Chicago cleantech startup Mycocycle, which trains fungi to eat trash, announced some follow-on investment this week.
An Inno Fire winner in 2023, Mycocycle pulled in $2.2 million in seed funding a year ago and is adding $3.6 million in a seed extension, the company announced on Wednesday.
Closed Loop Partners led the round with follow-on investment from the Telus Pollinator Fund for Good and participation from U.S. Venture Inc. and the Illinois Department of Commerce and Economic Opportunity.
The Chicago cleantech startup uses mushrooms to transform waste into a renewable, low-carbon material in an attempt to divert waste from landfills. Mycocycle said that compared to May 2023, it has significantly increased its output and now completes over 10 times as many treatments per month.
Mycocycle has now raised $7.3 million to date and has tripled its research and development footprint following the seed extension.
When the company's seed round was announced, Mycocycle founder and CEO Joanne Rodriguez told Chicago Inno that the company planned to double its local footprint, but in a conversation on Wednesday, she said that the company found that tripling their footprint was needed.
She added that the company would continue to expand its commercialization in 2024 with upcoming announcements on exclusive licensing.
The new funding comes "the bar has gone up" for startups seeking new deals as investors have become cautious and selective, according to the first-quarter Venture Monitor report released by research firm PitchBook and National Venture Capital Association.
"Investors prefer to either double down on the best-performing portfolio companies or invest in the highest-quality companies that have demonstrated traction and product-market fit," the report said.
This wariness has also resulted in an increase in extension rounds, according to PitchBook analysts.
"We actually thought that this we would be a Series A round, but we started to run through some of the metrics we needed and the general consensus that came back was that we needed to de-risk our off-take contracts a bit more and needed to see the upside," Rodriguez told Chicago Inno. "As a result, we restructured the round as a seed extension and we realized our opportunities to demonstrate a revenue-positive business around a rubber treatment and supply chain that really changed the dynamic."
