Allow me to tell you a fascinating story. A brilliant founder builds what is ostensibly an awesome climate tech startup, with the company’s promising technology generating meaningful commercial traction. Suddenly, economic conditions change. Despite raising $63M to date, future funding becomes an issue. Acquisition offers, which were previously rebuffed, must now be considered.
The founder sells the climate tech company to a large corporate for $100M. But, the founder gets nothing.
Here’s the rub: Building a climate tech company is hard. It is a capital-intensive exercise that takes time. To secure the necessary capital, concessions are often made, some of which may seem insignificant at the time. But, if the company is ever sold, even for what feels like a sizeable sum, liquidation preferences across multiple classes of preferred stock can be a gut punch to the founders holding common stock.
Building a good capital strategy can make a big difference for climate tech founders, especially those looking to deploy hardware or infrastructure solutions. But, before building that capital strategy, understanding the intricacies of cap tables and stock option pools is a must.
More on each of those below. But first…
The furniture isn’t even here yet, but the stage is built, and the lights are on. It still feels like the perfect time to get together, so who needs furniture for a party anyway?!
This Thursday, August 24, we invite you to Green Drinks: the return of a New Haven tradition and the start of ClimateHaven’s quarterly networking series. Join us at ClimateHaven for an evening of beer, wine, and great conversation with old and new climate friends. A big thanks to our friends at FORGE for collaborating on this event.
And while we’re thinking about events, mark your calendar for the Yale Clean Energy Conference on November 9th and 10th. We’re excited to serve as your host for the first day of the event—much more to come regarding this event next month.
Most folks who join a climate tech startup are looking for a few things: A growth-oriented culture, the opportunity to make an impact on climate change, and stock options.
Stock options are the pathway to prosperity for startup employees, so of course, folks want them! And the more successful the startup is, the more stock options they want.
If only it were that simple. Managing stock option pools can be a major headache for founders and boards. Stock option pools create issues for HR, corporate governance, and capital raising. Founders endure these management challenges because of the potential prosperity stock options offer employees. But future prosperity is no sure thing when building a climate tech startup (see above).
The bottom line, stock options are indeed a blessing and a curse for founders and their early-stage employees—all the more reason to dig in and learn more about stock options in our Summer School Series
A company’s capitalization table may seem like a tedious inventory of outstanding shares of company stock, but I am here to tell you something very important:
The Cap Table is your everything!
In other words, if you sell your company for $100M, I’m sure you’d like to see some of that money.
Check out our Summer School Series on cap table management to learn the ins and outs of keeping your cap table in tip-top shape.
You know things are getting serious when the swag shows up.
ClimateHaven t-shirts, stickers, and mugs are here, and I’ll be honest, the t-shirts are pretty darn sweet.
What’s the best way to get your hands on one? Apply to be a member! Our membership application portal is open. We are reviewing applications now in anticipation of welcoming our first 12+ startups into the incubator this fall.
Keep in mind, the door to ClimateHaven membership is always open. Applications are reviewed on a rolling basis and additions to the incubator will be ongoing. Reach out to Kiko Wong, our startup portfolio manager, to learn more.
Second best way to get a ClimateHaven t-shirt? Donate to ClimateHaven!
Third best way to get a ClimateHaven t-shirt? Email me a top-notch dad joke. Or a killer pun. Your choice.
The Inflation Reduction Act turned one last week. With all the chaos in D.C., it’s still hard to believe the IRA became law, but thank goodness it did! There are a lot of recaps of the IRA’s first year, but I like the series Canary Media put together. It is definitely worth your time.
I’ll admit to being a bit more excited about the IRA’s long-term impact. The IRA’s incentives should propel cost reductions across several clean technologies in the second half of this decade and prepare us for profound structural change in the first part of the next decade. The 2020s will feel like a climate tech scrum compared to the order and market maturity the next decade will bring – in no small part because of the foundation laid by the IRA.
That’s right; I’m enthusiastic about the IRA’s impact on decarbonization in 2035! I suddenly feel old.
There are many reasons why I love climate tech entrepreneurship, but two reasons are always on top of my mind. First, climate change unites economic opportunity and moral imperative like no other issue. Second, entrepreneurship is the ultimate economic development tool.
Climate tech entrepreneurship has the potential to unlock incredible prosperity for founders, their teams, and the communities they serve. It is also really, really hard.
No solution, however complex, will ever make climate tech entrepreneurship easy. But vibrant communities of passionate people, strong networks, targeted resources, the right tools and equipment, and a wealth of useful information will hopefully make climate tech entrepreneurship less complex.
That’s precisely what we’re aiming to do at ClimateHaven! Come hang out with us this Thursday, August 24, to have a beer and learn more!
Until next time,