Eight Factors that can Birth the Next ClimateTech Unicorn

The transnational push to net-zero, sealed in the Paris Accords and boosted by the latest COP26 conference in Glasgow, is a long-term global commitment pulling the weight of the most powerful sovereign nations. That three-decade agenda provides a sustained tail-wind for ventures which contribute toward the consensus goal, pressuring companies and countries to deliver on their promises or be left behind, if not tossed aside. Here are some of the make-or-break factors likely to separate ClimateTech winners from the also-rans.

1. A Strong, clear, product-market fit

The original cleantech involved investing a lot in basic research and development rather than investing in product. While R and D will always need to be part of the mix, with ClimateTech most of that should be behind you. What’s needed is more of a product-market fit. There must be a clearly defined market need, and a product which is designed and engineered to meet that need. If there is, then that’s a key success factor.

2. A Sales and Marketing Rainmaker

The next most important factor is to have an active executive who is really strong in commercializing the product, everything from sales operations to marketing and branding. It’s extremely important. What I’ve often seen is that a lot of these companies will get their product out there and then just focus on squeezing the juice out of that kind of the low-hanging fruit: that relatively small camp of environmental true believers, consumers who are already gung-ho on going green. But what about everyone else? Tree-huggers alone do not make a scalable company. They don’t deliver the mass-scale impact we require right now. So you need someone savvy who can shake things up by thinking differently. An environmental background in this role is less important than coming from a high-growth, fast-paced company who has learned how to scale.

3. A Team with Specialized Climate Know-How

So having that key growth-hacking executive is key, but the rest of the founding team needs to have skills which differ considerably from what would be required for a fintech company, for example. You do need someone who really understands the science and the RD, who can keep up with what’s happening in the field and the government, from the UN to NGOs to national and local governments in one’s target markets. Following what’s going on with climate policies is almost a full-time job, just to keep up. You need to have a thought leader on board in the ClimateTech space.

4. Backing by a VC with Experience in this Environment

Another key success factor is to get the right kind of VC backing. I’ve raised rounds in the Nordics and the UK and the US and what I keep encountering are venture capitalists who will tell you, hey, what makes us special is our platform team. Well, if the platform team is just plain vanilla marketing sales legal and finance, then that’s really not so useful. But, if the VC happens to have one or two people on board who really know the cleantech or ClimateTech spaces, that can be a real asset. You really don’t just need money in this space. You need smart money.

5. Investors with Passion plus Patience

And it takes passion. The team needs to be fired up, passionate about changing the world but also in creating a scalable product they can ride from round to round. I think that when VCs look at ClimateTech, they see it as something that they kind of like. Oh I need it. I need to get on that bandwagon. You know right now, but you know from being on the other side of the table. As an entrepreneur, you really want to look for VCs who are going to provide passion capital but also patient capital.

That doesn’t mean you should expect investors to be indefinitely patient. They won’t be as patient as they were, for example, with cleantech in the early 2000s. We shouldn’t expect them to be. They were burned by vague promises, sketchy science, and premature tech. Sure, VCs need to look for a certain IRR and the planet needs fixing now. But that’s no guarantee that a product fits a market or a solution can scale in time.

There needs to be an understanding that ClimateTech is uncharted waters, unsettled science, with a steep learning curve, and a wicked Death Valley. And that will require patience by the investor for each startup, to find the business model and the sales and marketing formula to break out. Fintech went through that, overcoming hurdles like ever changing industry regulations and authentication processes. GDPR was adopted formally in 2016, but five years later that bear has been tamed. ClimateTech, by contrast, is still early-days. The challenge of planetary decarbonization comes with risks but also vast opportunities. But the engines of global change are spinning up to meet that challenge.

6. Motivation to be Part of the Next Big Thing

The passion for massive planetary change needs to extend to employees as well. ClimateTech companies need to be on the lookout for people who not only have the skills but also crave higher meaning, desire to make a difference. Sure, you need to offer them a competitive compensation package, and options. But when it comes to talent acquisition, don’t forget that emotions and life-meaning fit into the mix.

Make your company one which is fired up about what it does and which instills the belief that it is making a difference for its own people and for the planet. Don’t neglect the fact that ClimateTech is a whole new sector that has yet to be defined. There are no real limits to its growth. For once, we have companies which really are “changing the world” — not just pretentiously claiming to do so in their mission statements. That’s exciting. For founders and early employees especially. And therefore investors as well.

7. The Ability to Transform Obstacles into Opportunities

Sometimes the biggest pains are prods to new ideas. It can be something as onerous as bureaucratic regulations which can spawn a whole new growth spurt. Remember when GDPR came along. Most people saw it as an intrusive burden on their businesses. But other entrepreneurs transformed it into an opportunity. The same thing is going to be true with climate regulations and policies. Companies are arising to track your carbon emissions, or to automate your ESG reports, Since every company will need to make emissions and carbon offset reports, these regulations can be in effect market-makers. Companies which can automate and simplify processes and reports now need to be performed by expensive consultants camping out in your meeting room for weeks — those companies are going to be big winners.

8. The Vision to Go Beyond Greenhouse Gases

ClimateTech may now seem to be focused on decarbonization but that’s likely to change and expand to much wider areas. Water will be very big. How to turn saltwater into fresh water economically, so that the costs of electricity and fresh water are not prohibitive. How to cost-effectively export water. Water may be the petroleum of the future, straddling the border between cleantech and ClimateTech.

Another exciting areas is plant-based food. That may seem to be far from climate concerns but PBF is a powerful trend which will have huge environmental and consumer impact. See what happened with Beyond Burger and Oatly. Both show how savvy sales and marketing can send a business into the stratosphere, with all kinds of celebrities hopping on board. Plant-based cheese and eggs may taste odd now, but some ingenious company is bound to crack those niches and become a unicorn.

About the Author: Nolan Gray is a Silicon Valley SaaS exec turned ClimateTech entrepreneur and investor. American-born and based in London, Gray was selected in 2020 for Forbes 30 Under 30 in Europe. He is co-founder of Svea Solar, a pan-European digital energy innovator that has eliminated millions of tons of CO2. The company has generated $130 million in revenue, while raising $31 million, with more than 500 employees. Previously, Nolan served as CMO at Jobscience, a San Francisco-based SaaS company sold to Bullhorn, owned by Vista Equity Partners, for $50 million. He has helped raise over $80 million for multiple SaaS and ClimateTech startups in the U.S. and Europe, and has made a series of impact investments.

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