Keel Labs, the U.S. startup behind the first fibers made from algae, filed for Chapter 11 bankruptcy protection in a North Carolina court on June 5. The company therefore has estimated assets of up to ten million US dollars and debts of one million US dollars.
To produce the Kelsun fiber developed by Keel Labs, biopolymers are obtained from algae and processed into threads using a chemical process. These threads are then spun into fibers. Keel Labs describes Kelsun itself as a “plug-and-play integration”: the material can be knitted, woven and mixed with other fibers such as cotton or hemp. In 2024, the company received the “Innovation Project of the Year” award at the Textile Exchange Climate & Nature Impact Awards for this innovation.
The founders Tessa Callaghan and Aleksandra Gosiewski started in 2017 in a small laboratory in Brooklyn, then called AlgiKnit. Their mission was to bring fiber from the ocean to the environmentally damaging fashion industry. A significant growth spurt followed in 2022 thanks to a Series A financing of $13 million, in which Collaborative Fund, H&M Co:Lab and Horizons Ventures participated, among others.
After almost ten years, the founders seemed to have proven that algae can be an excellent raw material for clothing. After the corona pandemic, Kelsun’s popularity grew quickly through collaborations with big names. Kelsun made a knitted tank top for Stella McCartney (2023). A cotton shirt from the Californian brand Outerknown (2025) was made from one third Kelsun. Finally, H&M and & Other Stories released a capsule collection with the material in 2025.
In an interview with FashionUnited in 2024, the company was confident that it had survived the most difficult growth phases of a scale-up. Garments with Kelsun came onto the market in editions of more than 100 pieces at a competitive price. The sustainable “next-gen” material seemed ready for the big fashion system.
While the current bankruptcy filing doesn’t necessarily mean the end for Keel Labs, it does raise questions. So what does it take to run a viable business in the alternative fibers segment? How can a small business produce scalable, high-quality fiber with a lower environmental impact while maintaining a healthy cash flow?
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