Investors and entrepreneurs don’t always speak the same language. That’s maybe even more true in cleantech.
Just before the long Easter weekend, I spent the day at the Nexus building in Leeds for GreenTech Gathering‘s special event on funding for early-stage climate tech companies.
The unwieldily-named Green Innovation Ecosystem Catalyst brought together northern entrepreneurs with cleantech investors to chew over the challenges involved in turning innovative technologies into sustainable growth businesses.
A lot of the discussion seemed familiar from when I was writing a lot about venture capital and technology transfer during the first wave of cleantech investment in the 2000s.
That funding valley of death at the early commercialisation stage is still there, despite countless government-led interventions.
The UK still prefers innovation to commercialisation, so the long-term value is captured elsewhere.
And companies based outside London still find it harder to raise the money they need. In the UK climate tech scene, some 64% of funded companies are based in the capital.
These longstanding challenges of early-stage VC can be even greater in the cleantech sector. Reducing emissions is inevitably a physical challenge, and bringing physical products to market is a lot more demanding than it is for software plays.
As Dr David Greenfield said in his engaging introduction to the forthcoming Circular Economy Growth Plan: “Circularity is not a quick win – you need long capital. Investors aren’t going to get their money back in three years.”
Making it easy for cleantech investors
There are also some big communication and PR challenges for early-stage companies. Visibility is key for securing investment, and VCs see a founder with demonstrable clout in their target industry as a much lower risk than a relative unknown. (What exactly constitutes “clout” is perhaps a question for another day.)
You also need to tailor your comms to different stakeholders. Potential investors need to hear a different story to the one you’re telling your potential customers.
“We invest in the company, not in the product,” said Stephen Price of the Clean Growth Fun. Investors need to be confident in the growth potential of the company, not just the wonders of whatever it is that you’re selling. Economic viability and market traction are more important than ever.
This can be a particular challenge for companies led by tech-minded founders, who tend to focus on the technical innovation rather than the value proposition or financial returns.
“The founders that get financed are the ones who make it easy for the investors,” noted Niamh Donovan of Sustainable Ventures.
If you’re working in cleantech innovation and looking for comms support to help tell your story to the people you need to reach, get in touch.