Make It

How 2 college kids turned a school project into a million-dollar eco-friendly business

Turning mushrooms into packing material and furniture might seem like science fiction, but for Eben Bayer and Gavin McIntyre, it's just a typical day at the office.

In 2009, they founded eco-friendly company Ecovative, which produces an alternative to plastics and Styrofoam using mushrooms.

Essentially, they mix agricultural farm waste with mycelium, or mushroom roots. It can be used for industrial applications or softer applications like packaging computers.

Ecovative founders Eben Bayer and Gavin McIntyre pictured with CNBC’s Landon Dowdy in Ecovative’s factory in Troy, NY.
Sophie Bearman | CNBC
Ecovative founders Eben Bayer and Gavin McIntyre pictured with CNBC’s Landon Dowdy in Ecovative’s factory in Troy, NY.

What started as a college project is now a full-fledged business. It has produced mushroom packaging for companies like Dell and Crate & Barrel, is starting to move into furniture and home goods, and has raised nearly $18 million in equity and debt financing.

But it wasn't always easy. The founders persisted despite false starts and a lack of funding, and they even walked away from good jobs before they finally got the break that would make their big idea a reality.

It all started in 2006, when Bayer and McIntyre were studying mechanical engineering at Rensselaer Polytechnic Institute in Troy, New York. The two teamed up in a class called Inventor's Studio.

They were assigned to find a problem that affects the world, come up with a technical solution to solve that problem, patent it and start a business.

Simple enough, right?

They pitched multiple projects to their professor over the course of the class, to no avail. Finally, they pitched the mushroom idea. "He was like, 'I love it! You have to retake my class and do this project,'" said Bayer.

Ecovative uses ingredients such as flax, canola and hemp, which come from nature, that are safe, healthy and sustainable alternatives.
Qin Chen | CNBC
Ecovative uses ingredients such as flax, canola and hemp, which come from nature, that are safe, healthy and sustainable alternatives.

"We weren't out trying to identify the next cellphone case; we were looking at alternatives to the plastics and resins that really plague our planet," said McIntyre. Mushrooms were the perfect alternative, because they fit directly into nature's recycling system.

After the class, and a successful project, both Bayer and McIntyre had plans to get out in the working world as engineers.

"We actually both had jobs and full scholarships to be architects as well," said Bayer, who decided to quit his job on the first day because their professor kept at them to drop what they were doing and pursue their business.

Bayer then called McIntyre and said, "I'm not going to work today. We are starting a business."

They began by "boot strapping" their idea, working out of one of their basements and growing the mushrooms under Bayer's bed. But they soon realized they needed to raise capital.

So they went to investors. However, getting others to understand their concept was a struggle. "Our pitch was: We're going to put mushroom insulation into people's homes," said Bayer. "And it just didn't work."

This sustainable engineered wood is bound together using mycelium, or "nature's glue," a formaldehyde-free alternative to furniture glue.
Qin Chen | CNBC
This sustainable engineered wood is bound together using mycelium, or "nature's glue," a formaldehyde-free alternative to furniture glue.

After unsuccessful attempts to get investor backing, in 2008 the Ecovative co-founders decided to enter business competitions. It worked. Their concept won a few contests, including the top prize of $750,000 at the Postcode Lottery Green Challenge, and grants from the National Science Foundation.

Their winnings allowed them the seed capital to prove the product out into an application. Within a year, Ecovative had its own prototype facility and started producing for companies like Dell and Crate & Barrel.

"We've seen a tremendous amount of growth in our business from the days where we were growing materials under our beds," said McIntyre.

In 2015 the two opened a full-scale 20,000-square-foot manufacturing plant, and this year they launched Ecovative Interiors, featuring their latest product, MycoBoard, which is used to make wood furniture and wall tiles. The company is reportedly bringing in millions in annual revenue.

Pressed by a machine in Ecovative's Green Island facility, these nontoxic engineered wood products are able to be molded into custom shapes or pressed into boards.
Qin Chen | CNBC
Pressed by a machine in Ecovative's Green Island facility, these nontoxic engineered wood products are able to be molded into custom shapes or pressed into boards.

Bayer and McIntyre shared a couple tips to becoming entrepreneurs and turning a project into a business:

1. Work on an important problem. "If you work on an important problem, you can get funded and you can solve it," said Bayer.

2. Get feedback from potential customers. "The best feedback that you can get is to put it into a potential customer's hand and let them tell you whether or not the product is ready," suggested McIntyre.

3. Hire the right people. It's important to develop the right culture within your company.