Programs +
It’s been an interesting year, hasn’t it? Okay, maybe interesting isn’t the right word. But I could not have imagined just a few short quarters ago where we would find ourselves as we embark on Q2 2025.
As the climatetech community grapples with the whiplash of daily changes in policy, regulation and funding, I can’t help but think we have reached the end of an era. Call it the end of Cleantech 1.0.
Now I know some folks out there might think of Cleantech 1.0 as a period from 2006-2011 when venture capital first poured into cleantech. But a lull from 2012 until 2015 doesn’t mean the principles changed when money started coming back into the cleantech / climate (using those words interchangeably) sector. On the contrary, the principles remained the same:
Those principles drove investment activity to new heights. And the frenetic activity pushed startups that had no business going public into SPAC deals that had no business happening.
Even as investment activity slowed, meaningful investment occurred in 2023 and 2024, supported in part by the Inflation Reduction Act and the multitude of incentives, nondilutive capital, and debt facilities the legislation offered.
Climate change is one of the most critical social issues of our time – perhaps the most critical – and it came as one that was both moral imperative and economic opportunity. We embraced the moral imperative and rode a wave from the novel notion of sustainability to the bold, audacious and wide supported goal of NetZero 2050 (remember when NetZero commitments were a thing?) Along the way, a startup’s ghg emissions reduction plan became as important it’s pro forma income statement.
Moral imperative and economic opportunity. It was the clarion call – through the boom years and the lean years of cleantech – until January 20, 2025, at which point the era of Cleantech 1.0 came to a sudden close.
Executive orders, tariffs, layoffs, rollbacks, cuts, closings, eliminations. You name it and it has seemingly happened over the past two months. And from the fog of this never-ending chaos, we emerge.
Welcome to Cleantech 2.0.
Don’t lose your moral imperative. We must be resolute in our commitment to building a healthier, cleaner, greener planet. Energy abundance, resilience and prosperity remain the cornerstones of a clean energy future. But let’s be clear, launching a startup in Cleantech 2.0 needs to be about one thing:
Economic opportunity.
We must build products that are simply better than the incumbents in the marketplace and we must build market-based strategies to scale and deploy them. Energy abundance, resilience and prosperity await, provided they come with a predictable, positive gross margin. We can’t rely on green premiums – and we certainly can’t rely on change customer preferences, especially in the B2B space.
What we can rely on? Products that are better, financial plans that secure capital from the right investors, and scaling businesses that generate returns for those investors. The environmentalist in me wants moral imperative to be the necessary and sufficient investment criteria, but that would require us to price the externalities of our hydrocarbon-powered economy and – spoiler alert – that didn’t happen. Moral imperative will never generate great profits, great products will. We must be clear-eyed as we search for the cleantech founders with great products, and we must be honest with ourselves and them about the time it will take to get those products to scale.
Let’s not forget, horses were preferred over the internal combustion engine vehicle (the Benz Patent-Motorwagen – 1885) for many years, until they weren’t. And that’s because Henry Ford ignored customers’ pleas for faster horses and instead gave them a better vehicle (Ford Model T – 1908). Quick math, people – that’s 23 years!
Economic opportunity – the battle to win customers on price and experience and the revenue earned from victory - will unlock economies of scale, propel technologies down the cost curve, and over time create the right conditions to supplant the dirty incumbents. From time to time, scaling will be supported by federal and state policy, but such temporary tailwinds should not become the basis for a company’s value. The value should be rooted in abetter product that is appropriately priced and solves a problem for a very large market.
Moral imperative will always be one of the reasons why we want clean technologies to scale, but economic opportunity will be the reason they actually do.
Let us be resolute and clear-eyed as we run headfirst into Cleantech 2.0 and build the best technologies we can. For profit, for the planet, and for ourselves.
