Climate Tech Is Back—and This Time, It Cant Afford To Fail

Yet co-author of the 2016 MIT report, Francis O'Sullivan, now a lead climate investor at S2G Ventures, says the way startups are funded is still not working. O'Sullivan says the problem now is that the money is spread across different departments. A lot of money goes into early stage startups. There is a lot of money from banks and institutional investors for so-called infrastructure spending on well-tested technologies (like building a new wind or solar farm). But funding for the critical "growth phase"—funding needed to demonstrate new technologies—is relatively modest.

In a just-completed report, S2G Ventures' O'Sullivan and colleague Gokul Raghavan estimate that between 2017 and 2022 US and European private investors raised $270 billion in what the authors broadly define as the energy transition. About $120 billion was spent on start-ups and another $100 billion on infrastructure spending. Only about $50 billion was dedicated to financing the growth phase.

What's changing, O'Sullivan says, is funding new venture technology development — the stage where startups learn that their innovative technology actually works and is profitable. This means that many highly regarded early-stage climate technology startups may find themselves without a clear path. O'Sullivan says this is "one of the biggest barriers" to decarbonising the industry.

Going beyond the green wash

Besides financing, there are other serious obstacles to decarbonizing the industry. Chief among them: startups must understand the challenges of large-scale manufacturing processes. Romano Nanda, professor of finance at Imperial College London and founder of the Institute for Deep Technology Entrepreneurship, says many cleantech 1.0 venture capitalists have looked at online businesses and "applied software heuristics to things that aren't software vendors".

"I think the main lesson of Cleantech 1.0 is that molecules don't work like bytes," he says. First, he says, "we don't know if something will work until we build a large demonstration plant that costs a lot of money."

Even when a new technology works, startups often face risk-averse industrial customers who invest millions of dollars in existing equipment and processes, notes Nanda. "What they don't want to do is throw everything away and start a new process after only ten years, which is an unexpected outcome that no one predicted," he says.

According to Nanda, a promising approach is to develop components that can be selectively added to existing manufacturing operations while minimizing risk. Rather than hoping to completely fix an entire industry like steel, he says the trick is to ask, "Can you be part of the manufacturing process?" Can you adapt existing infrastructure? In practical terms, he says, this often means offering modular solutions that existing industry players can integrate into their processes with relatively little disruption.

Take Boston Metals, a startup that wants to change global steel production. The industry is responsible for about a tenth of global carbon emissions and is growing rapidly in many parts of the world. The company aims to replace the popular blast furnace with an electrochemical process that converts iron ore into pure iron, the first step in steelmaking. It's an almost absurdly audacious goal: replacing the centuries-old technology that underpins one of the world's largest industries.

How a small Pacific island became the cyber crime capital of the world

Despite having a population of only 1,400, Tokelau until recently had more users of .tk domains than any other country. Because of this.

Why hasn't Apple figured this out yet?!