Mushrooms Instead of Styrofoam? There's a Startup for That

Editor's note: Innovative entrepreneurs are just about everywhere in the United States. And this year, the 40 weekly newspapers that are part of Portfolio.com's parent American City Business Journals chronicled some of the most creative business ideas around. Here's an excerpt from one, originally published November 4 in The Business Review of Albany, New York.

Ecovative Design’s green packaging has edged its way into a giant computer company, the U.S. auto industry, and the country’s biggest office-furniture supplier. Even the National Oceanic and Atmospheric Administration is deploying the company’s unique technology in its weather operations.

Not a bad résumé for a four-year-old company rooted in mushroom spores and wood chips.

The Green Island, New York, startup has generated a lot of buzz since its founding in 2007, when Eben Bayer and Gavin McIntyre, then both 22, started the company while finishing their master’s degrees at Rensselaer Polytechnic Institute in Troy, New York.

In the beginning, the startup eked by with two $2,500 stipends—living expenses provided by the founders’ alma mater—$3,500 from a business competition and a three other small prizes, all under $15,000.

“We had no money. We couldn’t even afford rent,” Bayer, now the company’s chief executive, said. The latter dilemma was solved when Rensselaer gave Ecovative free access to 400 square feet of space in its incubator during the company’s first year in business.

Today, Ecovative is expanding almost as quickly as the fungi it grows for its packaging and consumer products. In four years, the biomaterials company has accumulated more than $4.5 million in grants and prizes, secured a multimillion-dollar private investment, increased staff to 40, and outgrown the 10,000 square feet it currently occupies. It’s also attracting such big-name customers as Dell and Steelcase, the country’s biggest office-furniture supplier.

Revenue for 2011 should come in at $1 million. And 2012 looks even brighter for Ecovative, its founders, and the company’s unique mushroom technology. That’s when the startup will move into space that is 10 times larger than what it occupies today, ramp up manufacturing, and hire up to 10 more employees.

Bayer, from a farming family in Vermont, and McIntyre, a Long Islander and “happy hybrid” of a biologist and mechanical engineer, grew the first prototypes in their kitchens and bedrooms before moving to Rensselaer’s incubator. They outgrew that space quickly, and in 2009 moved into 10,000 square feet in an industrial park.

Their patent-pending process works this way: Mushroom roots “feed” on oat hulls, cotton burrs, or other unusable, regional vegetative waste. The resulting material is then molded and baked into forms for lightweight packaging material, insulation, and other consumer goods.

Earlier this year, Ecovative received a multimillion-dollar investment from Rensselaer, 3M, and the Dutch-based DOEN Foundation, a nonprofit that provides grants to promote eco-friendly ventures. The money will be used to prepare Ecovative’s new, soon-to-be-announced location and add staff.

DOEN’s share of the funding was $1.5 million. It was the second investment in Ecovative from the organization, which in 2008 awarded the company $700,000.

Jeffrey Prins, program manager for DOEN, named three things that set Ecovative apart from other startups: its dedicated team of “ambitious young people;” a product that is environmentally friendly, practical, and cost effective; and its growing base of commercial customers.

“It’s great to see this company as a company really concerned about the environment and deeply involved in innovation,” said Prins.

Ecovative secured its first commercial customer in 2010, Michigan-based office supplier Steelcase Inc. Computer giant Dell Inc. followed in early 2011, and several car manufacturers are testing the materials in their automobile parts. Discussions are underway with at least one other electronics company.

In addition, the National Oceanic and Atmospheric Administration plans to protect its weather detection systems with Ecovative’s EcoCradle packaging product. The sensitive systems will be encased in Ecovative’s material in the form of buoys then dropped into the ocean, where they will biodegrade over five months.

The fledgling tech company has also enjoyed its share of TV celebrity. In a 2009 episode of the popular TV series, CSI: NY, Ecovative’s Greensulate insulation became a clue in a serial-murder case in which a character wonders: “How did the cutting-edge insulation get on our vic?” It’s also appeared on the Science Channel’s Invention Nation.

Going forward, the pair sees countless opportunities for their invention. For example, Rwanda in eastern Africa is considering an all-out ban on plastic bags.

“We’re investigating if there’s potential for our mushroom technology to replace Styrofoam completely in that nation, and in others like them,” McIntyre said.

To read the full story about Ecovative, click here. And to subscribe to the The Business Review, click here.

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Pam Allen writes for The Business Review, of Albany.