PEELSPHERE raises ~US$13.8M Series A from Shenzhen Capital Group

What's the deal? Shenzhen-based PEELSPHERE, a plant-fibre leather startup, has closed a strategic funding round of nearly US$13.8M from Shenzhen Capital Group (SZVC), one of China's largest state-backed venture firms. The funds will go toward new product development and team expansion.

PEELSPHERE uses a proprietary deep eutectic solvent process to extract cellulose from agricultural waste — coffee grounds, orange peel, apple skin — and reconstitute it into leather-alternative fabrics. It already supplies over 30 fashion groups, including BalenciagaDealroom has a profile for this one. Try Dealroom →, KeringDealroom has a profile for this one. Try Dealroom →, Mercedes-BenzDealroom has a profile for this one. Try Dealroom →, BMWDealroom has a profile for this one. Try Dealroom →, and NikeDealroom has a profile for this one. Try Dealroom →.

Why now? The sustainable materials sector hit a funding peak in 2021, when startups in the space raised over $1.1B, according to the Material Innovation InitiativeDealroom has a profile for this one. Try Dealroom →. But a brutal shakeout followed. By 2022, investment had roughly halved, and prominent players like Bolt Threads and Piñatex either shut down or exited the market as tighter greenwashing regulation exposed the gap between lab promise and factory reality.

PEELSPHERE argues it survived that correction because it prioritised manufacturability over novelty. Its top-selling product line, Bestwaste, accounts for roughly 85% of shipments and sources raw materials from Starbucks coffee grounds and Moutai distillery waste. The company has built production partnerships in China's Yangtze River Delta that it says can meet demand for the next two to three years.

What could go wrong? The plant-based leather sector carries real baggage. Many predecessors burned through capital chasing sustainability narratives without achieving competitive cost or scale. Even with brand partnerships in place, PEELSPHERE must prove it can hold up under the rigorous, multi-year supply-chain validation cycles that luxury and automotive clients demand.

Founder Isabel Song acknowledges the challenge. "Brands used to pay for the concept of sustainability," she told 36Kr. "Now they want proof the material actually works in their products — and drives growth."

The signal: SZVC's sole strategic investment here underscores growing Chinese state-capital appetite for homegrown brands that can compete in global material supply chains historically shaped by European and American players. With sector funding roughly halving after the 2021 peak and high-profile failures like Bolt Threads clearing the field, the round suggests that surviving startups with proven manufacturing partnerships — not just lab breakthroughs — are now capturing the capital that remains.

Read more: 36Kr