As part of our ongoing effort to map the future of the built environment, we’ve recently completed a deep dive into next generation insulation materials, a space we believe is ripe for disruption and highly aligned with Zacua’s core investment themes: industrial & asset transformation, decarbonization, and circularity.
1. Why Insulation Materials are an Interesting Space for Zacua to Cover
Improving envelope efficiency is one of the fastest and most cost-effective decarbonization levers for the built environment (much easier to decarbonize than heavy industry from a science and deployment perspective). Insulation also plays a crucial role in reducing heating and cooling loads, especially since energy efficiency, electrification, and low-carbon materials are converging.
Market is large and growing – global insulation market is expected to reach ~USD 80‑90 B by 2030, with a CAGR of ~5‑6%. Retrofit is a massive opportunity: 70% of current building stock in Europe and ~60% in the US will still be in use in 2050, most of which is under or poorly insulated.
Regulatory pressures are increasing to 1) improve energy efficiency of existing building stocks (EU regulation coming in before 2030 – energy codes (IECC, RE2020, EPBD)), and 2) reduce the carbon footprint of conventional insulation materials.
New solutions are becoming increasingly cost-competitive, making an economic case for these to be absorbed by the market (although they lack the distribution and production means).
There are therefore a couple angles which make new insulation technologies interesting: 1. Improving the performance of existing insulation, 2. Getting a higher yield into new assets consuming certain of those materials, and 3. Making our insulation materials less pollutant. Solutions also go hand-in-hand with HVAC and other building system technologies.
2. Current Industry Pain Points
- High Embodied Carbon: Conventional insulation (EPS, XPS, PU foam, fiberglass) is derived from fossil fuels and energy-intensive manufacturing.
- Poor Retrofit Suitability: Rigid forms or toxic materials make it difficult to use in retrofits or occupied spaces.
- Occupant Safety & Health: Toxicity, VOCs, and fire resistance are growing concerns.
- End-of-Life Waste: Difficult to recycle; most insulation ends up in landfills.
- Performance Degradation: Over time, some conventional materials lose their insulating properties.
3. Emerging Technology Categories and Startup Examples
4. Key Performance Metrics
| Metric | Description |
|---|---|
| R-Value / Thermal Conductivity | Core performance metric (higher R = better insulation) |
| λ-Value (Thermal Conductivity) | Intrinsic thermal conductivity of the material (W/m·K) – lower is better |
| Embodied Carbon | Life-cycle emissions profile (kg CO2e/m2) |
| Cost ($/m2 or $/R-unit) | Installed cost in typical applications |
| Fire Resistance | Meets regulatory codes and occupant safety |
| Retrofit Compatibility | Ease of installation in existing buildings |
| Moisture Resistance & Durability | Long-term performance in real-world conditions |
| Acoustic Performance | Sound insulation or absorption properties (dB rating or NRC, if relevant) |
| Vapor Permeability | Ability to allow moisture vapor diffusion (μ-value or SD-value) |
| End-of-life Circularity | Recyclability, biodegradability |
5. Performance Assessment Matrix (Indicative on core Performance metrics)
| Category | R-Value (m2K/W) | Embodied Carbon (Kg CO2e/M2) | Retrofit Fit | Cost ($/m2) | Circularity |
| Hempcrete | 0.4 – 0.8 | 10 – 25 | Medium | 40 – 70 | High |
| Mycelium | 0.5 – 1.5 | 5 – 15 | Medium | 80 – 120 | High |
| Carbon-Negative Materials | 1.0 – 2.0 | -20 to -5 | Medium | 100 – 150 | Medium |
| Aerogels (bio-based) | 5.0 – 10.0 | 30 – 50 | Low | 200 – 400 | Medium-High |
| Recycled Panels | 1.5 – 2.5 | 15 – 30 | High | 60 – 90 | High |
6. Application Use-Cases
- Aerogels, VIPs: High-end commercial facades, space-constrained retrofits
- Hempcrete & Mycelium: New-build low-rise, modular housing, interior partitions
- Recycled Panels: Commercial retrofits, acoustic insulation, tenant improvements
- Carbon-Negative Composites: Mixed-use facades, B2B OEM applications
7. Conditions for Success and Scaling
- Supportive regulatory frameworks and mandates (embodied carbon limits, circularity credits)
- Certification & third-party validation (e.g., EPDs, LEED/BREEAM, fire testing)
- Partnerships with architects, contractors, and prefab/modular OEMs
- Production scalability: localized manufacturing, modularity
- Cost competitiveness at scale
8. Deployment Challenges
- Lack of standardized performance benchmarking
- Building code inertia and insurance limitations
- Low awareness in AEC ecosystem (limitation branding and production/distribution capacity of startups)
- Cost and availability of bio-feedstocks
- Challenges in meeting fire safety or moisture resistance at early stages
- Existing installers knowledge
- Willingness to adopt new materials/categories in such a traditional industry
Takeaways
Market buyers (ie developers, asset owners, and contractors) are looking to deploy new solutions as there is an economic opportunity for them (from a cost-based and performance perspective) to capitalize on beyond the sustainability benefits (such as higher hit rates in tenders through sustainability performance).
Buyers face a trade-off triangle between unit cost, carbon, and thermal performance (developers will want to maximize sqm of their built area) – there likely won’t be an ideal solution, but rather the startup will have identified the use case / building type it is fit for, and will build its GTM and distribution/partnership strategy around that use case.
Startups that address embodied carbon, unlock circularity, have a competitive cost base (feedstock and logistics perspective), and enable scalable retrofit solutions will be the ones inclined to scale naturally.
It is crucial for startups to have partnerships with large, certified suppliers for renown branding and production/distribution capacity. Proving they are able to deliver to end buyers is key for their products to break into the market.
From a Zacua Ventures perspective, the ideal bet in insulation will be a startup that combines:
- Strong and defensible IP both on the materials and manufacturing sides
- A sound margin structure and unit economics, which entails abundant feedstocks; simple logistics/supply chain; and an energy efficient process
- A solid and established supply chain to procure its feedstocks
- Good thermal, acoustics, moisture regulation, fire retardant, and transpirability properties
- Significant carbon reduction vs existing materials (i.e. mineral wool, etc.)
- An established means to produce and distribute their products (re-assuring potential buyers that they can deliver on orders under tight timelines – typically will involve corporate partnerships with large manufacturers)
