It is hoped the product will help cut the use of conventional single-use plastics, which can take hundreds of years to break down.
Sky Ocean Ventures – which has set aside £25m to back ideas to keep plastic out of the oceans – is also investing in an edible sachet that can hold water or condiments.
Group director Fred Michel said consumers needed “viable alternatives” to regular products currently in the shops.
The bottle, manufactured by a company called Choose Water, is made of recycled paper on the outside, with an inner waterproof liner.
The money from Sky will fund its next phase of development and testing.
It is expected to be launched later this year.
Company founder James Longcroft said the investment would “bring our biodegradable bottles to shelves even sooner”.
The edible sachet, called the Ooho, is produced by Skipping Rocks Lab and is described as “100% biodegradable”.
It is made of natural materials extracted from plants and seaweed, can be flavoured and coloured, and is said to break down in four to six weeks.
The firm’s chief financial officer, Lise Honsinger, said Sky’s investment would enable it to commercialise the product “ahead of a larger funding round next year”.
“The fantastic commitment Sky has shown to reducing ocean plastics, both in their own corporate environment and by communicating this issue to the world, makes them a natural partner for us,” she added.
These are the first two investments Sky Ocean Ventures has made.
“We want to accelerate bright, bold ideas that will create a lasting impact,” Mr Michel said.
“The investments today reflect our shared objective to turn off the plastics tap.
“Only through viable alternatives can we help people make a choice to plug the plastics problem.”
Experts from Imperial College London’s Grantham Institute are joining Sky Ocean Ventures to find ideas that can help reduce plastics litter.
Professor Martin Siegert, the institute’s co-director and a polar geoscientist, said: “There is a global momentum to stop the wave of plastics being wasted by our society, prevent further plastic pollution, and engineer an effective clean-up effort.
“I welcome this timely opportunity for the experts we have at Imperial to collaborate with a globally-reaching organisation like Sky, so that together we can help turn the tide on this challenge.”
:: Sky’s Ocean Rescue campaign encourages people to reduce their single-use plastics. You can find out more about the campaign and how to get involved at www.skyoceanrescue.com