If you had to sum up our zeitgeist with just one word, you might well choose “awareness”. Topics like social inequality or the climate crisis have become subjects of pressing discussion and debate at news outlets, on social media, between friends, and in workspaces. This has had a knock-on effect on how people spend their money, with consumers increasingly concerned about the provenance and environmental implications of items they buy, and the ethical approaches of the companies which sell them.

It’s therefore no surprise to see that more and more firms are stepping up to make real, tangible contributions to change. Thanks to a generational demand for environmental responsibility and sustainability, the circular economy is proving a particularly fertile field for startups and incumbents alike. Growth in this space has also been spurred by a few other key factors.

One is technological progress, with advances in everything from e-commerce software to cloud computing systems making it more viable than ever to build profitable businesses based on repair, recirculation and renewability.

Another is the growing pressure on boards and investors to comply with Environmental, Social and Governance (ESG) guidelines. The knowledge that being socially/environmentally conscious can make them more appealing acquirement and investment targets is incentivizing entrepreneurs to build businesses within the circular economy.

So which startups have been on investors’ radars recently? Let’s take a look at some that seem poised for impressive growth in the months and years to come.

Back Market

Selling refurbished electronic devices like phones and computers isn’t exactly an especially innovative business model. After all, anyone taking a walk around a typical high street is likely to spot a shop with refurbed devices in its window. Yet, despite working in this well-worn sector, French startup Back Market has received serious interest from investors. In January 2022, it announced $510 million in Series E funding, following on from a $335 million Series D round in May 2021.

The company’s current valuation of $5.7 billion is a testament to its position as a premier online marketplace for used electronic devices. It also underscores how a savvy approach and the use of efficient e-commerce software can position a company for great success without the need to carve out a particularly novel niche within the circular economy.

The tone on the Back Market site is chatty, irreverent and speaks directly to millennials/Gen Zers (“Love tech. Hate waste. We feel you.”). It’s also as smooth and intuitive to use as any major-name online retailer selling brand-new items, and even tells you how many grams of e-waste you save with each purchase. Being such a well-designed and welcoming entry point to the circular economy for shoppers, it’s no surprise Back Market has achieved funding success.

WatchBox

Luxury goods have a strong showing within the circular economy. One marketplace that’s recently made waves is WatchBox, an online seller of high-end timepieces. Rather than being a marketplace where third-party vendors can showcase their shiny wares, WatchBox is itself the retailer, owning every watch it sells. It has an in-house team of Swiss-trained watchmakers and refinishers, who ensure the items are in near-new condition. This provides the kind of consumer peace of mind that’s so important when items are being sold for such lofty prices.

Its $150 million inventory, its emphasis on the highest standards for pre-owned items, together with the enduring global popularity of brands like Rolex, Breitling and Patek Philippe, have all helped make WatchBox a sought-after company for investors. These include NBA icon Michael Jordan, among other athletes.

In November 2021, WatchBox enjoyed a $165 million financing round, reportedly bringing its valuation to around $1 billion. The pre-owned watch market is tipped to be one of the booming subsectors of the circular economy, with McKinsey predicting that – thanks to digitalisation – sales will reach between $29-$32 billion by 2025.

Nona Source

Waste in the fashion industry has made headlines in recent years. From Burberry purposefully burning almost $40 million in unsold goods to maintain scarcity, to the uncomfortable revelation that clothes production makes up around 10% of global greenhouse gas emissions, there are numerous reasons why seismic shifts within the industry are occurring.

As noted in Hampleton’s newest Digital Commerce report, a significant startup making its mark is Nona Source, which bills itself as the first online resale platform for deadstock leathers and fabrics from top French fashion houses. The site, which launched in 2021, allows creatives to browse deluxe materials like cashmere felt and lambskin leather that have gone unused by the likes of Givenchy, Christian Dior and Fendi. These materials are rather poetically described as “sleeping beauties” by the company’s co-founder, emphasising the quality and potential of these wares.

It’s notable that Nona Source owes its existence to an intrapreneurial scheme run by luxury goods behemoth LVMH, which owns some of the world’s most recognisable prestige brands. The idea for Nona Source was dreamt up by inventory managers at LVMH brands, then incubated by the scheme before rolling out. This highlights how incumbent companies are embracing the potential of e-commerce to make inroads into the circular economy.

MycoWorks

Reuse is one of the pillars of the circular economy, but California-based biotech firm MycoWorks is taking an even more ambitious approach to sustainability. It uses mycelium, a kind of fungus, to create an eco-friendly biomaterial that can be used in place of leather. In the words of the CEO, the company grows “the only made-to-order, made-to-specification luxury material”, which it’s named Reishi.

An eye-catching coup by MycoWorks has been its collaboration with top-end fashion brand Hermès to create a handbag partly crafted using the mycelium product. In January 2022, MycoWorks secured $125 million in Series C funding, providing the resource to scale the manufacture of Reishi.

The company is undoubtedly at the forefront of what’s being called the “New Materials Revolution”. As such, it stands alongside other pioneering firms like Ananas Anam, which turns pineapple leaves into a textile called Piñatex, and Desserto, which manufactures a leather alternative from cacti. As awareness among consumers continues to grow, it seems likely that such innovative materials will become increasingly mainstream, and attract the investment to meet the needs of a switched-on, socially conscious generation.