So My Climate Tech Company Raised Its Series A — Now What?
You’ve popped the champagne and basked in the glory. Now it’s time to get back to work. With a new cash infusion in your company, you have the resources to start accelerating your growth and the pressure of increased expectations from your investors.
So where do you start?
As your technology development progresses and gets ready for prime time, here are three keys to keep in mind for success as you scale.
Start With the End In Mind
Your climate tech company has a mission — likely one driven by the desire to make the planet a better place. This mission focus, coupled with (for many founders at least) a technology-focused background can sometimes obscure the fact that you need strong economics at commercial scale, particularly when commercial scale seems to be so far away.
For this reason, it’s imperative to develop and maintain a Techno-Economic Model (TEM) for a commercial scale deployment, with accurate data and assumptions to serve as a north star, guiding your development toward a commercially viable end product.
A good TEM can serve as a guide for the company by directing the focus of R&D and pilot plant efforts to de-risk and validate key assumptions, as well as help focus cost reduction efforts on the most impactful areas of the process.
Understanding the underlying economics at commercial scale will also allow you to have more intelligent conversations with the market and understand key drivers of commercial success:
- Are you in a commodity space with well-understood pricing dynamics?
- Are you able to secure a premium price for a green premium?
- Are you dependent on incentives or regulatory drivers to increase market penetration?
All of these are important questions that must be kept in mind as your technology matures into the commercial space.
Why? Because the best technology in the world can’t have its desired impact if it is uneconomical to deploy or is counting on market/regulatory drivers that are uncertain to develop.
Project Development is Hard
It’s almost a guarantee that developing a commercial-scale project will take more time, money, and mental energy than you assume. The challenges are particularly enormous for large-scale, first-of-a-kind infrastructure assets that are project financed. Even the best technology solutions can fail at this stage.
Think of project development as a second valley of death for a climate tech startup.
Even worse, project development faces binary risks that can kill a project (think permitting) due to no fault of the technology company. If your company is dependent on developing projects (either internally or with partners), steel yourself now. The going will be tough.
According to the Barriers to the Timely Deployment of Climate Infrastructure report released by Prime Coalition, project development costs can run approximately 5% of the total installed cost of a project. This means for large-scale climate tech projects, project development costs well into the millions of dollars (if not tens of millions), which is above and beyond the R&D costs associated with developing the technology to a commercial-ready state.
Tack that on to the two to three years it can take to go from project concept to a shovel-ready project (excluding the technology development cycle).
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So how do you survive the project development gauntlet?
While there is no magic bullet, make sure you allocate adequate capital, operate on a reasonable timetable, and assemble an experienced team with a track record of successful projects. And always remember a poorly developed project (one that cannot secure the necessary financing) will cost you more time and money in the end.
You probably don’t have to look far to find examples of companies that haven’t survived project development. The climate tech industry is littered with cautionary tales.
You Don’t Have to Do It All — But You Don’t Have to Hire, Either
As a climate tech founder, you’re used to doing five different jobs on any given day. So with an influx of cash, it may be tempting to start the hiring spree to offload the myriad of responsibilities you’ve been taking on and hit the gas pedal.
Full-time hires, however, aren’t always the most effective way to achieve your goals for every aspect of your business.
Far too often we’ve seen climate tech companies build out internal teams and hire for roles where a full-time hire is either underutilized (or worse yet, buried in work one week and twiddling their thumbs the next) or expected to operate far outside their area of expertise in order to fully utilize their time.
It’s often far better to hire the internal teams required to fulfill the core needs of your business and partner with third-party experts for tasks that stretch beyond the basics.
Think of it this way: Would you rather hire all the people required to start a construction company, or would you hire a general contractor who’s already well-established in their field?
The right partner can often be more cost-effective than bringing on full-time hires, as they can be ramped on and off projects as necessary, with the added benefit of gaining access to a team of experts, rather than just the expertise of a single person.
Of course, this isn’t the right solution for every need, but founders should think critically about how to grow their teams, which often means partnering with highly qualified experts to fill functions outside of the core need of the business.
At Nexus PMG, we’ve used knowledge gained by advising leading infrastructure investors to help hundreds of companies in all aspects of project development. If you’re ready to outsource without the hiring hassle, get in touch.
- So My Climate Tech Company Raised Its Series A — Now What? - September 14, 2022