought capital and had been courting Spring Lane Capital, a sustainability-focused private equity firm, for over a decade. Impressed with CleanFiber’s progress and financial performance, Spring Lane Capital led a $28 million Series B funding round. The round also included a $31.5 million project financing facility. Other investors in the round were Ahlström Invest, AXA Investment Managers, Climate Innovation Capital, and Tokyu Construction/Global Brain.
This funding positions CleanFiber well for a national rollout, according to Strimling. The company’s unique process of transforming a different feedstock into a drop-in replacement for existing cellulose insulation presented a challenge during product development. However, CleanFiber ensured that the new insulation would not cost more and would perform as well or better for installers.
CleanFiber has been selling its bales at market prices while refining its production process. Although Strimling did not disclose profitability, he mentioned that the company has significantly reduced the marginal cost of production. With its first-of-its-kind plant operational, CleanFiber has overcome a major hurdle that often hinders startups trying to commercialize new technology.
While building additional factories will still pose challenges, Strimling is optimistic, pointing out that stricter building codes now require more insulation in new homes than ever before. This means there is a growing demand for insulation, and CleanFiber does not necessarily need established players to fail in order to succeed.
