News
Climate Tech: Where Big Missions Meet Big Costs
At a recent workshop for startup founders hosted by Blank., our guest speaker and, by lucky chance, a friend Michael Matesic, CEO of Idea Foundry Inc., observed that environmental technology consistently attracts investor interest and receives positive media coverage.
Experts from TechCrunch echoed this sentiment in a recent article, noting that while climate-focused companies find initial funding relatively accessible, securing financial support for scaling is significantly more challenging.
To help you quickly grasp the nuances of today's climate tech landscape and make informed decisions whether you're a startup founder or an investor, we have prepared a series of insights.
4 key insights
Venture capital system was built for digital innovation rather than hardware
You can't fix climate issues with just SaaS, that’s just how it is. When you're developing an app versus a big infrastructure project, the funding needed is worlds apart. Like any early stage venture, startup founders often aren't sure if their idea will fly. And investors, even though they like to take risks, aren't always ready to throw a lot of cash at a project just to get it off the ground.
Forgetting the key value leads founders to dump money in pointless features
Even if a project makes it from the lab to its first commercial launch, there's still a big chance it might flop when it tries to scale up. The usual suspects? A business model that wasn't thought through well enough, or losing track of what made the project cool in the first place. Too often, startups get distracted trying to roll out new offerings instead of developing the major business line.
Climate tech startups can’t be a one-man band
The sooner startups bring on skilled folks for construction, engineering, manufacturing, and management, the quicker they can move ahead. Having experts on board really gives an early venture a boost. As for finding money for the salaries —that's a whole different ball game.
To fund or not to fund?
Typically, early-stage SaaS startups are shooting for a 10x return on investment, but climate tech hardware startups might only promise 2x-3x. That's why you don't see as many VC firms specializing in climate-oriented projects. However, investors have more tools to reduce their risks when putting money into these ventures, like asset-backed loans, mixing equity with debt, and of course, really thorough due diligence.