This article was produced by Earth | Food | Life, a project of the Independent Media Institute. Claudia Erixon, communications and development assistant at Material Innovation Initiative, provided research. Elaine Siu is an adviser at Material Innovation Initiative (MII), where she previously served as the chief innovation officer. She has also served as the managing director of Good Food Institute APAC and is the author of the book Your Next 40,000 Hours. Siu advises startups, corporations, and investors on strategies and industry insights, particularly on harnessing the power of technology and market forces to shift the world away from industrial animal agriculture. She is a contributor to the Observatory.
Next-generation (“next-gen”) materials are innovative alternatives to traditional petrochemical and animal-based materials like leather, silk, down, fur, wool, and exotic skins. They aim to replace animal-based materials and significantly reduce environmental impacts and animal welfare concerns.
Next-gen materials replicate the performance of their animal-based counterparts by using biomimicry approaches while being more sustainable.
The six main input categories of next-gen materials
The rise of innovation companies has led to several types of next-gen material being available in the market. These high-performance materials tend to vary from one another. For instance, mushroom leather produced by one company will differ from others; each innovator follows their own specialized approach.
To simplify the diverse landscape of formulation and processing approaches for next-gen materials, MII categorizes next-gen innovation into six “main input” categories:
- Plant-derived: Next-gen materials derived from plant matter, including fungi (fruiting body) and algae inputs.
- Mycelium: Materials utilizing the root-like structure of fungal species called mycelium. It is distinguished from the plant-derived category by its rich activity in next-gen innovation.
- Cultivated animal cells: Materials grown from animal cell constructs in laboratory tissue engineering approaches.
- Microbe-derived: Materials produced through cellular engineering approaches like cell culture or fermentation processes to create proteins and biopolymers.
- Recycled material: Materials utilizing recycled plastic or textile feedstock as the primary input.
- Blend: Materials made by combining components not well captured by any of the above categories.
State of the industry
The fourth State of the Industry report by the Material Innovation Initiative (MII), where I serve as an adviser, highlights the importance of next-gen materials in transitioning away from unsustainable practices in material production.
The report provides insights into the progress made by the next-gen industry in 2023. It further details the key stakeholders and the challenges posed by the industry while spotlighting the “rising stars.”
Companies in the next-gen materials industry
As of the start of 2024, there are 144 “innovators,” or companies developing next-gen materials. The majority (92 companies) worked on biomimicry of animal leather and exotic skins. Twenty-four worked on biomimicry of silk, 16 on wool, 14 on down, and eight on fur.
Some companies work on more than one material. The U.S. had the most innovators at 44; other countries had between one and 13, according to the MII report. The vast majority of innovators’ main focus is next-gen materials. Also, some larger corporations have a next-gen material product as part of their diverse offerings. For example, Volvo has developed its next-gen leather, Nordico (with a blend input). The company aims to use this material in 25 percent of its new cars by 2025, comprising “recycled and bio-based content.”
More than half of all innovators used a plant-derived source as their primary input for their material, according to the MII report. The remaining half was divided between microbe-derived, mycelium, recycled materials, and blends, with cultivated animal cells forming the smallest input category at around 4 percent.
The feedstock, inputs, and technologies used to create a material affect not only the look, feel, and properties of the finished product but also—crucially in this industry of innovation—the time and cost it will take to reach commercial manufacturing scale.
Many innovators chose to stay in stealth mode until they were ready to launch. No new companies were created in 2023, but 29 that existed previously in stealth mode publicly disclosed their activities.
Due to their high market value, silk, fur, and exotic skins may appeal to early-stage innovators. Unlike commodity markets, these high-value product targets could lead to faster price parity. For instance, while polyester yarn costs around $1/kg, raw silk averages around $55/kg. These underserved product categories lack competition, making them attractive to innovators and investors seeking entry into the next-gen materials industry.
Investment in next-gen materials
Investors play an essential role in the next-generation materials industry by funding research, development, and growth.
In 2021, there was an unprecedented spike in capital invested in next-gen materials companies, followed by a sharp decrease in 2022. An upward momentum returned in 2023, with just more than $500 million raised in 36 publicly disclosed deals.
Despite a global decline in venture capital funding and deal count in 2023, funding for next-gen materials companies increased. The industry experienced a 10 percent rise in investment funding, indicating higher investments than the general market. This is a positive sign for such a nascent industry.
The total investment figure of more than $500 million excludes significant investments made internally by companies in developing next-gen materials. Such internal investments are important as they reflect the expertise and resources of the companies. Gucciʼs capital investment in their Demetra next-gen leather exemplifies this trend, leveraging the companyʼs reputation, expertise in high-quality leather, and available resources to drive innovation in the next-gen materials industry.
Industry brands’ involvement in the next-gen materials market
Industry brands are established companies in fashion, automotive, and home goods that are the biggest buyers and users of materials. Although consumer preference has driven brands in these industries toward more sustainable practices over the years, material innovators seldom have a direct relationship with consumers. The success of transitioning from animal-based materials to next-gen materials largely depends on the ability of innovators and industry brands to work together.
Industry brands can play vital roles in the next-gen material innovation ecosystem, including funding internal and external initiatives, switching to next-gen materials as their raw materials, and collaborating with startups to create new products. These actions help accelerate commercialization and scale-up production of next-gen materials to replace conventional products.
Top-tier industry brands like Nike, IKEA, and Volvo are driving demand for next-gen materials due to pressure from consumers and regulations to improve sustainability and reduce the environmental impact of their products. Regulations such as the EUʼs corporate sustainability due diligence directive, Franceʼs AGEC law, and the New York Fashion Act replace voluntary supervisory systems with mandatory targets and consequences for non-compliance. This regulatory landscape and consumer sentiment are driving the shift toward next-gen materials in various industries.
Next-gen materials and the ‘hype cycle’ of innovation
The Gartner Hype Cycle is a graphical representation of the stages in the life cycle of a technology. It depicts the typical progression of innovation from “overenthusiasm” toward a period of “disillusionment” and then to “eventual productivity.”
High expectations and low maturity lead to the “Trough of Disillusionment,” where interest wanes as experiments and implementations fail to deliver. However, investments may continue if the product is improved to satisfy early adopters.
The Hype Cycle consists of five key phases that describe the life cycle of new technologies and the challenges and opportunities they may encounter along the way:
- Innovation Trigger: Potential technological breakthroughs that spark initial interest but often have no usable products and unproven commercial viability.
- Peak of Inflated Expectations: This is characterized by early success stories, which generate hype, but failures also occur.
- Trough of Disillusionment: This period is characterized by declining interest as experiments fail, leading to shakeouts or failures among technology producers.
- Slope of Enlightenment: This occurs when there is an understanding of the technology’s increasing benefits, with second- and third-generation products emerging.
- Plateau of Productivity: This is a function of mainstream adoption, which begins with clearly defined criteria for assessing provider viability and broader market applicability.
The innovation trigger for next-gen materials began in 2018 when many startups received their first round of venture capital funding. The peak of inflated expectations began around 2020, with next-gen materials becoming a trend in business, industry, and fashion publications. Companies capitalized on this by using buzzwords like “next-gen materials” and “apple/cactus/mushroom leather.” Investment spiked in 2021, reaching $980 million, a significant increase from previous years.
After 2022, the industry has undoubtedly been in the trough of disillusionment signaled by a sharp decline in investment, exacerbated by the pandemic’s unprecedented disruption of various facets of business, from supply chains to funding availability. Early success stories were repeated, and the market soon became impatient with the lack of scaled production and availability of innovative materials. There was negative press as a result, and the innovation was discredited for not living up to the early, overinflated expectations of being the “perfectly sustainable” solution to the grand challenges faced by the fashion industry.
However, despite these challenges, innovation has continued, with companies working to improve products based on feedback, addressing scaling challenges, and exploring new markets.
The length of the trough of disillusionment is one of the most variable parts of the hype cycle. And yet, the industry’s progress to the next phase may be closer than expected. At the end of 2023, there was an upward trend in investments in the next-gen materials industry. This reflects progress with the hope that next-gen materials continue to be more widely adopted by leading brands to ensure a more sustainable future.
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