Our thesis on climate


Our thesis on climate

Words Founders Factory

November 16th 2023 / 12 min read

Far from being a distant threat on the horizon, the impacts of climate change are being felt intensely. Heatwaves, forest fires, flooding, and tropical storms are no longer extraordinary: they’re ever present, an urgent reminder of the changes that are needed, and yet are just the tip of the iceberg with regards to what will come. 

We require nothing short of “rapid, far-reaching and unprecedented changes in all aspects of society”, according to the IPCC. 

This demands wide scale innovation and investment on all fronts. Our infrastructure needs upgrading across the board to cope with a clean energy transition. The cost of sustainability remains too high to incentivise both on an industrial scale and a consumer level. Cost effective approaches to transforming our industry remain a scarcity: we need innovations that can create more with less. 

But a lot has changed in the past several years. Scientists have reached a broad consensus around the severity of the challenge, and the actions that are needed in order to reverse the effects of climate change—from changing our energy sources to finding ways to sequester carbon from the atmosphere. 

Public awareness is shifting—although we are still some way from consumers backing up their words with actions. Global commitments to Net Zero have been cemented by government legislation (like the Inflation Reduction Act in the US) not just to invest in climate commitments but to enshrine them in law. Broader business has taken note: ESG is no longer a sector, but rather a theme that runs across all industries and financial markets. 

Where there is great opportunity, investors pay attention. Climate tech funding has accelerated in recent years, representing more than a quarter of venture capital investment in 2022.

The situation is urgent, but it is not too late. To achieve wide scale change, we believe entrepreneurs have a critical role to play, both at the forefront of scientific discovery and implementing solutions at global scale. With this huge opportunity comes a unique set of challenges for founders—and for these challenges, a unique platform of support to give them the best chance of success.

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A unique opportunity with a unique set of challenges

The good news for founders looking to build in climate—the scale of the opportunity has never been bigger. You are addressing a challenge that affects the whole population and the entire surface of the planet. 

While governments, political organisations, and financial institutions have a huge role to play, we believe entrepreneurs are uniquely positioned to discover and scale the solutions that will help us adapt to and ultimately mitigate the climate crisis. Entrepreneurs sit at the bleeding edge of innovation, whether this comes from experience of working at the frontline of climate impact or from testing and developing new technologies in the science lab. 

But this enormous opportunity comes with considerable challenges—and while starting a business is never easy at the best of times, building in climate is unlike any other sector. 

For one, there’s the hardware paradox. On the one hand, climate change is a very physical problem which requires physical solutions—technology that can change our physical environment and our impact on it. But as the adage in VC goes, building atoms is much harder than bits. Venture is particularly well suited to software/SaaS companies, who have business models that are far more conducive to high yields: higher margins, lower operating costs, repeat revenue opportunities, and with much greater scalability. Hardware in many senses is the opposite of all these things: higher unit economics, slower to build and scale, far more capital intensive.

Then you’ve got the technological risk that comes with climate tech. Investors in the past have underestimated the time it takes to develop and scale climate technology. R&D is far more extensive around science-based solutions, and given regulation, it can be particularly challenging to access real world testing. 

This leads to another challenge around the difficulty of commercialising intellectual property. Much of the great climate tech will emerge from laboratories, led by our top scientists and academics. But building a technology and proving its efficiency is only the first step: understanding how to commercialise it and build a viable business model from it is crucial in order to scale. 

All this is met by an additional complexity around measuring impact. There are two challenges here for climate tech startups. One, they must quantify their impact, which requires specific processes and highly technical work which can be very time consuming. More challenging is the fact that each investor may have different metrics and benchmarks, so meeting expectations can be difficult. Is it enough to look at your impact on carbon emissions? Or should you be looking at how many consumers you’re impacting? Knowing where to focus your efforts around tracking your progress is not simple. 

Constructing a comprehensive platform for climate founders

Understanding the unique set of challenges that climate founders face has forced us to pose a question—what exactly is it that climate founders need to succeed? In this, acknowledging that climate entrepreneurs come in many forms, building many different types of solutions and business, requiring different support at different stages. 

As with each of our programmes, support is never one size fits all—it’s bespoke, adaptable to the needs of each founder. We've identified what we believe to be the core value drivers in climate tech and designed unique programmes to deliver maximum impact to climate ventures.

Hands-on support for commercialisation. This remains one of our standout areas of support across all businesses: helping turn innovative ideas into profitable, venture-backable businesses. With over 300 businesses in our portfolio, over 80 of which we’ve built from scratch, we’re constantly testing, reviewing, and optimising our understanding of taking a business from 0 to 1. With climate founders, this comes with a heightened focus, as we apply our commercial know-how to help founders take world-changing IP into prototypes that we help them translate into their first enterprise customers. As part of Planet Positive Lab, our cohort of science-backed entrepreneurs received one-on-one support across product, design, and growth to help them understand the path to launching their technologies out of the lab and into the real world.  

Access to a fundraising ecosystem. Given the complexity around fundraising with hardware or hybrid business models, we believe there should be a huge emphasis on providing climate founders not just with fundraising skills and competencies, but also facilitating warm introductions to our network of top tier VCs, angels, and so on. Our Investor Showcase, open to any startup in our portfolio, runs founders through several weeks of pitch training (with support on how they are telling their story in a concise manner) before placing them in front of a room of investors, many of whom have a specific climate agenda.

Access to government partnerships. For climate tech to have a real impact, entrepreneurs need the twin benefits of private capital and public sector will. Governments are a critical partner for being able to prove climate technologies, whether that’s through overcoming regulatory barriers or getting permitting to test their technology in real world environments. Once ready to scale, these government partners are instrumental for implementation and roll out.

Real world testing grounds. To scale innovation out of the laboratory, entrepreneurs need to be able prove effectiveness in a real world setting. This is easier said than done: for many climate technologies, it can be highly complex to gain access to environments to test their product. We’ve found this is particularly true for ocean-based startups—hence why with Blue Action Accelerator we’ve built a network of marine ecosystem partners in the Bahamas, as well as Monaco, Florida, and several other locations. 

Leverage of corporate network. Access to the enviable scale and reach of global corporations is central to the ‘unfair advantage’ we offer across all of our programmes. For climate tech, this may be instrumental in helping founders launch pilot projects to prove the effectiveness and scalability of their technology, as well as start to generate revenue. Moreover, as the emphasis moves from offsetting to insetting, startups and corporates will work closely together to help clean up processes across supply chains. Take Oxwash, a sustainable laundry company, who secured a partnership with CPG multinational Reckitt, partnering with their Vanish brand to tackle ‘unacceptable clothing waste’.

Analysis and reporting of climate impact. The highly data-driven process of measuring, analysing, and reporting environmental impact requires considerable expertise, often not something that an early stage climate startup will have access to. We take a stage appropriate approach to measurement aligned to best practice principles. Impact measurement should not be a burden: rather it should align with business metrics, hold the venture accountable, and help move the venture forward. With very early stage ventures in our Mission Studio, we ensure there is a clear articulation of the impact goal and how it will meaningfully contribute towards that goal. As the venture matures we introduce baselines, impact KPIs, and tracking that can inform ongoing reporting. For more, see Byway’s Impact Report.

Access to non-dilutive funding. There’s a huge range of grants and prizes available to highly innovative companies, especially those operating in the climate and sustainability space. G-Force has a dedicated grants support team, not just to identify grants but to support startups with accessing this kind of non-dilutive funding. (Metalchemy, a nanotechnology business in the G-Force portfolio, were supported in successfully applying for a £330k grant from Innovate UK).

Brand positioning and storytelling. One of the biggest challenges climate founders face is around persuasion—whether that’s persuading consumers to change their behaviour, or to persuade investors that they’re not trading off profit for purpose. We’ve identified a strong demand for support around how climate founders are telling their story, to help them clearly communicate how their product will improve on incumbents and deliver scalable impact.  Particularly around deeptech or hardware solutions, this means helping founders take complex technologies and translating them into cohesive and marketable brands.

Our current climate programmes

Pre/Seed Climate Fund

Details of investment: €250k cash investment + 6 months operational support + grant advice

Investment themes: Broad criteria—Are they solving a unique problem, are they scalable, will they have a clear impact on lowering greenhouse gas emissions?

Investments include:

  • Solivus (solar panel innovation)

  • Materials Nexus (next-gen materials R&D)

  • Quiron Digital (satellite monitoring for forest threats)

Some might baulk at the scale of the challenge ahead; others might despair. But for entrepreneurs, this is a chance to solve the biggest problem that’s ever faced humanity. And as investors and venture builders, it’s an opportunity of a lifetime. 

Interested in building with us in climate?

Explore our climate programmes

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