TheOnePoint - ClimateTech Fundraising
In this conversation, we discussed the pre-seed/Angel stage fundraising journey of four ClimateTech founders. We delved into a comprehensive range of fundraising topics, each of which is crucial for understanding the complex world of ClimateTech fundraising.?
Since we are dealing more often with Atoms than Bits, the topic becomes challenging with much ground to cover. Also, fundraising in Europe is not the same as in the U.S.
I was joined by Johanna Broell from Carbonsate , Laura Laringe from reLi Energy , Manu Pillai from CarbonBridge , and Matias Machado from Leap Photovoltaics to cover the topic from multiple dimensions and to explore the nuances.
Key points that we covered:
Listen to the complete podcast.
A concise (???? ChatGPT'ed) version of the recording is below.
+++ I'd recommend listening to the original recording +++
Rohit Yadav (00:02): Welcome to the One Point podcast. Climate tech is a hot area for VC investments because these startups are crucial for human survival. However, many founders face fundraising challenges, especially in early stages. This is compounded by the fact that climate tech involves physical infrastructure, not just software. Today, I have a special panel of four founders—two from the US and two from Germany—who will help us explore fundraising and compare the ecosystems. Let me introduce them, starting with Johanna. She spent two decades in corporate before co-founding CarbonSet to make a real impact.
Rohit Yadav (01:30): Johanna left her corporate career to co-found CarbonSet, where she applies her leadership skills to build the company from the ground up. Welcome, Johanna. Please introduce CarbonSet to our audience.
Johanna (01:45): Thank you, Rohit. CarbonSet’s mission is to remove carbon dioxide from the atmosphere using one of the most efficient and cost-effective methods. We use natural processes—trees storing carbon—and build artificial carbon sinks that store it underground for centuries. Our technology has been successfully tested, and we are preparing to scale globally, with partnerships securing millions of tons of biomass. We're building our first large pilot site in Germany, supported by a grant from the Ministry of Economic Affairs.
Rohit Yadav (03:00): Thanks, Johanna. We'd love to hear more about your grant later. Next, we have Laura, co-founder of Reli, with six years in renewable energy. She’s passionate about optimizing energy systems for global transition. Laura, please introduce Reli.
Laura Laringe (03:35): Thanks for having me. We created RELY to maximize the efficiency of energy storage, particularly batteries in the renewable energy space, like solar panels or standalone batteries. There’s significant inefficiency in how batteries are operated today, so we built software to improve both operational efficiency and asset profitability.
Rohit Yadav (04:07): Great, Laura. You're our only software-focused founder, so it’ll be interesting to hear your perspective. Next, Manu has worked with over 100 hardware products and pivoted to sustainability in 2015. He helped build a leading agritech company in the US before starting Carbon Bridge.
Manu (04:49): Thanks. To clarify, I didn’t launch 100 companies, but I did work on 100 products. I shifted to sustainability after realizing many of my prototypes had no long-term use. I built a company in outdoor irrigation, working with farmers in California, which produces about 40% of US food. Seeing farmers adapt to climate change made me realize the urgency. Carbon Bridge aims to intercept fossil fuel production by converting biogas into methanol using microbiology, which cuts costs and eliminates carbon waste. We’ve received a Department of Energy grant to prototype this technology.
Rohit Yadav (07:12): Thanks, Manu. We’d love to hear more about your fundraising journey later. Lastly, we have Matias, co-founder of LeapFold. After a career in clean tech finance, he decided to tackle solar manufacturing bottlenecks.
Matias Machado (08:04): Thanks, Rohit. Solar energy is critical to clean energy transition, but the solar supply chain, especially silicon solar cells, is a mess. Production is concentrated in Western China, and the technology is outdated. We’re developing a way to manufacture silicon solar cells without wafers, reducing material use by 90% and energy consumption by 70%, cutting costs by up to 50%.
Rohit Yadav (09:24): Thanks, Matias. Reindustrialization and reducing dependence on China is a hot topic. Moving on, let’s dive into climate tech investing. Matias, how has the market changed in the last 3-5 years?
Matias Machado (10:27): In 2020-2022, climate tech saw a surge in investment as everyone was eager to not miss the next Tesla. However, the market has since slowed. Investors realized hardware-based technologies take longer to develop, and with higher interest rates and cautious VCs, fundraising cycles are longer. But deals are still happening, and startups need bold ideas with financial discipline.
Rohit Yadav (11:43): Manu, your take from a US perspective?
Manu (11:50): I see it differently. Climate tech is about managing greenhouse gas emissions from energy use, and most solutions are physical. Early-stage funding gravitates toward university spinouts, where risk is reduced through research. We didn’t have that, so we turned to science-based accelerators like IndieBio, which helped establish credibility. We had to find accelerators with the right scientific background. The Department of Energy is also an equalizer, judging based on capability, not background. Their ARPA-E grant was a major boost for us.
Rohit Yadav (15:22): So, Matias mentioned a buzz in 2020-2022, but now things have slowed. However, deals are still happening, especially with different funding paths. Laura, how does the climate tech market feel to you?
Laura Laringe (17:37): It’s similar to the US, but I think the trend in climate tech is still increasing, even though overall investments in 2023 have gone down. Climate tech is a long-term investment and remains critical for the future. Investors now see that it's necessary for sustainability, especially in energy, which is essential for economic survival.
Rohit Yadav (18:46): Johanna, what's your take from Europe?
Johanna (19:13): There’s a big funding gap in climate tech, with many investors waiting to see what happens. Regulation is a key issue in Europe, and until it’s clearer, there’s hesitation. In the voluntary carbon market, we need individuals and organizations to pay for solutions. But I’m hopeful brave investors will anticipate future regulations like the EU Green Deal and help close this gap.
Rohit Yadav (20:39): It seems that everyone agrees interest in climate tech remains strong, though regulation and technology specifics influence how much funding goes where. Laura, how do you see the future of climate tech?
Laura Laringe (21:39): It’s definitely going up. Climate tech is essential to power the economy, and we need to invest in renewable energy to meet growing demand. The trend must grow, and as opportunities for return increase, more investment will flow.
Rohit Yadav (22:36): Matias, what about in the US?
Matias Machado (23:13): There’s still a lot of potential for transformation, but investors are more cautious now. We’re working with tight-margin industries that require large upfront investments. As investors better understand these risks, we’ll see growth, especially with the intersection of clean energy, electrification, and AI. But financial discipline is crucial.
Rohit Yadav (24:40): Manu, your outlook?
Manu (24:53): Everything is climate tech now because energy is everywhere. We need layered strategies for funding, and metrics are key. Efficiency, especially in carbon and energy conversion, will drive investment. Clearer regulations, especially in carbon markets, will speed things up. We’re seeing a recent uptick in investor interest, so I believe we’re emerging from the downturn.
Rohit Yadav (29:46): It sounds like the future of climate tech investing is optimistic. Let’s wrap up with this: what’s the hottest area in climate tech, aside from your own? Laura?
Laura Laringe (30:36): Aside from energy storage, renewable energy is critical. Demand is growing, and fossil fuels aren’t the future. Additionally, solutions like Johanna’s carbon removal tech are vital as we can’t reverse climate change without them.
Johanna (31:45): If we can’t remove carbon, I’d invest in climate adaptation technologies like firefighting, efficient cooling, and water management—everything that helps us cope with global warming.
Matias Machado (32:11): I’d look at technologies refining or recycling materials like lithium. There’s a huge need for critical minerals in clean energy, and the current production processes are problematic.
Manu (32:58): I’d focus on thermal storage. In fast-growing regions like South Asia, photovoltaic efficiency drops due to humidity, but thermal energy conversion could be a game-changer. It’s under-invested but could solve major energy challenges there.
Rohit Yadav (34:34): Great to hear all the interesting areas. Now, let’s switch to fundraising. Johanna, where are you in your fundraising journey, and can you explain the process you followed? Feel free to include numbers, investor funnel, and any ups and downs you faced.
Johanna (35:13): We bootstrapped for a year and are now in an angel round, with half already committed. As a first-time founder, I wasn’t sure whether to pursue angel or VC funding. I built a funnel of 120 angel investors and 60 VCs, narrowing it down based on fit and interest. We had 64 angel rejections and 32 VC rejections, some without even a conversation. Over time, I improved my pitch, learned which investors were worth talking to, and realized we were too early for VCs. Angels resonated with our vision and liked building the business together with us, which made it the right choice for us.
Rohit Yadav (38:09): Can you explain how you secured the grant in Germany, which can be tough?
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Johanna (38:15): Germany has many grants, so we had to find the right one for us. We chose a feasibility study grant from the German Ministry of Economic Affairs. We applied with a small-scale proof of concept, needing funds to scale. It took about 10 months, starting with an application, pitch, and Q&A, followed by a full application that took a week to complete. After waiting, we got approval, and I’m proud the government supports innovative climate projects like ours.
Rohit Yadav (40:27): Congrats! Laura, can you share your fundraising journey, any rejections you faced, and lessons learned?
Laura Laringe (40:54): Fundraising has been dynamic. We originally had a hardware startup working with second-life batteries, but pivoted to software. We were low on money when we pivoted and made the mistake of fundraising too early. We didn’t have traction or a clear customer base yet, so we relied on grants—raising over €400,000—which kept us afloat. We learned that investors prioritize traction. We refocused on product development and sales, and now we’re closing an angel round between €250,000 and €300,000, with more than half already secured.
Rohit Yadav (44:08): It seems VC funding might not be ideal for early stages. Matias, how was your fundraising experience in the US?
Matias Machado (44:55): We raised $1 million in our pre-seed round but faced challenges. We began by gauging interest and refining our pitch, but found ourselves between VCs saying the round was too small and angels saying it was too large. We anchored at $500,000 to get through our prototype phase, being transparent with investors about our adjustments. This built trust, and we ultimately hit our $1 million target.
Rohit Yadav (47:24): Manu, can you share your fundraising process and any pivots you made?
Manu (47:48): We started focused on dairy farming, raising money from an accelerator, but our partners abandoned us, forcing a pivot. We moved away from relying on third-party technology and shifted to bio-based solutions. This hard pivot meant restarting our investor funnel, which diluted us early on, but the knowledge gained helped us confidently evaluate competitors. We joined the IndieBio accelerator, and although fundraising has been tough, we’ve remained transparent, which helps build trust with investors.
Rohit Yadav (52:55): What are the biggest challenges founders face in fundraising, and what are your suggestions for overcoming them? Laura, you go first.
Laura Laringe (55:00): One challenge is navigating the overwhelming amount of advice—some of it isn’t useful or outdated. It’s important to test advice quickly and see what works for you. Another challenge is bias. Our team is diverse, and as a female CEO in a male-dominated industry, we faced extra hurdles. We had to fight for credibility despite our strong technical background.
Rohit Yadav (58:42): What solution do you suggest for filtering advice?
Laura Laringe (58:42): There’s no one-size-fits-all solution. Test advice quickly and see if it works for your team. Failing fast helps you understand what’s useful.
Rohit Yadav (59:29): Matias, what challenges did you face?
Matias Machado (59:39): Dealing with rejections is tough, but staying open-minded is key. Sometimes rejected investors come back or connect you to others. One of our early rejections later ended up contributing 20% to our final round. Stay positive and flexible.
Rohit Yadav (1:00:50): Manu, what about you?
Manu (1:01:04): As a minority team, we faced bias, and our due diligence process felt more rigorous compared to others. Staying motivated through setbacks is tough. It’s crucial to hold the team together and discard useless advice quickly. We've learned to trust ourselves and not get distracted by bad advice or disrespectful investors. It’s about finding partners you want to work with long-term.
Rohit Yadav (1:05:24): Great points. Johanna, any final thoughts?
Johanna (1:05:42): One challenge for me was my mindset from the corporate world—I felt I needed to have all the answers in investor meetings, but early-stage startups naturally have more questions than answers. I had to get comfortable with that. Another challenge was refining my pitch. Initially, I focused too much on the science, but investors care more about the market opportunity. Once I changed my messaging, fundraising improved.
Rohit Yadav (1:07:34): Do you have specific tips or resources for founders to help them prepare pitches and streamline the process? What worked for you?
Johanna (1:08:06): One game-changer for us was participating in accelerator programs. These programs challenged us, pushing us to improve how we explained our story, strategy, and business model. As founders, we’re often too optimistic about our business. Having outside experts challenge us helped us see the downsides and made a huge difference.
Rohit Yadav (1:09:09): Laura, what about you? Any tips or resources for fundraising?
Laura (1:09:17): For me, asking lots of questions helped, especially to investors. Even if you're not ready to fundraise, start building relationships early, ask what you need to focus on, and get introductions. Also, get mentors or advisors to give you feedback in sales, tech, or fundraising. It’s impossible to have everything perfect, so seek guidance from those who understand your business and want to help.
Rohit Yadav (1:10:48): You mentioned mentors and advisors. How do you approach finding them?
Laura (1:11:13): There’s no set rule. Sometimes we were validating the market and found people who later joined our angel round. Other times, we contacted people for investment advice or industry insights, and some became advisors. We also had mentors from accelerators, though it doesn’t always work out. But getting out there, talking to people, and applying to accelerators is key.
Rohit Yadav (1:12:50): Matias, any tricks or strategies for founders?
Matias (1:12:58): We’re developing breakthrough hardware, so it was hard to show investors a working product early on. What helped was having a good data room, a clear business plan, and financial forecasts. Investors understand early-stage deviations but want to see a solid team and plan to execute.
Rohit Yadav (1:13:56): Manu, your tips for founders?
Manu (1:14:06): Climate tech is a new space, so finding established mentors can be tough. We applied to Clean Energy Venture Group and were rejected, but two angel investors from the group still invested. They became valuable sounding boards. Surrounding yourself with great people who are better than you in their fields raises your game. Leverage accelerators, networks, and find top experts to work with.
Rohit Yadav (1:18:36): Johanna and Matias, what’s the role of advisors and mentors in your journey?
Johanna (1:19:05): We have a few advisors from different areas, some we met through networking. Sometimes you need people who believe in your vision, especially during tough times. They provide expertise, fill gaps in our small team, and offer valuable outside perspectives when we get stuck.
Matias (1:20:41): Advisors have been incredibly helpful. In the solar industry, we rely on senior entrepreneurs who’ve seen the ups and downs. They remind us to be cautious when making big decisions and help us balance risks. Advisors also help me and my co-founder work through disagreements by offering an objective viewpoint.
Rohit Yadav (1:21:55): Has anyone used fundraising consultants? Would you recommend them?
Johanna (1:22:15): I looked into fundraising consultants but found them too expensive for an early-stage startup. I don’t know anyone who’s had success using this path in my network.
Matias (1:22:46): We didn’t use a consultant, but if they can help expedite the process and let you focus on execution, there’s value. However, at the early stage, you want to be careful, as investors prefer you putting money into the business.
Manu (1:23:35): I’ve seen consultants work when the value proposition is clear. At an early stage, it can be problematic if product-market fit isn’t established. But once that’s clear, hiring someone to accelerate fundraising could work. It’s stage-dependent and requires cash flow.
Rohit Yadav (1:25:03): What about government support—do you expect more help? Are you satisfied with what’s available?
Matias (1:25:37): Without government grants, we wouldn’t exist. Grants from the California Energy Commission, DOE, and NSF have been critical for us. But there’s a gap between early-stage grants and the larger loans needed for scaling to commercialization. We need more support in the $5-30 million range to help companies bridge that gap.
Manu (1:27:01): We’ve used private and government funding, and the DOE has been essential. Government funding provides a level playing field with rigorous due diligence, like the DOE’s loan program under Jigar Shah, which is a huge validation. More support would be great, but the current system is good.
Laura (1:29:40): There’s room for improvement in Europe. Grants are vital, but more is needed, especially for early-stage companies that can't access private funding. The process should also be simpler—right now, it’s extremely time-consuming and founder-unfriendly.
Johanna (1:31:51): I agree with Laura. Grant applications are too complex and time-consuming. Governments should act more like investors to help close the funding gap and support early-stage companies. They could also act as early customers for solutions like carbon removal to take on some risk.
Rohit Yadav (1:33:28): To end on a positive note—what keeps you motivated during tough times, and have you come across something inspiring lately? Manu, let’s start with you.
Manu (1:34:07): Family motivates me—knowing I need to leave the planet better for the next generation. Something inspiring? I read Admiral McRaven’s book about how trust, competence, and execution are key in both startups and special operations teams. It reinforced the importance of building a strong, trustworthy team.
Matias (1:38:05): I’m motivated by our mission to solve the climate crisis. If we don’t do it, who will? Recently, I’ve been looking into how small landowners like us in Patagonia can access biodiversity credits, and I’m encouraged by how voluntary carbon markets are becoming more accountable.
Laura (1:40:22): The mission of our company keeps me going. I also read an article on the future of work focused on regenerative economy jobs—restoring nature instead of focusing on AI. It was a refreshing perspective on the future.
Johanna (1:41:45): Nature is my motivation. I love the outdoors, and I want to ensure future generations can enjoy it. Recently, I’ve been thinking a lot about systems thinking—how everything is connected and how solving one problem can impact others. It’s complex but offers the chance to address root causes, not just symptoms.
Rohit Yadav (1:43:44): Thank you all! This was a fantastic discussion, and I wish you all the best with your fundraising and future journeys. Take care!
Disclaimer: All views are personal. The content above is for informational purposes only and is not investment advice.
Business Head - Corporate / SME | P&L owner, Customer acquisition & retention
1 个月Insightful
Thank you! Great conversations and perspectives
Impact Entrepreneur | Executive MBA | Biomass Storage for Carbon Removal
1 个月Great discussion with inspiring entrepreneurs on climate tech fundraising! Loved sharing insights and learning from everyone. Thanks, Rohit Yadav, for bringing us together! ??
Creating Impact Through Content | NDTV | CNBC-TV18, Forbes India, CNN-News18, Moneycontrol, News18.com | Fortune, The Telegraph, ABP | News Corp | Zee Media
1 个月Very insightful. And, the transcript helps. Looking forward to many more.
Startup Catalyst ?? | Unlocking Global Opportunities for Founders | Director @ Start2 Group (formerly German Entrepreneurship)
1 个月Hannes Weiland