Stony Creek Colors, the natural indigo maker based in Tennessee, is in conversations with “more than a handful” of potential buyers, Jerry Steiner, the startup’s chairman of the board, told Rivet.
After over a decade in business, and an announcement late last year that it had raised $4.8 million in Series B2 funding, co-led by Levi Strauss and Lewis & Clark AgriFood, the company needs a new owner in order to scale its natural indigo innovations and products, said Sarah Bellos, the startup’s CEO and founder.
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“It’s a very deliberate action that we’re taking to be focused on finding a buyer for the business right now,” Bellos said.
The startup has made a solid mark on the denim industry. Brands including Levi Strauss, Lucky Brand, Patagonia and J. Crew have used Stony Creek’s sustainable, plant-based indigo. Stony Creek makes that available by growing proprietary, regenerative Indigofera plants, extracting the natural indigo and turning it into a powder. From there, the powder is used to create the company’s first-of-its-kind pre-reduced natural indigo, sold in liquid form, called IndiGold, which manufacturers can substitute for harmful, chemically based synthetic dyes. The supplier announced a partnership with Archroma in April of 2022 to manufacture and distribute the product at scale.
To continue scaling the natural indigo, Bellos said, now is the right time for Stony Creek to find new ownership. She indicated that the focus of the potential purchase is to scale natural indigo solutions to the industry at large.
Bellos said she understands that may require further expansion to a more tropical environment to give the plants Stony Creek is known for a more suitable climate to grow in. The extension into more tropical climates was cited as part of the need for the company’s Series B2 funding, and leading up to the announcement of that funding, Stony Creek expanded its growing operations to Homestead, Fla, about 40 miles south of Miami.
“I think that we were able to access the capital that we needed to grow. Taking this next step meant that we were going to need to double down in a [tropical] geography and really set up the scaling ourselves. We took a hard look at one, are we the right team to do that? And [two], is it right for this mission for us to pick that spot, or should we be exploring where there are already potential synergies within what really is a very global color space?” Bellos told Rivet.
Bellos said she and her team have spent a number of growing seasons understanding what could—and does—go wrong in agricultural production and introducing a specialty chemical into the market. For her, new ownership would mark a way to share that knowledge and introduce robust talent.
“I think what’s exciting is [that] this is the right time for us to now really replicate—and [do] that in a way where there’s already synergies with teams that have done that before and we don’t have to try to steal those people from other companies, we can put the technology into the places where it is best capable of really having the best impact for the marketplace,” she said.
Steiner said that scaling and deploying the product has the potential to make a big splash in the industry.
“Sarah has spent a decade figuring out how to do this, and it just isn’t easy to do. You make an impact when you actually deploy, and the exciting part for me is that the partners that we’re in conversations with are going to deploy, and it’s going to make an incredible impact—so it’s kind of the payoff for a decade of work from Sarah and her team,” he said.
Bellos said that, while Stony Creek has been considering its options, she doesn’t yet know whether the future holds a merger or an acquisition, but that her company has a “diversity of prospects” for its new owner. She also shared that textiles is not the only industry that has shown interest in clean, renewable color sources.
According to Bellos, Stony Creek Colors stopped production in the late summer so the team could focus its efforts on the impending transaction. She declined to comment on whether that meant Stony Creek laid off any of its employees. However, the company’s director of impact initiatives and strategic growth left the company that month.
Bellos said despite the changes, Stony Creek is still on target to deliver against all it has promised its partners. She also said it’s important that farmers and partners continue signaling interest in working with the company so that she and her team can help facilitate contracts for new ownership. Stony Creek’s website alerts consumers that the company has closed its online artisan store, but industrial mill partners can contact the team directly to discuss ordering in bulk.
Stony Creek’s relationship with Levi Strauss has been key to its growth over the past several years. The denim giant partnered with the startup to test IndiGold before it launched in the market and uses the plant-based indigos in some of its Wellthread denim products. Its status as an investor in the startup shows its conviction in what Stony Creek can do, Bellos said.
“Levi’s has been a great innovation partner and solid customer even before they became an investor last year,” Bellos said. “I would say that them investing was this signal that our solution was really the one that they saw capable of scaling, and so this move is the next logical progression for us.”
Steiner said Stony Creek has taken Levi’s—and the company’s other shareholders—into consideration as part of a potential transaction.
“For shareholders… our job in developing the company and running the company is to create value for them, and that’s what we’re focused on doing,” he said.
A spokesperson for Levi Strauss declined to comment on how the search for new ownership had affected its partnership with the startup and on whether the San Francisco denim giant had discussed becoming Stony Creek’s new owner.
Bellos noted that rising interest rates and the uncertainty in the venture capital market could cause further disruption to startups looking to scale on their own—and Stony Creek Colors is not the only material innovation company that has recently decided to make changes.
Biomaterials company Bolt Threads recently went public in a combination with Golden Arrow Merger Corp. Prior to the signing of that deal, the then-startup said it would stop producing one of its marquis products, Mylo, a mycelium-based substitute for animal leather. The company cited financial constraints limiting its ability to successfully scale the lab-grown ersatz leather. Instead, it turned its attention to B-silk, a product that is more focused on solving for sustainability in the beauty industry.
And Natural Fiber Welding, the Ralph Lauren-backed Illinois-based startup which manufactures sustainable, plant-based materials, has announced two different rounds of mass layoffs this year, both of which affected 10 percent of its workforce each time. The Allbirds partner announced the first round of layoffs in April and the second in July. NFW recently announced its efforts to begin large-scale production of its plant-based leather, Mirum.
Bellos said she is deeply invested in Stony Creek and hopes that, under new ownership, there may be a path for the current team to continue its work, but said that the success of the business is her personal priority. Steiner said the team’s deep industry know-how would benefit any new owner.
“Any buyer is going to be foolish not to want that incredible experience, but it’s going to be up to the buyer,” Steiner said.
Steiner said he expects it to “take a number of months” before Stony Creek makes a deal official. He said one of the most important aspects of the deal will be preserving the company’s mission.
“We’re now [far] enough into the process that we’ve had a good number of conversations. These are all companies who highly value delivering on the benefits of a sustainable, nature-based approach for colors. So I am very confident that… continuing the mission of sustainability is in the heart of every one of the companies that we’re talking to,” Steiner said.
