There’s still much to discuss, topics like hiring best practices, working with legal partners, and how to develop an effective communications strategy, which we’ll address in future posts. In the meantime, we’ll pivot to something new, as startups are prone to do!
Our next ten posts will explore what lies at the center of successful climate tech ventures: An exceptional, scalable product. First up, an incredible challenge startups will face in 2023 is needing to “skate where the puck is going, not where it’s been.”
Those words belong to Wayne Gretzky, but the phrase is highly applicable to climate tech startups. Why, you ask? These young, wide-eyed businesses must navigate a massive energy transition, and transitions, by nature, mean change—lots of it. They cannot build for 2023 but, instead, 2030 and beyond, a world where these energy transitions are well underway.
It seems simple enough, but building for 2030 requires startups to make some critical assumptions:
Let’s tackle each of these in turn.
Spoiler Alert: All founders think their technology will win. They must. Otherwise, where’s the conviction to raise capital? That said, founders must assess competing and complementary tech to understand those best positioned.
First off, the cost, quality, and proficiency of competing products could sink your business before you can mount a defense.
Remember Solyndra? Most don’t, but the solar technology company should serve as a cautionary tale. It’s best known for defaulting on a massive loan from the federal government, even after it received accolades, funding, and backing from top leaders before spiraling into bankruptcy.
Several factors contributed to Solyndra’s demise, but none more telling than the dramatically decreased pricing of their main competitor, the photovoltaic module. The Solar PV module’s price dropped so significantly (almost 90% in the decade between 2010 and 2020) that Solyndra had no chance. None.
Understanding your product’s competitive landscape is critical to determining how aggressively it can play in the market. If competing tech will out price you, it’s better to figure that out earlier rather than later!
Looking beyond your product’s competitive edge, you’ll need to identify the availability of complementary technologies. The successful adoption of climate tech will require integration into larger, economy-wide industries like energy, transportation, buildings, industry, food and agriculture. As clean energy advances to provide abundant, cost-effective electric transportation, investing in hydrogen fuel cells for passenger cars and buses may not be wise. That’s not a prediction (ok, maybe it is), just an example of how complementary technologies may dramatically impact the commercial pathway of another.
Ultimately, founders should know their competitors and the complementary technologies! It will only drive your innovation, making you more investable and efficient in your technology development process.
In one corner stands the world’s biggest companies and, consequently, the biggest carbon emitters. In the other, the untested climate tech startups determined to propel us toward decarbonization.
In this scenario, corporations would represent the incumbent and the startup, the disruptor, pitting the two sides against one another. Perhaps we should consider the value and potential progress of a collaboration.
Maybe the incumbent is your competitor, in which case you must quickly evaluate how to get to market before they do. They’ll have the cash, resources, a market position, and the ability to outlast you, but that doesn’t mean they’re not vulnerable either. Still, acknowledge their advantages before making plans to unseat them.
Startups should assess the present landscape of incumbents to understand their role in the energy transition. Have the conversations (with or without them) to understand how corporates plan to decarbonize, their pain points, and opportunities for your startup to solve these concerns.
It’s equally likely that your incumbent could be your partner or customer! Remember, decarbonization is a massive challenge for everyone. Incumbent carbon emitters will likely look to new ventures for ways to decarbonize. Tread carefully but understand an enormous opportunity exists to partner with or sell to these corporates if you intimately understand their problems and can provide a compelling solution to address one or more of them.
As you consider how your product could fit into this changing market, don’t ignore how quickly the market will evolve. Time is money, and when your financing depends on venture capital, waiting too long for a market to expand or new markets to emerge could derail your momentum to scale your company.
Case in point: The Grid.
Our electrical grid is the backbone of our economy. However, rapid electrification and decarbonization will strain it. Before our collective despair settled in due to mounting evidence that a strained grid could diminish the prospects of companies focused on renewable energy and electrification, the U.S. Department of Energy awarded $1.3 billion to three transmission projects. This award will fund one project here, in New England, opening up corridors for clean energy development to support the electrification of our economy. Talk about whiplash!
You don’t want timing to become an unexpected headwind, but there’s no crystal ball for these things. Founders will have to wager their best guess here. Macroeconomic conditions (high-interest rates, anyone?), geopolitical issues (war, terrorism, and trade disputes, sometimes all at once), and consumer preferences (EV hesitation) will only complicate matters when timing this transition.