LOOPED IN with Carl Warkentin

The Future of Textile Recycling with EEDEN Co-Founder & CEO Steffen Gerlach

• Season 1 • Episode 4

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Join us in this insightful episode as we engage with Steffen, the dynamic co-founder of Eeden, a pioneering startup in the textile recycling sphere. In this episode, we delve deep into how Eeden leverages innovative recycling technologies to reclaim the two most common materials in textiles: cotton and polyester. 

Steffen shares his perspectives on the current state of the textile recycling market, unpacking the implications of rising regulatory pressures, investor sentiments, and macroeconomic trends. He contemplates the relationship between supply, demand, and pricing dynamics, stressing the pivotal role regulations play in shaping investor confidence in sustainable solutions. Throughout our conversation, we explore various recycling methods, showcasing the innovations that allow companies like Eeden to effectively manage mixed-fiber waste and create new textile solutions.

As we navigate through the intricacies of recycling technology, Steffen emphasizes the necessity for a holistic approach to sustainability. Effective recycling cannot be just about recycling alone; it requires addressing the entire textile lifecycle to ensure meaningful environmental improvement. We conclude with Steffen's vision for the future of textile recycling, where market acceptance, regulatory support, and technological advancements come together to drive the industry towards a sustainable, circular future. Tune in to learn more about how we can collectively revolutionize the textile landscape for a brighter, greener tomorrow!

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Carl:

Today I'm talking to Steffen, co-founder and CEO of textile recycling startup Eden from Germany. Steffen, we know each other now for about two years and have been part of some of the events I've been hosting and pilot projects within the Circular Republic initiative, and I really love your holistic approach and understanding of the textile industry, and I also get a lot of the same feedback from investors and industry players, so I'm really happy to have you here today.

Steffen:

Yeah, hi, great being here with you in that setup today.

Carl:

Yeah, really, really cool, after all our conversations, to record one of them. But maybe you know, let's start from the beginning, and you started the project Eden. What path led you to become founder of a textile recycling company?

Steffen:

Well, actually my involvement started with an old friendship out of school time. So my friend early school friend was actually studying biology and then textile technology, textile management, in Mönchengladbach in Western Germany and I was studying business administration in Hamburg and was doing several different jobs and roles and then he approached me. We talked about founding a company from when we were young, basically, but never had the idea or whatever we wanted to do. And then, out of his studying, he was doing research and development on chemical recycling technologies for textile waste. And then, over the course of that initiation of the project, I would say, he approached me and asked me whether I want to be his business co-founder. And yeah, that's how I got involved at OD.

Carl:

Wow. So how long are you with the project already?

Steffen:

um, we always say, well, 2019, 2018, 2019 was when he started, and then, over the course of 2019, I started to kind of phase into the project and then from 2020 onwards was really like 100 go a lot has happened over the last five, six years.

Carl:

then how do you see the current state of the textile recycling market in general, but maybe also looking at the different markets, like with Europe, the US, where a lot of things are changing now in the political environment, how do you see the market at the moment?

Steffen:

Well, generally speaking, I see a lot of noise, a lot of movement, a lot of pressure here and there, but also a lot of potential. So I would say it's just a crazy mix that has been a little bit more crazy in the recent times, in the last, let's say, one or two years, but nevertheless, aside of that overall noise, geopolitically, economically, I see some, let's say, golden lines, some bigger trends moving into directions that I find quite interesting from a regulatory perspective as well as macroeconomic perspectives, and that's why we think we're quite set on a road to circularity in tech sales, with a few hurdles to overcome that we definitely need to talk about, but, generally speaking, I see some straight path going forward in that regard.

Carl:

You already mentioned regulations like the extended producer responsibility which we have in Europe, but also now even the bill passed in California. How important are those regulations and policies for your business?

Steffen:

Well, I always say they are speeding up things and they definitely make it more easy to convince investors because it's just an additional, let's say speed up and additional, it's just supporting aspects in the market. But we always see the macroeconomic trend of the textile industry as, let's say, the basic foundation driving circularity and, yeah, some some shortages of some feedstocks in the face of the overall growth of the textile industry, um, let's say, the groundwork that makes circularity very attractive in a business case. And then regulation just comes on top, increases certainty, increases potential and speeds up the processes. And that's kind of like the way I try to differentiate it.

Carl:

I really like what you're saying because lately I hear a lot of startups talking about, basically the core of their business model is the regulations and the policies behind and and I think that is really not the convincing part for me, because we see the political landscape can change. So many things can change there. There needs to be, especially in circular economy, which is not, you know, just a principle of philanthropy or something. It's really about a business model of the future. So I really like that you base your business model on macroeconomics and can you I mean you already mentioned it Can you share a bit like what are the big hurdles that you talked about before?

Steffen:

In terms of macroeconomics. Yeah, that was one of the aspects I tried to look at early on when I was thinking whether I want to join the project. Right, I was just looking at FAO data and some big data banks World Bank and some of the other data banks on the growth of the textile industry and especially the fiber industry, which is the beginning of the the currently mostly linear textile value chain. Right, and when you look at the fiber data, it's it's pretty obvious that the textile industry is growing exponentially, correlating mostly with population growth and then even being a little bit speed up by growing middle classes and the fast fashion trend. But, generally speaking, when you look back 100 years, the world was consuming and producing around 5 to 10 million tons of textile fibers annually and then every, let's say, 20 to 30 years, the demand of the production was doubling and today we're like at 120 million tons and the projections are going the same same path and you can kind of calculate it actually. So look ahead into 2050. Then it would be over 200, maybe even 250 million tons of textile fiber demand every year and it's pretty obvious that some of the fiber types can't be scaled that quickly, that big, because it's just, yeah, it's a conflict with natural other fibers, it's a conflict with food crops, with available arable land, with cutting down trees, etc. Cetera, et cetera. So there's growth limitations in some regards which don't need to be, let's say, hard set growth barriers, but which are coming to certain limits and also blocking the economically viable business model of harvesting some of the fibers.

Steffen:

And, yeah, we see that since around the 2000s the cotton production is not growing exponentially anymore and that ever since then, other fiber types, cellulose fibers for example, are filling up the demand for, let's say, cotton like fibers, so fibers that are absorbing moist, that you generally like to have on your skin, compared to some synthetic fibers. And, and that's a general trend in terms of scale up of the overall market and big question of which fiber types are able to scale like that, and where can we put in, and kind of like in a plug-and-play system, alternative circular raw materials and and then have a good business model that is driven by that supply demand gap and then, as I said, regulation is just speeding up the process. But that's, that's the basic and overall need on a macroeconomic level that cascades down to the individual perspective of the brand of a textile company that are then, yeah, trying to source alternative solutions, right?

Carl:

so which material flow are you focusing on when you say like, uh, uh, there, there are so many different materials coming into place. Not all of them can be harvested in an exponential way. Where do you see the biggest potential?

Steffen:

um, when we started the company, we said we need to focus on the big streams first, due to infrastructure limitations. And when you look at the fiber industry, the biggest fibers in the textile industry are cotton and polyester, and that's what we are focused on. So we've developed a chemical recycling technology focusing on being able to separate and recover those two most dominant fibers in the market cotton and polyester. To separate and recover those two most dominant fibers in the market cotton and polyester and the cotton we are turning into a cellulose and the polyester we're turning into the basic building blocks of polyester. And both products can be used to produce new textile fibers or other products of the chemical industry, of the textile industry and even other industries. But, generally speaking, what we're doing is producing a cellulose that can be turned back into cellulose fibers, such as viscose fibers or lyosol fibers, and the polyester building blocks can be turned back into polyester fibers.

Carl:

All right, before we go a bit deeper into your respective technology, can you maybe take us a bit through the general technologies that are out there for textile recycling? Right, because textile recycling is already out there for actually many years. It's become very popular over the last five to ten years, but it's happening even in small towns, in Italy already for many years before, in italy already for for many years before. Can you maybe you know like take us through the steps like of mechanical, thermomechanical, chemical recycling and where the major differences are?

Steffen:

yeah, um, I can. I can try to make it short, but generally speaking I would divide it into mechanical and, uh, chemical and then that kind of intermediate um of thermomechanical recycling processes. The way mechanical recycling processes usually work is that they shred or rip apart the textiles, but try to do it in a way that the fibers stay as long as possible so that the fibers can be directly respawned back into a yarn, with certain limitations when it comes to what can you produce out of that? What quality levels can you achieve? Is the fiber length reduced? And there are certain limitations. But nevertheless a very, very good way, especially when you're talking about production waste, for example, when you have homogeneous batches of textile waste out of production, for example, that you can mechanically recycle and put just right back into the production process. Then you have the same colors on the fiber, you have the same fiber types and compositions, and that's something that has happened already decades ago in wool recycling or wool products and some other fiber compositions as well.

Steffen:

And then what most people then just differentiate is mechanical and chemical recycling.

Steffen:

And then when they talk about chemical recycling, you have to kind of distinguish in between those thermomechanical and the actual chemical recycling processes and some of them have to do mostly or mostly, when you talk about thermomechanical recycling processes with rather synthetic fibers and kind of like melting them back down to spin them right back into synthetic fiber. And when you're talking about an actual chemical recycling process, it's usually about, let's say, dissolving or cutting down the individual molecules and parts of a fiber to either recover a polymer that can be respawned back into fiber or to recover the actual monomers, the absolute building blocks of the fiber that you can then re-polymerize. So put the monomers back together to polymers and put the polymers back together into a fiber, and that's just really breaking it down to the not minimum level on an autonomic level. But let's keep it simple and say, on a on a fiber level, it's like the minimum level, and then you put it back together and yeah, it's, it's different qualities that you can achieve right.

Steffen:

Mechanical recycling usually rule of thumb least energy put in, but quality limitations. Thermomechanical is kind of like in between, a little bit more energy, a little bit higher quality of the product coming out, but with certain limitations. And then chemical recycling is usually talked about like you need the most energy and the most effort to put in, but you get the highest quality if the process works right okay, yeah, thank you for already taking us a bit also to the to the pros and cons when it comes to the requirements of the feedstock.

Carl:

Right, because we have a huge feedstock. Now more and more of old textiles and waste textiles is being collected. What are the requirements from like for chemical recycler or mechanical recycler?

Steffen:

I would say it depends on the technology and the company a little bit, and not everybody is fully transparent about the qualities that the processes need. There's many claims out there and the question is, where's the actual truth in the end? And are we talking about a lab scale at the moment, where you maybe can put in more energy and things work, but then you need to also scale it up? So it's a big puzzle piece that needs to work perfectly together. But generally speaking, we have a big challenge in the textile industry with different compositions within the textiles right, different fiber types, different dyes, different chemical agents on the products, prints, stitches, buttons, zippers there's so many things attached to an apparel, if you think about it, and the question is always where do you get out what and are you able to really separate it completely, or will you always have a certain level of impurities in the product? And then, when you break it down into the different routes right, buttons, zippers there's mechanical shredding solutions to get rid of hard applications and then on a fiber level, with mechanical recycling technologies, it's usually very limited in terms of separating the different fiber types. So usually what you put in is kind of like the mixture that you get out and then what you put in determines also on another, like the mixture that you get out and then what you put in determines also on a on another level, the quality that you get out in terms of the mechanically recycled product, and usually mechanically recycled products have to be blended in with virgin fibers in order to achieve a, let's say, closer to market standard quality level.

Steffen:

And and then with the thermomechanical and the chemical recycling processes, it really depends on the technology and the abilities and not only on the chemical processes but also on the engineering solutions. So that's where it gets a little bit blurry and fuzzy in terms of who can do actually what. But what we've been focusing always was getting a very pure quality of the cellulose out in order to have some kind of drop-in solution for the existing cellulose fiber production, so that you can aim at a plug-and-play system in terms of switching from the virgin feedstock to the recycled feedstock, switching from the virgin feedstock to the recycled feedstock, and in the past we've always been able to prove that that the cellulose that we're producing can be used to produce 100% recycling fibers. If you will do that on an industrial level, it's dependent on a few other questions, but it's important to show that that's possible, and same on the polyester part as well. And then for some of the other companies out there, it's really hard to verify their claims and what they're able to do and whatnot.

Carl:

I mean you're right. I mean I see so many different startups and everybody is talking about recycling and recycling technology. So many also really interesting projects out there. It's very hyped. For me as a circular economy enthusiast, it's sometimes a bit but annoying that we we basically, when we talk about circular economy, only talk about recycling. There's so many other steps right in the circular economy, but they're so important, right?

Steffen:

right, you don't. If we only do recycling, um, then the question is is it really a benefit in terms of sustainability, right, if we just wear the product one time, throw it away chemically, recycle it, put all the energy back into production of a new apparel, textile, and then just call it sustainable? It's probably the opposite of being sustainable. It's a more complex picture and we are a big fan of telling a more complete story in that regard. Right, recycling, mechanical recycling, thermomechanical recycling, chemical recycling we need all of those solutions, and all of those recycling solutions are just one bit of the overall circularity transformation that is needed in the textile industry if we actually want to be honestly, more sustainable, and that's very important to underline that.

Carl:

Absolutely. I couldn't agree more. You always need to have this holistic view on the entire value chain. That's what I realized throughout the last years. So much. You cannot just produce a recyclable product without thinking of all the steps after If that recyclable product end up in an landfill.

Carl:

It's also not really helping from an environmental point of view, and I'm also convinced that there will be uh, you know, once, once the whole recycling infrastructure is a bit more established, there will be a really a reason to stay for all different kind of technologies, depending also on the feedstock. Um, you know, something will probably go to you and some to other players, to mechanical recyclers. Coming back to your technology, what I really liked from the beginning and you're not the only one, but one of the few ones that are able to focus on not just taking out either the polyester or the cotton out of your feedstock and recycle one of them, and the other one is waste, but you're actually able to recover both. How did you manage to do that and it's really impressive. What can you share about your technology?

Steffen:

Well, first of all, I can share how we got there right. In the beginning, we set ourselves a few development goals right. We asked ourselves the questions what does a successful recycling technology need to goals? Right, we asked ourselves the questions what does a successful recycling technology need to have? Right, and one aspect of that was being able to handle mixed fiber products, because it's just the way the products are out there right. If you're just focusing on mono fiber material, you're going to have a hard time in terms of infrastructure for collection and sorting because most products are just mixed fiber products. So it was setting the focus early on onto that challenge. What got us here in the end, right.

Steffen:

And then from there on the way we approached it was really starting with the different chemical and mechanical processes that you need for for a solution and putting them all out there on a whiteboard and be like okay, those are the different options out there. And then we tried them all enzymatic processes, different chemical chemical processes, right. And also kind of like not like chemically working processes, but without the use of actual chemicals. There are some tricks that you can use and really tried out many different pathways and then just let data decide what the best solution would be right and then kind of try to narrow down the technology. We wanted to apply the proof of concept around that and and just verified our solution and the setup and put together that, as I said earlier on, that puzzle piece of different pieces that need to to fit together perfectly in order to have a a good solution. And the way it works in the end for us is, after the shredding and getting out the hard applications, we put the shredded fibers in our process. We then depolymerize the polyester In that step we liquefy it and then can separate it from the leftover cotton and impurity part of the textile and then we can purify the polyester basic building blocks and produce them into the first product of our process, right, and the leftover cotton part goes into a further decolorization so that we have a white product. Again a little bit of further separation steps in terms of the other impurities that you might have within the product, and then we have to adjust some certain parameters of the cotton and technically turn it from cotton to cellulose if you want so, and then have that product ready to being shipped to the customer. But that's like the, let's say, high level overview of the technology and kind of like the different steps. So it's a multi-step process focused on the challenges that you have in terms of separation, purification and making it white against that. You have a terms of separation, purification and and making it white against that. You have a drop-in, drop-in solution for the product, right, and maybe just on a?

Steffen:

On another note, as I said, the development goals that we set ourselves. One of them was being able to to separate and recover the two most dominant fibers in order to not have thousands of tons if you scale it up to an industrial level of waste fibers in the process. It's a cost question, it's an LCA impact question as well. So that was one of the development goals. The other development goal was having a CAPEX efficient, scalable engineering setup that works with off-the-shelf equipment. It doesn't need special machinery or machinery that we need to develop ourselves.

Steffen:

So that was a very different dimension of those recycling technologies that mostly people don't speak about. It's always just of what chemical process do you use? But the big leverage is the question how do you industrialize that right? And usually you don't speak about that and we are very protective on the way we are doing it. But we think we have a very interesting setup in that regard. And then that helps with the third development goal being able to do all of that within a reasonable cost structure that helps you to scale, scale big and can achieve price parity with the virgin substitutes. And we think that's what it needs, right. It needs mixed fiber products, scalable CapEx, efficient engineering setups and cost efficiency on a product cost level right.

Carl:

Absolutely. And again you prove your holistic approach on this because I think, especially if you want to scale, at one point you need to have in mind how you can scale and how Cappex intense it is. How much do you need to develop technology and machinery in the end? So it's really impressive that you have this rather lean approach in the end. Still very capex intense market, if we want to stay in this directly. How do you see the landscape when it comes to your investment rounds? I mean, I think you are currently trying to close series a um, depending on on when, when we go live with this podcast, but um, more or less in the series a round you can share as much as you want, but so you're you're not like super early stage anymore, so you have to have these things in mind. But still, what I hear as well from the investor side a lot of vcs are very shying away from capex intense projects. How do you face that?

Steffen:

with a good strategy, I would say, um, you just have to face at least that's my perspective, right. You just have to face at least that's my perspective, right. You just have to face, honestly face the aspects of your company, of your startup, and then just ask the question of how can we best finance that? Right, and certainly one part of that is developing a solution that is, in comparison to other solutions out there, rather CapEx light. If you have a super fancy solution but it needs much more capex than the competitive solutions out there, you're gonna have an additionally hard time to have that financed right. But then in the end it's just facing the truth. You have capex as part of your case.

Steffen:

I'm sometimes a little bit annoyed by investors having that kind of like rule of thumb. We hate capex perspective because it's just a question of how much money do you need, how big is the potential in terms of return on investment for the investment? And whether I, to speak in the vc language, burn my money for customer acquisition cost for a sars solution or invest it into steel and hardware to make a solution possible that will go in a different direction in terms of their exit perspective. It's not really obvious for me why that has to be such a big difference, and I think a lot of that has also to do with perceptions by investors and historical origins of where does venture capital come, which is usually the big source of of capital for early stage companies like ours as well. Um, but then yeah, just facing that and trying to see how can we finance that, and do I have to finance that all purely on equity or can I raise early on some debt capital or some grant money?

Steffen:

And just a few days ago I saw some numbers on companies like ourselves with certain CapEx requirements in the case, and a few years ago they had like a percentage rate of around 70% financed by equity.

Steffen:

And now it has evolved and some of the promising cases just need 30% of equity financing because other sources of financing just became bigger and bigger. And that has a lot to do with grant financing and debt capital financing. And I think you need to be always very aware of where can I source different sources of of capital and then bring that into cap, into into a story for the investors and be like, okay, we need this, but we have those sources of financing and we just need that percentage rate of of equity for our case, and thereby we are quite capital efficient, um, in regards of the equity we need to raise from investors. And then I would say there, it's a question of what investors like to invest in a case like yours, and if you have a good, good setup in that regard, a good strategy, then it works and there's enough investors out there. It's just a way of doing making the best out of it.

Carl:

I would say yeah, and I see that a lot in the ecosystem of the venture funds and I think there still needs to be a lot of development done when it comes to the supply chain of vc firms, if you will like, from early stage investors to to later stage investors up until ipo.

Carl:

There's a very clear investment path for startups. When it comes to sas models right, but when it comes to deep tech and hardware, it's not that easy to bridge like an early stage investor can still lose its money because there's no investor at a later stage, whereas it does models. It's like way more developed, like if I go early and maybe I can even still do the bridge, and then there's the next investor and it's a very clear path and communication. But in in deep tech, this is not as developed yet, so so I totally see that as well. You mentioned I mean obviously a lot of vc funding. When it comes to capex intense project, like, in the end, yours as well do you feel, um, that it's interesting to also go for corporate venture capital or strategic partnerships like machine building companies etc. Are those interested as well in investing and are you interested in having them on board?

Steffen:

um, I would say two times yes, but always with a certain extra question mark on that right. I think taking on a strategic investor and, as a strategic investor, investing into a startup and needs to be a lot of building up a relationship first and kind of lining perspectives right. The startup needs to know what the expectations and kind of aligning perspectives right. The startup needs to know what the expectations and perspectives of the strategic investor are, and the other way around as well. What I try to be cautious with in, let's say, rather early financing stages is involving strategic investors that block certain ways for the startup right. A customer that doesn't want you to work with other groups of customers, right. That's generally something that I would try to avoid if possible and that we are able to avoid. Also for this financing round.

Steffen:

What I like is strategic investors that have a, let's say, smart money perspective, so that are opportunistic investors that want to have a return on investment on our case, but that have know-how in order to leverage probability of success.

Steffen:

So, let's say, a company with a certain footstep in the chemical industry, having know-how, having people and experience within their company, being able to support us on our pathway to speed up, to increase probability for success, but that don't have the big interest of taking over the company early on or blocking certain ways to customers. That's something I really like to have and that's something that we're probably taking on in this round as well, and then in later stages, obviously, it becomes a different picture as well, but that's just something that I'm cautious of in the early days. So there's not that strategic investor and it needs to have alignment in terms of different perspectives. And then you just need to be honest about it and what do they from me and what do I want from them, and if that's a fit, that's a green light and and if there are certain question marks, you need to be very cautious about that right, right, when it?

Carl:

um, I mean, we're talking about capex intense project, so can you already share a bit how your business plan looks like in terms of are you planning to build you know one plant after the other and and run those plants as well, or do you rather think of a licensing strategy?

Steffen:

we have both in mind and we're at a point where we have both of these options still on the table and are very comfortable about exactly this and not committing to one or the other. What we see is that we're coming out of a lab setup in the pre-seed stage. Then we now build a pilot plant in the seed stage to prove the engineering concept and industrialization set of the technology. And now, with the Series A, we are building up a demonstration plant that will be able to produce sufficient amounts of product. But it's, let's say, the last development stage in terms of putting together all the different bits and pieces before then, with the Series B, building up a first industrial folk plant, if you want. So a plant that's more focused on commercialization of the technology right, of the technology right and during that next phase now and then the Series B phase with the first commercial plant, we believe that scaling will be mostly in-house.

Steffen:

There are certain upside potentials with some partners that are generally open on the potential of also building our first commercial plant already at their site within a joint venture or licensing structure.

Steffen:

But that's for us an upside potential. Generally speaking, I see that you need to scale the technology first to a sufficient level before big players come in and be like we want to buy a license or go into a certain joint venture structure because they want to see big scale, they want to see unit economics and they want to see a robust process. So up until that point we will for sure scale it in-house. But then from there on we are very excited about the potential of a licensing model, because it just takes out some of the CapEx requirements generally, the requirements for amount of capital needed and it just flips the case into an even more interesting case for venture capital investors and just puts you on a different pathway. So, long story short, we are not 100% set on one or the other. We are aiming at a licensing structure long term, but we think first you need to scale in-house and prove everything at commercial scale I mean it sounds very agile, uh and lean in that regard, and I think that's also the way to do it.

Carl:

Um, even when you would say we only go for a licensing model, a certain capex, you will anyway set right, because until you are at a scale where you can say, now my, my technology works on an industrial scale, you need to do it in-house anyways for licensing it out. So that seems smart to do, thank you. So we are already here talking about big plans, big investments, obviously in three digits, in the millions. Where do you see yourself, but also generally the market, going in terms of location, geography, because the textile industry, I mean, it's so global, it's very Asian-dominant when it comes to production. Then, obviously, the Western civilization, civilization. We have a lot of consumption brands, retailers.

Carl:

At one point, when we collect here in europe or in the us, when we collect, it can like, at one point it has to go to asia. But at what point? What is? What is your take on it, especially now? I know you also. Your project is similar to the one of Cirque, who are already a couple of years ahead, I want to say, or at least started earlier than you guys, and it's an American startup for those who don't know who also focus on the same not on the exact same technology, but on the same material flow and they're an American company, but focusing now on building the first big plant in Europe, which is very interesting. What is your take on this for you, and how do you see this development now, for example, with CERC?

Steffen:

Well, generally speaking, I see that many of the players that are focusing rather on monomaterials are rather scaling up in Asia due to large volumes of production waste and more homogeneous feedstock in the production waste post-industrial waste there. So for us it's not a big surprise that CERC is thinking, or maybe even now scaling here in Europe or planning to do that here in Europe, or planning to do that, because their technology, just like ours, is focusing on the blended mixed fiber waste right, and we think the biggest potential is in the post-consumer waste. And when you want to recycle post-consumer waste, it's a question of infrastructure, because you're focused on recycling, right, you don't want to build up collection and sorting infrastructure. You want to have partners who are already doing that or planning on doing that in the early future. Right, and when we look at Europe, one of the big outstanding aspects here, and especially in Germany, is the existing collection and sorting infrastructure. There is a lot of movement in that as well right now, but there is an infrastructure collecting millions of tons of textile waste annually and that's a big, big benefit that we have in Europe and then especially in Central Europe, with Germany just collecting the most, which has an historical aspect after the wartime, historical aspect after the war time, but that's a big, big, big plus for Europe and Germany and for us. Thereby it makes a lot of sense to start scaling up those technologies here, close to the feedstock, collection and sorting, because the product, the finished product, you can anyways ship to Asia as well.

Steffen:

But there is still also production closer to Europe. Right, we have big cellulose fiber producers in Europe. We have textile producing industries in Turkey, in Portugal, in Spain. So the large share of the textile industry takes place in Asia, obviously, but it's not like there's no textile industry in Europe, and I think long term it will be Europe, asia, north America, south America, africa. We will have recycling all over the world because it just makes sense to have it all over the world.

Steffen:

We just think the best place to start is Europe and for me it's just a validation that CERC seems to agree on that end. And we're not afraid of CERC. Obviously we know them, we've been watching them closely. We obviously think that we might have a better solution than them and they are probably thinking the opposite way around, and that's totally fair. I think there's a lot of room in this market and this movement and then in the end, let technology and the better technology win. Maybe there's even coexistence, because their technology might work on a certain fiber share better than ours and ours might work better on another fiber share. Let's see, we will find out. But generally speaking we have rather a corporate co-opetition perspective on the other players out there than a hard competition perspective in that regard.

Carl:

How do you see and I mean circling back to that, probably also the whole aspect of public funding and grants is also playing a role, I guess next to venture money. But how do you see, when we're talking already about competition and other technologies, how big is the competition of big players like Eastman, basf? I mean one should think you know they're able to do what startups are able to do like easily. Are they like a big competitor? Are they the first investor and interest, you know, collaborator?

Steffen:

Or how do you see that Well, they could be both. But generally what I see with the big players is that they usually work on the platforms that they have already and we've seen that in the past it works. But the question is, will that be the most scalable, most economically viable solution? And that might be very specific in terms of textile recycling. But if I just use the conventional engineering setup of the chemical industry with purely liquid based processes and then I throw in a fiber, a fiber mixture, with that solid content within the process, the question is, will that be the most economically viable solution, or will that even be profitable or price competitive at all? And in that regard, I think startups have the benefit of thinking outside the box, not being reliant on that platform that they already have. And when you have an interesting solution in that regard, obviously the big players become more interesting and collaborating, because if you're doing something they can't do at the moment, it becomes a case for them to to work together with you.

Steffen:

Um, so I think they can be both. Um, I think we're distinguishing from the solutions that the big players have out there and yeah, it's, it's uh. Yeah, they're we. We don't take on too big to strategic investors in this round. Uh, but it's not a secret that we've been speaking with players like that for the last couple years already and that they were very aware of that. We are here and kind of like what direction we're going in and there is loose exchange here and there and updating each other here and there and and interest in in both ways. I would say so there again, I don't see them too much as competition, rather as a future upside potential of collaboration let's.

Carl:

let's go a bit north. Uh, to the nordics, which are famous for right, like being very advanced when it comes to circular economy and sustainability and and and technology innovations. I remember that we talked about the bankruptcy of RenewCell and what that meant for you. Maybe you can share that a bit. And now I mean RenewCell being Circulus and H&M going big time into a project like Sire. Well, I hope I pronounced it correctly. Nobody seems to really know, but how did you back then experience this bankruptcy of RenuCell and the development since with Circulus and Sire?

Steffen:

Yeah, Well, for both of them it's different stories, I would say, but generally it applies what I already said. Right, we're not too negative about competition. Obviously, we are very aware and watching what they're all doing, I usually try to distinguish between the claims that are put out there and the strategies and what's actually being executed. Then, let's say, behind the scenes and with some actors being executed. Then, let's say behind the scenes and with some actors, you're talking to the same people, right? So you know a little bit here and there. And and yeah, for me, for saya, for example, it's it's not 100 sure yet which direction in terms of that hyper scaling announcement and all of that, it will actually go, but we're very excited that there's more and more players coming. It just underlines the potential. And then we're very have a, let's say, sporty ambition in terms of comparing the different, the different solutions. When you come to to uranus, hell and circulos, they were like, yeah, the I would say, the lighthouse project in the early years, right, the let's say first generation technology out there. And when the bankruptcy happened, obviously that was more of a risk to us than us being one competitor less right. That was not our perspective. We were rather a little bit shocked and cautious on yeah signals does that send into the market and to investors as well? And I wasn't too too happy about all the pr work around that not saying by renew cell, but generally the all the the press and media, because it was all about it can't be profitable to recycle textile waste, it's too expensive and all of what has been said and not even by Reniocell. So we didn't like that and we saw that rather as a risk. So we're happy that they have a pathway to go into the future now.

Steffen:

And, yeah, it's hard to speak about what might went wrong because I'm not part of RenewSell and I can't really speak about it. Obviously you're hearing things here and there but it's really hard to verify. But I think one thing that they have publicly announced is that the IPO was quite early. Then they had a certain level of delay and if you're out there on the public market you have a delay, you have negative announcements, share price goes down. It becomes hard to bridge to in terms of that delay and then you're kind of like a little bit trapped and I think that's a big part of what happened there.

Steffen:

And then that they got yeah, that they took them off the pipe. The public market again and saw a pathway there, tells me that there is people out there that see a potential in their technology. And now let's see how it how it plays out, right. Um, but that was like the the perspective when it happened. We were a little bit scared on what do investors take out of that? And now, um, yeah, we are obviously distinguishing ourselves in terms of technology, feedstock focus and execution plan.

Carl:

And now let's see where it both goes right have you heard of a project in stockholm um in sweden called renaissance?

Steffen:

I did actually hear that, uh about the name, but I can't tell you exactly um what it is. So maybe if if you're looking as excited as you're just looking, you're the better person to explain a little bit more um, I heard about them from a friend in stockholm and I'm actually now planning a trip to stockholm this year.

Carl:

There are so many amazing places and hubs and startups. One of them is renaissance. I would like to have a look at they and I quote, have. They are using a waterless technology that consumes less energy than other solutions, so basically reducing both climate footprint and cost. So it sounds like in the person who was introducing me to them. Also, like I said, like it sounds almost too good to be true. It's amazing. So I was just wondering maybe you already have heard of them and have an opinion. Um, I'm obviously, as you know, like I'm super excited for anything that's happening in the market, and that sounded just very different than all the other projects that I've came across so far so it's, it's recycling, it's chemical recycling and they're claiming they're not like using water.

Steffen:

Can you?

Carl:

yeah, I think I mean I can't speak for them and I don't want to put anything wrong out there, but apparently it's working in a container, so also you don't have to have this big capex and big machinery. So it's like kind of a container with pressure. It's waterless and somehow within that you don't need a special heat, it's like room temperature and somehow you divide different materials and can then go into the recycling process. Sounded very interesting. I'm going to keep you posted when I'm going to Stockholm, but I just thought maybe you heard of them we have, uh, to be fully transparent on that, we have other people within the team.

Steffen:

I'm the business guy, right, I usually try to get summaries on what to take from that, and there's other people's watching the, the technology and development out there. But I'm curious if other people and experts in your network are excited about new solutions coming up. But yeah, what you've just said is like what you usually do, what all startups out there do. What we also do is taking out a small piece of the overall story and and telling a story around that. Right, and not using water in a chemical-based process. I would say, okay, you usually have a small level of water in there. If you're recycling cotton, there's always water and moist within the fiber, right, but not having water within the process doesn't make me too, too excited.

Steffen:

Room temperature and smaller plants makes me interested. Room temperature the question is temperature. Time is usually a ratio, right. If you put in more temperature, it is quicker if I don't use higher, high temperatures, but then it takes me three days to recycle a ton of textile waste. I'm also questioning unit economics, again, right, and we can go through all the different dimensions of costs and yield, and also small plants versus big plants. Maybe low ca, but it's a question of how much capex per ton of output. Is it actually right? So you definitely need to have more details in order to make a good judgment. But if someone says, well, I need less energy because I need less heat, that's always something that can be exciting. But then it's a question of how long do you need? What other cost sources do you have? Do you put stuff in there that needs to be disposed afterwards, etc. Etc.

Steffen:

So, um, yeah, interested, I will take a look at it, but uh, it needs to to have a, let's say, more complete picture in order to have a good judgment. Right, right?

Carl:

right, absolutely totally agree. And and in the end, uh, like all good deep tag in inventions, we have to see what is scalable in the end as well. Right, economically and technically. That's what we see all the time. We talked a lot about feedstock and what kind of you know purities your fractions need. Let's talk about the other part, like who is your customer? Like how far along are you integrated in the, in the supply chain? Who's your customer? Do you already have, like clients, off-take agreements? Um, how, how's that looking like?

Steffen:

yeah, um, we always divide into two different groups of of players that are important when you speak about, let's say, customers, um, direct um touch point, the industrial offtaker who's taking our raw material. So, in terms of integration, we're stopping at the raw material, at the cellulose pulp, at the polyester monomer, um, and we want to sell that, right? Um, further integrating into the value chain is again a capex question, might be upside for the future, but right now we're just focusing on the recycling part and ending where we think it is a sufficient drop in solution for the market. So we need partners on the industrial side to further process the product, the product, and we think it has an advantage of having partners who are the actual brand, the textile company that is putting a product out there on the market. But our partners can be basically every different company in between the direct offtaker fiber producer, if you want to different company in between the direct off-taker fiber producer, if you want so, and the brand, because all of them along that value chain of producing Texas the yarn producer, the fabric producer, the manufacturer, the brand they all source their product somewhere, right? So the brand has the customer in the shop and in the online shop right, but all the other companies before that have a brand or someone else buying the product as well, so they're looking for products like ours and they could source it. So yarn manufacturer could come up and be like I want to reserve a certain amount of your product and can sign an offtake agreement. A brand can do the same if hyper producer can do the same, so they can all become customer and directly buy or reserve a certain amount of product. And we have different partners along the value chain that are doing exactly this.

Steffen:

What we are now doing, or the last couple of years have been doing flying a little bit under the radar in terms of public, publicly putting out their names of our partners.

Steffen:

And now, after closing the round, we will start to announce more and more of our partners. But we think it has an advantage of not doing that too early but doing it close to the point of time where you're actually able to scale big. That was something that we actually saw with sire. So I really like the style of execution there as well, because I think if you go out there and be like, yeah, we're doing chemical textile recycling five, six years ago when we were at university, people become all excited about it, but it needs a certain amount of time in order to scale big. Then people are within that time frame. Yeah, haven't heard from them. They are not scaling. I don't see. Big quantities of product can't be too exciting right now. You can create that momentum a little bit more and, yeah, that's that's kind of like the strategy that we've undertaken. But long story short, all the different companies along that chain can become customers.

Carl:

Yeah, probably a smart way of how you approach this, and there's always a right time to go out there and to go public. You always need a certain momentum. When it comes to this demand side, where do you see the biggest pull from? Is it the consumer, who actually requires more sustainable products? Is it the brand? Is it you know, because I'm talking to everyone along the value chain and consumers seem to be interested, but you know only if there's no, no downside when it comes to the price or the quality or the design. The brands tell me actually a lot that there's no demand from consumer side. So they are, unless really like, intrinsically motivated, not not that motivated. Or they say, if there was a fabric out there that was as good and as expensive and as nice, I would buy it, but then again they this goes through until the fabric producer who says the same things. So where do you see the biggest pull?

Steffen:

um, exactly what you just pointed out, right, quality and price needs to be at a comparable or parity level of the virgin substitute. I think we generally have a large consumer trend that everybody and I think if you would ask someone, would you like your product to have a big footprint or a small footprint, most, if not all, people out there would agree I would like to have my product obviously have a low footprint. If you then ask are you willing to pay for it, it actually starts becoming interesting. Still, many people say I am willing to, but then you don't see that in the actual shopping behavior. Right, and I think that's the point where it cascades down into the behavior of brands and tech side companies.

Steffen:

Because if everybody tells you I want sustainable or more sustainable products, but nobody's willing to pay for it and it costs them more, it takes out margin for them and that's a hard way, if not impossible, for them to go right. But if you have a product out there that's of the same quality and of the same price maybe in the future even cheaper then you have an edge. Because then everybody is intrinsically motivated to say, okay, I want to have the product with the lower footprint, and if it's of the same quality and the same price, it's a no-brainer right. So I think that's what it needs. You need to scale, you need to have parity in terms of quality and price, and then the demand is there big time. But if you, and then the demand is there big time.

Carl:

But if you decrease quality or increase prices, you're going to have a hard time if it is not impossible to scale a solution like that right. Rounding up as well our conversation about the whole market oh, what is your vision and how do you see the market in five years from now? Right, like 2030 is is literally only five years from now. Where do you see the market in terms of circularity in tech sales?

Steffen:

yeah, I think that's. The two pieces are fit together there. If we talk about the macroeconomic perspective that we started the conversation with, right, if scarcity increases of certain feedstocks, obviously it's a question of supply and demand also influencing pricing, right, and that also helps making circular solutions more attractive, because you're actually a pain reliever in supporting to keep a product price at a certain level because you're putting supply out there on the market. And the further we look into the future in terms of 2030, prices at the level that the industry and the people are known and thereby I see demand growing and expanding, even being accelerated by regulation now coming into effect more and more and showing its effect on the market effect more and more and showing its effect on the market and I think by 2030, we will see amongst the group of competitors and different solutions out there that some of them will maybe fail in the scale up phase and others will succeed and that there's more supply of high quality, comparable price recycled product out there and that the share of recycled content in the market will increase.

Steffen:

We're at like what? The 1%, still below 5%, certainly, and if we increase that number step by step to 510% and then when we talk about the 50s 60s whatever. Then when we talk about the 50s 60s whatever, um, get closer to 20, 30, 40, 50, 60 percent, um, maybe sometime 80 percent. That would be the vision where I think most of the players are aiming for, and I think in 2030 we might see the first effects on that and can see that in the numbers well.

Carl:

I'm very excited to follow your journey on the road to 2030 and, stefan, thank you so much for being here for for representing your project, eden, and I wish you best of luck and thanks for being here today yeah, thanks for having me.