Fungal decomposition

Fungal decomposition illustrates how nature’s most refined biological system can inspire low-impact, circular solutions — transforming organic residues into energy, soil health, and long-term carbon stability.

Cities today are growing faster than the infrastructure built to support them. Every day, vast amounts of resources end up as waste, traveling long distances to centralized facilities. This linear model — take, use, dispose — is reaching its limits: logistics costs are rising, environmental regulations are tightening, and climate impact is now a direct factor in business competitiveness[1].
Organic waste is one of the biggest challenges. It represents 30–50% of municipal solid waste, is costly to collect and transport, and generates significant methane emissions in landfills[1]. At the same time, regulations such as the EU’s mandatory bio-waste separation (2024) are accelerating the shift toward circular solutions[2].
For forward-thinking companies, this is more than a compliance issue – it is a strategic opportunity to create value from innovation, reduce risk, and build resilience. Emerging biological, nature-inspired and tech-driven solutions are proving that organic waste can be upcycled into energy, fertilizers, proteins and biomaterials[3].
At Activae, we group these solutions into three complementary pathways:

• Biological (e.g. composting, fermentation): low CAPEX, emission reduction, nutrient recovery.
• Nature-Inspired (e.g. insect larvae, microbial bioconversion): protein and biomaterial production.
• Tech-Driven (e.g. thermochemical, electrochemical): high-value outputs for industrial use.

Their modularity and decentralization make them especially relevant for business: they reduce costs, lower regulatory risks, and open new revenue streams. Real transformation comes from strategically combining these technologies to address different waste types and business goals — moving from passive waste management to local value creation and competitive advantage[4].

Within this landscape, fermentation has emerged as one of the most promising and versatile technologies. Its ability to transform organic residues into energy and high-value products makes it a cornerstone of the circular transition[5][6]. The following sections explore fermentation in depth — its technical foundations, applications, business potential, and the role it can play in building more resilient, profitable, and sustainable value chains.

Fermentation technology refers to the use of microorganisms under controlled conditions to transform organic residues—such as food waste, agricultural by-products, sludges, or even waste gases—into valuable products like biogas, platform chemicals, biofertilizers, or bio-based materials.

Unlike aerobic composting, which mainly stabilizes organic matter through oxidation, fermentation takes place under anaerobic or low-oxygen conditions, allowing microbes to break down complex organic compounds into simpler molecules through metabolic pathways such as acidogenesis, acetogenesis, and methanogenesis.
In typical processes, organic residues are collected and sometimes pretreated (e.g., screened, shredded, or buffered) to improve uniformity. Then, the material is fed into bioreactors or fermentation heaps, where microbial communities convert the feedstock over days or weeks. Depending on the specific process:

• Anaerobic digestion produces biogas (mainly CH₄ and CO₂).
• Acidogenic fermentation is stopped early to accumulate volatile fatty acids (VFAs), which are platform chemicals.
• Chain elongation uses these VFAs to produce medium-chain carboxylic acids (MCCAs), such as caproic acid.
• Solid-state fermentation produces enzymes or bioactive compounds on moist solids with minimal water use.
• Gas fermentation uses specialized microbes to convert waste gases like CO or syngas into fuels or chemicals.

Overall, fermentation technologies valorize heterogeneous organic waste streams, turning them into useful products while reducing environmental impacts compared to disposal or composting (7).
In recent years, advances in membrane separation, in situ product recovery, and microbial consortia engineering have significantly improved the efficiency and selectivity of fermentation pathways, especially in recovering dilute or unstable products like VFAs or caproates(8). Additionally, modular and decentralized reactor designs are enabling smaller-scale deployments close to the waste source—such as in residential complexes, food hubs, ora farms—reducing transportation emissions and making fermentation more accessible in both urban and rural settings. Regulatory incentives (e.g., feed-in tariffs, landfill bans, carbon credits) and the emergence of bio-based markets for materials, feed, and fertilizers are further driving adoption, positioning fermentation as a key enabler in the transition toward a localized, low-emission circular bioeconomy.
Fermentation technologies enable the conversion of organic residues into energy and high-value compounds through controlled microbial processes, bridging waste management and the bioeconomy. These technologies encompass a range of pathways — from anaerobic fermentation for biogas and nutrient recovery, to aerobic processes for producing bio-based chemicals such as lactic acid and ethanol, as well as emerging routes like gas fermentation, volatile fatty acids (VFAs) and medium-chain carboxylic acids (MCCAs) — each offering distinct opportunities depending on the feedstock, scale, and target market. 
Fermentation encompasses a family of biotechnological routes that transform organic residues into energy, fuels, and bio-based chemicals through microbial activity under controlled conditions. Yet, behind the single term “fermentation” lies a diverse set of sub-branches—each defined by its microbial ecology, process environment, and target outputs.
This table compares the main technological pathways currently shaping the circular bioeconomy: anaerobic digestion, acidogenic fermentation, chain elongation, solid-state fermentation, and gas fermentation. While all share the same biological foundations, they differ in feedstock requirements, reactor design, and commercial maturity (technology readiness level – TRL). Understanding these differences is key to identifying where each technology fits best—whether for decentralized biogas production, platform-chemical generation, or high-value bioactive synthesis.

From the energy-oriented logic of anaerobic digestion to the precision chemistry of chain elongation or solid-state fermentation, each pathway plays a distinct role in turning organic residues into value-added outputs.
While technological readiness levels (TRLs) and market maturity vary, their convergence signals a maturing bioeconomy where waste is no longer a liability but a productive input. The most scalable opportunities arise when these processes are integrated—linking, for instance, acidogenic fermentation with chain elongation or gas fermentation with carbon capture—to create modular, circular systems adaptable to local contexts.
Ultimately, the strength of fermentation lies not only in its biological efficiency but in its capacity to bridge sustainability,

The radar chart clearly shows that Anaerobic Digestion (AD) is the most mature and balanced technology, with high technical readiness and scalability, though it still faces moderate economic and regulatory barriers.
Gas fermentation demonstrates strong technical maturity but is limited by high capital costs and regulatory dependency, making it more suited for large industrial integrations.
By contrast, VFAs and MCCAs are at earlier stages of development, with significant technical, economic, and market readiness gaps, particularly around process control, downstream processing, and immature markets.
SSF occupies a middle ground, offering niche opportunities but facing scaling and standardization challenges.
Overall, the chart highlights a clear maturity gap between energy-focused routes (AD, gas fermentation) and emerging chemical valorization routes (VFAs, MCCAs), indicating where R&D, market development, and policy support should be prioritized.
While fermentation is technically proven, its full deployment requires overcoming a combination of feedstock, economic and regulatory barriers that differ significantly between energy-focused and chemical-focused pathways

In urban and peri-urban areas, food service establishments and residential buildings generate large amounts of wet organic waste that are costly to collect and difficult to compost due to moisture content and odor generation. In 2023, a pilot initiative in Seoul, South Korea, tested small-scale anaerobic fermentation units designed for apartment complexes, each processing 200–300 kg of food waste per day. The system aimed to cut municipal transport costs while producing biogas and nutrient-rich digestate for local reuse.
Process and Technology
The units operated under mesophilic conditions (35–38 °C) and used a two-stage fermentation process:

1. Hydrolytic–acidogenic stage: breaking down food waste into volatile fatty acids (VFAs).
2. Methanogenic stage: converting VFAs into biogas (≈ 60% CH₄).

Feedstock was a mixture of household food scraps pre-treated with mechanical shredding and dilution (~10–12% solids). The biogas was captured and used on-site to heat water for the building, while the digestate was dewatered and co-composted with yard residues.
Results

• Biogas yield: 80–100 m³ per ton of food waste, covering ~25% of the building’s hot water energy needs.
• GHG reduction: estimated 0.5 t CO₂-eq saved per ton of waste diverted from landfill.
• Economic performance: payback estimated at 4–5 years compared to centralized collection fees.
• Social acceptance: odor-free operation and visible reuse of heat improved resident engagement.

Impact
The case demonstrates that fermentation can operate efficiently at community scale, turning local waste into tangible energy and soil benefits. Decentralization reduces transport emissions and strengthens local energy autonomy — especially valuable in dense urban environments.
Key Takeaways

• Efficiency: even small bioreactors can achieve 70–90% of the biogas yield of large plants if feedstock preparation and pH control are managed properly.
• Adaptability: modular units allow replication in housing complexes, markets, or canteens.
• Scalability: integration with district energy systems or local composting loops amplifies impact.
• Relevance for startups: strong fit for business models focused on decentralized infrastructure or circular energy services.

Below are three startups applying fermentation technologies to convert organic waste into valuable products. Each represents a distinct pathway within the biological valorization landscape — from anaerobic fermentation and gas fermentation to microbial bioconversion — showcasing how circular innovation can operate across regions and scales.

Together, they illustrate the technical breadth and market versatility of fermentation — from decentralized bio-refineries to industrial bioprocesses — and the kind of innovation opportunities Activae tracks within the Food to Value research series.

Deep tech investors are driving capital toward biotechnologies that link materials, sustainability, and climate impact — positioning fermentation within the broader circular innovation landscape.

For early-stage startups, grants remain critical to bridge research and market readiness, enabling the validation and scaling of fermentation-based solutions.

Investing in fermentation technologies for organic waste offers a unique combination of environmental impact, market diversification, and technological scalability. Unlike many conventional waste management or energy solutions, fermentation sits at the intersection of waste valorization, decarbonization, and bio-based production, enabling investors to tap into multiple revenue streams — energy, chemicals, biofertilizers, and carbon credits — from a single feedstock source.
The fact that there are already numerous examples and startups is not a sign of saturation, but rather of a rapidly maturing ecosystem. Established players validate the technical feasibility and market potential, while emerging startups open niche innovation opportunities in pre-treatment, microbial engineering, downstream recovery, and modular deployments.
Moreover, global trends such as decarbonization targets, waste diversion policies, and the shift toward circular economies are creating strong regulatory tailwinds.

Key insights

1. Fermentation is a suite of biotechnologies that convert organic waste into energy, chemicals, and fertilizers—creating value from waste across multiple industries.
2. New fermentation routes target premium markets, producing VFAs and MCCAs for bioplastics, feed, and green chemistry—beyond traditional biogas.
3. Modular fermentation systems reduce logistics costs, enabling on-site deployment in buildings, farms, or campuses—ideal for decentralized waste management.
4. Different pathways serve different goals—from low-CAPEX energy recovery to high-value chemicals—offering diverse entry points for investment.
5. Fermentation supports climate and circular goals, turning waste into low-carbon materials, closing nutrient loops, and enabling local, profitable circular economies.

If you’re a startup refining your strategy to scale, structuring your data room, or tackling manufacturing challenges—or an investor seeking technical diligence to de-risk a thesis or explore new spaces in the circular bioeconomy—we can help. Let’s connect to turn organic waste into local value.

If you want to know more contact us at contact@activae.io