Fashion sustainability is facing challenges, as material companies offering better solutions struggle to secure adequate support.
On July 30, American firm Bolt Threads made a surprise announcement that it had halted the production of its mycelium-based leather alternative, Mylo, which launched in 2018. Bolt Threads has raised a total of $213 million, most recently with a Series D funding round in 2018. The company did not respond to a request for comment in time for publication.
An alternative leather made using mushrooms, Mylo had been one of the most promising innovative fashion materials to date. It’s been used by the likes of Stella McCartney, who worked with the company to test and develop Mylo starting in 2016. In 2022, her brand released the Frayme bag made from the material.
In 2020, McCartney recruited Adidas and Kering to form the Mylo Consortium, meant to help scale the material. The Mylo material was subsequently used on a trial level by both companies. Adidas tested it in its Stan Smith trainers, while Kering’s Balenciaga also used it in trial products. However, Mylo didn’t reach commercialization beyond the Frayme bag, which came with a steep price tag of $2,000.
While Bolt Threads is currently looking for a Mylo investor to take it to wider commercialization, it has paused production for the time being. According to the company, the reason for the pause is that investors have turned to other opportunities, including AI. But additional factors, listed below, likely also contributed to the company’s financial inability to continue Mylo’s production.
Meeting the three Ps: Price, performance and planet
Material innovation brands are typically at the lab stage when they get brand and manufacturer interest. Eventually producing the material at their required scale is where the challenge comes in.
Elyse Winer, partner at investment firm Material Impact and CMO of material innovation company Gen Phoenix, said, “The performance element, the sustainability or planet considerations, and price parity are really meaningful metrics that a company has to hit. Startups often struggle with hitting those requirements, and so may [only] develop a lab-scale or limited run of production. That [will suffice], from a marketing perspective, but until a brand can meet the three requirements, it’s just not going to be able to make it into the mainstream.”
Gen Phoenix worked with Coach on the recent launch of its sustainable sub-brand, Coachtopia. In addition, it’s teamed with Doc Martens and Jaguar to scale the brands’ alternative leather material production. It started by servicing the aviation, rail and bus industries, earning a strong reputation for producing durable recycled leather over the past 15 years.
“At the moment, most leather sells in this $2-$5 per square foot range,” said Luke Haverhals, founder of material innovation company Natural Fiber Welding, which has produced plastic-free Mirum leather for Allbirds and Ralph Lauren. An alternative leather not offering brands better margins is “a tough sell to CEOs,” he said.
Creating the right agreements
In recent years, offtake agreements have become standard between startups working with brands and manufacturers. Carlo Centoze, CEO of textile innovation and IP company HeiQ, described offtakes as a brand making a deal with a value chain partner that involves agreeing on the price, quality and quantity of a material that it will purchase over the next five years.
“The offtake agreement is a bankable agreement. A startup can take this agreement and go to the bank and get a credit on it, and then deliver on its promises,” said Centoze. Others take it a different way – Hugo Boss CEO Daniel Grieder directly invested in HeiQ’s polyester-replacement cellulose yarn when it was at its lab stage in 2022, and the offtake came at a later stage.
And, through the investment company Collab Fund, Allbirds and Stella McCartney have all taken risks by investing in Natural Fiber Welding through a part-ownership model. Ralph Lauren invested in the company directly.
Offtakes protect the brand, while upfront investments provide more stability for the startup. “Hard offtake agreements don’t exist in the fashion industry, because it’s always conditional on if the performance, the cost and the scale meet [set] criteria, and only then can brands do the transaction,” said Haverhals.
This could have hurt Mylo’s success. “You can sign the paperwork very early in the [development] process, but then it’s going to be very conditional,” said Haverhals. “There’s a cat-and-mouse game that everybody is taking part in, when it comes to underwriting a business. That includes brands, startups and investors. It’s a complicated mix of trying to specify things on paper that take into account risk-taking, and letting time play out.”
For its part, Gen Phoenix has established 10-year plans with its partner brands, versus the usual five. “This isn’t the traditional boilerplate contractual agreement between material suppliers and large brands,” said Winer. “A startup can’t be penalized for bumps along the way; that could put them out of business. Instead, the 10-year journey is about collaborating together. It says, ‘Let’s think about the spirit of this relationship and then co-develop a contract that honors that with language that protects both partners and encourages managed risk-taking.’”
Managing risk in a tough economy
Ultimately, the cost of not investing in new technology will likely be greater than the pain points that brands investing in material innovation are currently experiencing. “Working globally, we’ve found that European brands are much quicker and understand that increased sustainability will soon be required,” said Tricia Carey, chief commercial officer at Renewcell. Renewcell is one of the largest textile-to-textile material innovators, working with brands like H&M. “U.S. brands are still mostly trying to understand what material innovation really means for them.”
“The issues in the near future will be around access to sustainable materials and the penalties if you do not comply. So it’s actually going to cost more in the long run if you don’t innovate and change, especially when it comes to extended product responsibility,” said Carey, referring to the E.U. regulations set to affect brands selling in Europe.
“What excites us as investors are technologies and materials that can move the sustainability needle today,” said Winer. “Our belief is that the riskiest option for brands is to do nothing or to do something too slowly. Senior leadership typically gets this. True category leaders’ organizations will understand that this new environment, this climate crisis, demands more risk.”
It’s the brands that take risks that are going to be rewarded, if they can survive the macroeconomic environment. For its part, Coach sold out of its Coachtopia products twice within two days of launching, showing the potential of scalable material innovations.
