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What climate tech startups should know to scale their businesses

Concept depicting the act of scaling up revenue
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Scaling any startup is a challenge. As their businesses grow, startup founders must build innovative products and cultivate top-tier talent bases, all while contending with the immense pressure of standing out in a crowded field of entrepreneurs bidding for the same investment dollars and customer backing. In the climate tech sector, this competition — and the hurdles companies face in order to succeed — becomes particularly heightened. 

Last year, we saw a record year for climate tech investment with over $16 billion allocated to clean energy and sustainability startups. As the industry responds to growing interest from the corporate sector and across government — from the White House to individual cities — appetite for, and the emergence of, new climate tech startups shows no signs of slowing. But even with extraordinary investor confidence, the road to growth is never easy. 

Climate tech startups face unique challenges that companies in many other sectors do not. The journey to scale for a consumer internet company sometimes can be a close-to-overnight success: a company achieves "product-market fit," gets the right attention from social and/or other media sources, and suddenly it is being used all over the world. Sales and replacement cycles for climate tech solutions, however, tend to be particularly long. 

As businesses, climate tech startups are also more capital-intensive than pure internet or software solutions serving other sectors. The long sales cycles mean companies must often simply survive longer — while sustaining losses —- before achieving scale or profitability. And hardware solutions require investments in additional team members, manufacturing capability, inventory and distribution. In short, many climate tech companies require more capital investment over a longer time than their pure-play internet startup cousins.

Despite these challenges, scaling climate tech startups is crucial as we collectively fight climate change across the globe. In order for these companies to find success in the months and years ahead, here are a few crucial lessons for climate tech startups to remember as they seek to grow their businesses.

Become a policy nut

Unlike many startups with internet-only or software products, climate tech companies must get uniquely good at understanding and navigating the world of public policy, particularly as they expand geographically. This means understanding regulations and the incentives available from government entities and industry stakeholders and how these relate to political and other actors who influence policy. 

For companies selling clean energy solutions in New York state, for example, the New York State Energy Research and Development Authority (NYSERDA) captures a number of available incentives on its website, including NYSERDA’s own Real Time Energy Management Program (RTEM), through which NYSERDA will share up to a third of the cost of projects to implement RTEM solutions in multi-family or multi-tenant commercial buildings. Companies selling solutions that qualify for RTEM support, therefore, have a real opportunity to unlock NYSERDA funding to help sell their products — but they have to know about and navigate the process for unlocking those incentive dollars.

If a climate tech startup is thinking about scaling, it must follow the U-B-I equation: making it easy to Understand, Buy and Install its solution.

Climate tech startups can fail because they lack this understanding or capacity for influence. They either wait too long for incentives or regulations to materialize to catalyze business that does not arrive before the runway ends or lose out to competitors who are better positioned in the policy landscape.

Simplify your solution

If a climate tech startup is thinking about scaling, it must follow the U-B-I equation: making it easy to Understand, Buy and Install its solution. 

Most clean energy solutions are complicated products, and startups are inclined to talk about "benefits" before describing what their solutions actually do. In product marketing and pitch materials, startups should use simple, relatable language to explain how their products work and their value propositions. This is a baseline, no-negotiation strategy for any climate tech startup.

Once it has its product marketing foundation, a startup should think about how its customers prefer to pay and their budget cycles — including replacement cycles, capital expenditure budget and financing needs — and provide options to match. Making it easy to buy also means using the right sales channels, which, in climate tech, often means working with channel partners such as consultants or installers. If customers are buying solutions from consultants or installers, startups may even want to consider hiring a leader in a partnerships function to invest time into these important relationships.

Finally, whenever possible, startups should enable customers to use at least some of their technology without completely retrofitting a major building or system.

For climate tech startups, where there is typically a hardware element to a solution and adoption often means replacing existing infrastructure (meters, boilers or hot water heaters), having the best product — even as acknowledged by the market — does not lead to overnight, wide-scale adoption. Even the most enthusiastic prospective customer is unlikely to replace her hot water heater before said heater dies. Unless, of course, she has a strong incentive — from the government, her utility or another economic actor — to make a change sooner. Hence the need for startups to know (and, ultimately attempt to influence) policy.

Enertiv, a portfolio company of The Clean Fight that digitizes energy operations in commercial real estate, provides new customers the option to start using its mobile app without installing any hardware. If this is not compatible with your technology, offer a simple menu of options so that customers can find solutions that work for their needs. Doing this well means building out onboarding, installation and post-sales support capabilities inside your organization or through partners.

For climate tech startups attempting to scale, some of these pieces already may be in place. In all likelihood, they have products that work, core teams that function well and a customer base to build out references and case studies. Keeping these lessons in mind during their journey will help reduce friction in their business units, enabling strong growth and position them for long-term success.

The Clean Fight is a not-for-profit business accelerator helping growth-stage climate tech companies scale in New York to speed the energy transition while boosting economic opportunity and job creation for all. Powered by New Energy Nexus and supported by NYSERDA. Cohort 2 will be focused on decarbonizing mass-market buildings in New York. Applications are open until July 18 at thecleanfight.com.

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