What do AltM Materials, BatX Energies, Zero Cow Factory, Metastable Materials, and Agri Leaf have in common? Besides sounding like characters from a sci-fi movie, they are all working to replace everyday materials such as plastics, batteries, and even milk with low-carbon alternatives. And they have all managed to raise venture capital. Growing demand for sustainability from both consumers and companies, along with the need for energy independence, has got investors excited about these materials. The key question now is whether these companies can grow quickly to deliver venture scale returns.
What Are Low Carbon Materials?
Low carbon materials are greener substitutes for conventional materials, which are usually fossil fuel based. These include recycled plastics, coconut husk-based products, and bagasse (sugarcane waste) as fuel. Such materials have existed for decades but were once seen as boring manufacturing businesses run by small and medium enterprises.
Today, the old wine has a new bottle. Rising awareness about cutting greenhouse gas emissions has supercharged demand. India’s reliance on imported resources such as lithium-ion for batteries has created urgency to extract more value from existing materials including used batteries and electronic waste. A third category is nanomaterials, which are barely a decade old and improve the performance of materials like cathodes, cement, medical devices, and textiles.
Broadly, low carbon material companies fall into three buckets
Why Is Venture Capital Pouring into Low Carbon Materials?
After COVID-19, several venture capital funds, both domestic and global, raised significant capital to invest in climate tech. Much of this capital is chasing a limited set of opportunities, mostly in electric mobility.
Low carbon materials present an attractive opportunity. Most commodity markets are worth hundreds of billions of dollars, so even a small shift toward alternative materials could create a massive opportunity. India has abundant underutilized biobased resources, low labour costs, and rising consumer awareness around sustainability. A new wave of founders, many from top research institutes, is now building world-class products for both domestic and global markets.
Funding for alternative materials has grown rapidly. According to Biowave, a report by Omnivore, funding for these startups in India rose from 3 million dollars in 2022 to 34 million in 2023, and then to 95 million in 2024. As per Pardeep V, partner at Now Venture Studio which runs an accelerator program for low carbon materials startups, the market opportunity is massive because these materials are ubiquitous in daily life. There are also many successful companies internationally including Evocative, which makes mycelium-based packaging, and Carbon Cure, which produces useful materials from captured carbon.
Will Early-Stage Investors See Returns?
For investors to see returns, these startups need to go mainstream and raise multiple rounds of funding. But the path is not easy.
Challenges of Selling to Corporate Customers
Most alternative material startups sell to other businesses. According to Gayatri Keskar, a materials science expert who advises brands on partnering with startups, working with large corporations presents three key challenges.
Sustainability is defined differently by each company. A new plant-based material may not be compatible with existing manufacturing systems. For example, refillable plastic might seem more sustainable and practical than switching entirely to bioplastics. The new materials must function within existing systems. Hemp yarn should work with cotton-weaving machines. Bamboo granules should run on standard plastic molding machines. Bio-based silica must integrate into tyre production processes. These alternatives should match or beat the cost of traditional materials unless they clearly add more value.
Some sectors like biofuels have shown promise. Biofuels such as agri-based pellets, biogas, and ethanol now offer performance similar to fossil fuels. Hemp and recycled battery materials also have potential, but it is still early days.
Availability of Capital Throughout the Company Lifecycle
Low carbon materials startups generally fall into two types. The first are trade-oriented models which act as intermediaries by converting agricultural or industrial waste into usable
products like fuels and consumer goods. These resemble platform or aggregator businesses. Many biofuels companies including GPS Renewables which raised Series B funding and Shubhshree Biofuels which went public have started scaling up.
The second type are deep-science startups. These go from lab research to pilot plants and eventually full-scale factories. While early-stage capital is often available for R&D, there is a significant funding gap at the first commercial plant stage. Startups at this point typically need a few million dollars but lack confirmed orders as clients want to see the plant first. VCs also find it difficult to plug this gap as they are unsure whether these businesses can scale via contract manufacturing or franchises.
What Does the Global Experience Tell Us?
Globally, several low carbon materials startups have raised multiple rounds and seen valuations grow. Unicorns include Loop Industries which breaks down plastic into base chemicals, Redwood Materials which focuses on lithium-ion recycling, and Spiber which develops biobased fabrics. While most of these companies are running pilot scale plants, some like Redwood Materials and MycoWorks have started generating early revenues.
But not all have succeeded. In March 2025, Danimer Scientific (plant-based plastics) and Northolt (battery materials) shut down. LanzaTech which turns industrial gases into products saw its stock fall by nearly 90 percent over the past year due to execution delays.
Final Thoughts
Low carbon materials represent a massive opportunity. But VCs may need to adjust expectations. These businesses take longer to build and face big execution challenges. Most remain in early stages and are often valued more on founders’ pedigrees than proven traction. Ultimately, what matters is the team’s ability to commercialize their invention, securing corporate orders and raising non-dilutive capital like grants and debt.
Krishnan is founder of FineTrain; Ramachandran is founder of Agribusiness Matters
Published on May 9, 2025