Introduction:
Ecovative Design LLC is a biomaterials company based in Green Island, NY
Uses renewable material grown from mycelium – part of a mushroom – and non-food agricultural materials
Products have hundreds of applications
Focus has been on transforming the packaging and building materials industry
Cost and performance of EcoCradleTM – the brand name of the proprietary protective packaging material - was equivalent to competitors
Required 1/5 the energy needed to create extruded polystyrene (EPS)
Received $700,000 in cash at the PICNIC Green Challenge in 2008 and $1.4 million from the EPA’s Small Business Innovation Research grant program in 2009
Dell is a primary client; ships servers as part of its environmental initiative
Context:
Sealed Air: one of the largest distributors of packaging materials in the Western world — was looking to exclusively license, manufacture and distribute Ecovative’s packaging in North America.
Sealed Air would be the exclusive manufacturer and distributor of EcoCradleTM in North America and Europe.
Sealed Air would construct a large factory in order to scale current operation to a commercially viable size.
Ecovative would earn licensing fees and royalties or an undisclosed percentage of net sales (whichever was greater).
Question:
How to ensure the financial viability while maximizing the positive environmental handprint of the company
Alternatives:
Partnership with Sealed Air
Sealed Air would have exclusive manufacturing and distribution rights; licensing fees & royalty or percentage of net sales
Ability to scale widely
Necessary capital for Ecovative to diversify products for commercial application and consumer use
Full control of technology
Unknown environmental impact
Licensing technology to entrepreneurs
Entrepreneur could manufacture packaging material; protective packaging would be grown locally
Limited ability to scale
No large influx of capital; may not be able to meet demand from entrepreneurs
Full control of technology
Positive environmental impact
Decline the offer from Sealed Air and not pursue partnerships
Maintain all distribution, manufacturing, and creative control/rights
Healthy cash flow from an equity investment
Current operation may not be commercially viable
Full control of technology
Positive environmental impact
Proposal: Partnership with Sealed Air
Ability to scale current operation to a commercially viable size
Necessary capital for Ecovative to diversify products for commercial application and consumer use
